January 18, 2000
Web posted at: 2:45 p.m. EST (1945 GMT)

In this story: Findings misleading? Gap shrank in three states Recommendations RELATED STORIES, SITES

WASHINGTON (CNN) -- The income gap between the poorest and richest U.S. families grew wider during the 1990s, according to a report released Tuesday by two Washington think tanks.

VIDEO CNN's Don Knapp explains the widening wage gap. Real 28K 80K Windows Media 28K 80K     State rankings of family incomes A new study found the income gap widening between the richest fifth and the poorest fifth of American families. Following is a list of states ranked by the ratio of richest to poorest family income between 1988 and 1998. The study uses U.S. Census Bureau data that has been adjusted for inflation. Select your state: Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virgina Wisconsin Wyoming United States Source: The Economic Policy Institute and the Center on Budget and Policy Priorities

The findings are attributed to several factors: Wall Street's long-running bull market, which favors wealthy investors; lower-paying service jobs replacing manufacturing jobs; and the largely stagnant minimum wage.

The report from the Center on Budget and Policy Priorities and the Economic Policy Institute covers the 10-year period between 1988 and 1998; it defines a family as two or more relatives living together.

The study analyzed before-tax data from the U.S. Census Bureau. The figures were adjusted for inflation.

According to the report:

• Earnings for the poorest 20 percent of American families rose less than 1 percent during the 10-year period but jumped 15 percent for the richest fifth.

• Income for the poorest families rose $110 to $12,990. For the richest families it increased by $17,870, to $137,480, more than 10 times that of the poorest sector.

"The benefits of (the recent U.S. economic) growth have not been evenly distributed," said Elizabeth McNichol, one of the study's authors.

"The booming stock market ... has mainly benefited people at the top end of the income scale," she said. "The incomes of the poor and middle class have fallen or stagnated."

That's true in California, according to economist Deborah Reed. Using the same Census Bureau data, she analyzed her own state's economy and found that middle-income earners lost ground.

A middle class man reflects on how rising expenses mean less disposable income today than in the 1970s 95K/8 sec. AIFF or WAV sound

"In the 1970's and 1960's we were talking about more one-earner families," said Reed, who works for the Public Policy Institute of California. "Now, we're talking about two-earner families having the same income level that one-earner families used to have," she told CNN.

But that amounts to fewer real dollars, Reed says, since much of the second income goes for child care and help at home.

One critic of the new study says it contorted data to put a negative face on a "spectacular economy."

"The rich are getting richer but the poor are getting richer, too, in this expansion," said Stephen Moore, director of social policy for the Cato Institute, a libertarian think tank.

The Center on Budget and Policy Priorities and the Economic Policy Institute are nonprofit, nonpartisan organizations pushing for changes in tax laws and other federal policies to benefit low-and moderate-income families.

Their study showed the income gap between rich and poor was widest in New York, with the poorest fifth earning $10,770, down $1,970, while the wealthiest group earned $152,350, up $19,680.

Income was most evenly distributed in Utah, where the poorest families had incomes of $18,170 and the richest $125,930.

Elizabeth McNichol of the Center on Budget and Policy Priorities says that states can help reduce the wage gap 140K/13 sec. AIFF or WAV sound

The income gap narrowed in just three states -- Alaska, Louisiana and Tennessee.

To "moderate the growing income divide," the report makes several recommendations for state and federal lawmakers to consider:

• Raise the minimum wage

• Strengthen unemployment insurance

• Implement a range of supports for low-income working families

• Reform regressive state tax systems

• Adopt tax credits for the very poor

• Avoid tax cuts that benefit the rich

Correspondent Don Knapp and The Associated Press contributed to this report.

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