ECONOMY'S LONG SURGE LIFTS MEDIAN INCOME TO NEW HIGH   

By Merrill Goozner  
Washington Bureau  
October 1, 1999  

WASHINGTON -- The Clinton-era economic expansion established another milestone Thursday when the Census Bureau reported the median household income in 1998 surged 3.5 percent to an all-time high of $38,900, surpassing the previous peak in 1989. 

The government's closely watched poverty rate also showed a sharp decline last year. More than a million fewer Americans had incomes below the federal poverty level. 

Although there were still more Americans living in poverty than a decade ago, the percentage now stands at 12.7 percent, its lowest level since 1979, when it was 11.7 percent. 

An economic expansion that, if it continues to next February, will rank as the longest in U.S. history is showering its benefits on nearly every income group and racial category. The 1998 survey represented the fourth straight year that American families have posted solid  income gains. 

"We've seen a substantial increase in working people's incomes the past few years, a change from the early 1990s when there was a profits boom and rising incomes at the top, but not for anyone else," said James Galbraith, an economist at the University of Texas.  "What this report shows is that when we get to full employment, incomes for average and low-income workers go up." 

The only blot on the latest report was among African-American households, whose median income was unchanged from the previous year. However, the 
group's median is still at an all-time high set in 1997. 

Since the rising tide lifted nearly all boats at about the same rate last year, the distribution of income in the U.S. was left unchanged in the latest census survey. 
Between 1980 and 1995, the share of total national income going to the top 20 percent of the population grew rapidly while for everyone else it either stayed the 
same or declined. 

But the disparity in income was far from President Clinton's mind as he stepped to a White House podium Thursday to take credit for the economy's bounty. 

"The best news is that these gains are finally being showered on all groups, from the wealthiest to the poorest," Clinton said. 

The median family--half earned more, half earned less--saw its income rise $1,300, or 3.5 percent, to $38,885 last year, in percentage terms the largest one-year gain since 1986. The median Hispanic household posted the best gains with a 4.8 percent increase to $28,300, a return to its all-time high after a sharp falloff last year. 

The median white household saw its income rise 3 percent to $40,912, while the median for Asian households rose 1.5 percent to $46,637. The median income for black households remained virtually unchanged at $25,351. 

Median income rose in all four regions, with the biggest increase in the Midwest, where incomes climbed 4.4 percent to $40,600. Incomes increased 3 percent to $41,000 in the West; 2.8 percent to $40,600 in the Northeast; and 2.6 percent to $35,800 in the South. 

There were 1.1 million fewer Americans living in poverty in 1998, which was set at $16,660 for a family of four. The total fell to 34.5 million, or 12.7 percent of the population. 

The black poverty rate fell to 26.1 percent, the lowest on record. The Hispanic poverty rate fell to 25.6 percent, the lowest level for that group since 1979. 

The Midwest continues to do better than the nation as a whole in reducing poverty. Illinois' average poverty rate over the last two years was 10.6 percent, compared to 13.0 percent nationally. 

However, some Midwestern states are doing considerably better. Wisconsin posted an 8.5 percent average poverty rate for 1997 and 1998; Indiana's was 9.1 percent; and Iowa's was 9.3 percent. Michigan had a 10.6 percent average rate for the two years. 

The number of children living in poverty also declined last year, although children under 18 as a group remain disproportionately poor in America. About 13.5 million, or 18.9 percent of all children, lived in poverty last year, down from 14.1 million, or 19.9 percent, in 1997. The poverty rate for children peaked at 22 percent in 1993. 

"We welcome the improvements in the U.S. child poverty rate since 1993, but we must also underscore that today's child poverty rate remains 35 percent higher than the low of 14 percent that was achieved in 1969," said J. Lawrence Aber, director of the National Center for Children in Poverty. 

The census report also evaluated the impact of government benefits on reducing poverty in America.  Using an experimental index that takes into account the earned income tax credit, which works like a negative income tax for the poor, the overall poverty rate fell to 12.5 percent in 1998, slightly below the official 12.7 percent rate. 

Clinton, hailing the census estimate that the tax credits have been responsible for lifting 4.3 million people out of poverty since 1993, castigated Congress for moving to limit the program. Republicans have proposed delaying payments of the earned income tax credit to help balance next year's budget. 

"Delaying their earned income tax credits will only put one more roadblock in the way of hard-working families," Clinton said. 

Income inequality was left unchanged. The top fifth of households raked in 49.2 percent of national income in 1998, a statistically insignificant change from the previous year. Other groups also were unchanged: the bottom fifth earned 3.6 percent of all income; the second fifth 9 percent; the middle fifth 15 percent; and the fourth fifth 23.2 percent. 

The distribution of total national income among the strata of wage earners has remained fairly constant since 1993. But it grew sharply during the previous two decades. 

According to an analysis by the liberal Economic Policy Institute, real family income has grown only 0.7 percent for the bottom fifth of the population since 1989, while the middle fifth saw its income rise 3.8 percent and the top fifth gained 15.6 percent. For the most affluent families, those in the top 5 percent of the income scale, average income has grown 26.3 percent since 1989. 

The least well-off families, those in the bottom fifth, saw income grow by 2.3, percent compared to 3.1 percent for the middle fifth and 3.3 percent for the top fifth. 

"These excellent economic conditions have failed to lower our historically unprecedented rates of income inequality," said Jared Bernstein, an institute economist. "The strongest economy in 30 years (has been) unable to ameliorate this serious economic and social problem." 

INCOME AND WEALTH INEQUALITY  

According to the Federal Reserve, in 1990 the richest 1 percent of America owned 40 percent of its wealth -- the greatest level of inequality among all rich nations, and the worst in U.S. history since the Roaring Twenties. Furthermore, the richest 20 percent owned 80 percent of America -- meaning, of course, that the bottom four-fifths of all Americans owned only one fifth of its wealth.  

Another revealing way of expressing this statistic is that the top 1 percent owned more than the bottom 90 percent combined.  

What caused this growing inequality? The most underlying reason may be that it takes money to make money. This is why many call for a progressive tax system: to redistribute at least a percentage of the wealth back to the middle class, thereby avoiding modern serfdom. We will explore the tax cuts for the rich in detail in the next section. But tax cuts are not the only way to polarize wealth. There are several others, and they can all be lobbied through Congress. A complete list follows in More.  

Tax progressivity was highest in the decades after World War II, when the rich were taxed a stratospheric 88 percent for nearly two decades. This was also an era in which the U.S. economy was a juggernaut, and the American Dream was indisputably alive and well. Because of this, most economists do not believe that high tax rates on the rich are bad for the economy.  
Personal income tax rate for top bracket 

Years      Percent 
1945          91% 
1946-63    88 
1964-81    70 
1981-86    50 
1988         28 
1991         31 

The following chart shows the effectiveness of a progressive tax system. When the top rates were truly high from 1950 to 1978, American income at all levels grew at about the same pace. But when progressivity was lost in the 80s, the income of the poor began falling, while that of the rich continued growing.  

Income                   Growth by Quintile  

Quintile              1950-1978     1979-1993 

Lowest 20%          138%             -15% 
2nd 20%                98                  -7 
3rd 20%                106                -3   
4th 20%                 111                5 
Highest 20%           99                 18 

Economists have a standard measure of income inequality, called the Gini Index. In this index, the higher the number, the greater the income disparity between the rich and the poor. (0 = perfect equality, 1 = only one person in the economy has all the income.) 

Gini Index of Income Inequality 
           Before    After  
           Taxes     Taxes 
1979    0.403    0.352 
1980    0.401    0.347 
1981    0.404    0.350 
1982    0.409    0.359 
1983    0.412    0.368 
1984    0.413    0.372 
1985    0.418    0.381 
1986    0.423    0.404  
1987    0.424    0.380  
1988    0.425    0.384 
1989    0.429    0.387  
1990    0.426    0.381  
1991    0.425    0.379 
1992    0.430    0.381 

As mentioned earlier, the U.S. economy slowed in 1973 for reasons still not completely understood. The average weekly earnings of nonsupervisory workers -- about four-fifths of the civilian workforce -- peaked in 1973, and have been falling ever since:  

Average weekly earnings of nonsupervisory workers, total private industry, 1982 dollars 

1965  $290    
1970   297  
1973   315  (Peak)   
1975   292   
1976   297 
1977   299 
1978   301 
1979   291 
1980   274 
1981   271 
1982   267 
1983   272 
1984   274 
1985   271 
1986   271 
1987   269 
1988   266 
1989   263 
1990   259 
1991   255  
1992   255  (Nadir) 

The above chart is especially useful in rebutting supply-siders who use other measures to argue that everyone's incomes rose during the 80s. For detailed refutations of these other measures, see More. 
Average hourly earnings also fell over the 80s: 
Average hourly earnings, total private industry (1982 dollars) 

1973  $8.55 
1980   7.78 
1985   7.77 
1990   7.52 
1993   7.39 

Presidents Reagan and Bush froze the minimum wage for 9 years, essentially giving those workers a pay cut each year as inflation bit into their paychecks. In 1992 dollars, the 1963 minimum was $5.74 -- or 35 percent more than it is today.  

Raises in the Federal Minimum Wage 
                  Percent of average 
Year     New rate     production earnings 
1950*    $0.75               54% 
1981      3.35                 43 
1990      3.80                 35 
1991      4.25                 38 
1994        --                   35 
*For brevity's sake, this chart omits the 15 minimum wage increases between 1950 and 1981. No newly introduced minimum wage has ever been lower than 35 percent of the average wage, although old minimum wages have certainly gone below this. 

Economists previously believed that raising the minimum wage would cost jobs, especially among teenagers. However, recent research suggests that the truth might be a bit more complicated than this, and that when the minimum wage falls too low (due to inflation), it can be raised safely. .  

On the other hand, the salaries of executives skyrocketed during the 80s:  

Salaries and benefits of corporate CEOs as a multiple of the average factory worker's6 
1980   30 times 
1991   130-140 times 
And these super-salaries did not come primarily from greater profits, but from a larger slice of the profits:   

Executive Compensation as a Share of Corporate Profits7  
1953   22% 
1987   61 
The following chart shows the growth in the number of millionaires and billionaires during the 80s. Notice that their numbers skyrocketed in the years 1985-87.  

Approximate number of millionaires and billionaires in the U.S., 1978-19888  
Year     Millionaires     Decamillionaires     Centamillionaires     Billionaires  
1978      450,000                                              1  
1979      519,000  
1980      574,000                                              ?  
1981      638,000                                              ?  
1982                                38,885                    400                      13  
1983                                                               500                      15  
1984                                                               600                      12  
1985      832,000                                            700                      13  
1986                                                               900                      26  
1987     1,239,000           81,816                  1,200                     49  
1988     1,500,000         100,000                  1,200                     51 

Percent Increase of Combined Salaries by Income Bracket, unadjusted for inflation (1980s) 

Income Bracket          Percent Increase 
$20,000 - 50,000              44% 
200,000 - 1 million            697  
Over $1 million                 2,184 

Viewing the above chart more broadly, the total wages of all people who earned less than $50,000 a year -- about 85 percent of all Americans -- increased an average of 2 percent a year from 1980 to 1989, which did not even keep pace with inflation. By contrast, the total wages of all millionaires shot up 243 percent a year. 
Defenders of the Reagan era claim that income mobility in the U.S. is great enough to overcome income inequality. That is, if people move up and down the income scale to a significant degree, then, over a lifetime, your average income is going to match my average income. However, there are a few flaws with this argument. First, income mobility in the U.S. is not even close to making this a reality. (More.) Second, one could hardly justify slavery on the basis that, for 1 percent of your life, you, too, will be the master. 
So who gets ahead, and who gets left behind? The single most decisive factor is education:  

Education, Experience and Wages 
                                                                  Percent change in earnings 
New Workers (1-5 years experience)         from 1979 to 1987 
Less than 12 years of school                       -15.8% 
High school degree                                      -19.8 
16 or more years of school                         +10.8 

Old Workers (26-35 years of experience) 
Less than 12 years of school                       -1.9 
High school degree                                     -2.8 
16 or more years of school                        +1.8 

Some people claim that if the poor want to get ahead, they should just return to college. However, the job market can bear only a limited percentage of educated professionals, and there is already a glut of college grads in most fields. This makes competition the hallmark of today's meritocracy, which critics call destructive in its extreme form. 

Although the following chart is one of the largest, it is also one of the most important. This chart shows how the incomes of most American families stagnated or fell during the 80s, with gains posted only by the top 20 percent. It also reveals how supply-siders lie with statistics, but more on this in a moment. For those unfamiliar with the term "decile," the 1st decile is the poorest 10 percent of the population, the 2nd decile the 2nd poorest, and so on.  

Average Income Level and Effective Federal Tax Rates in Each Family Decile by Year, in 1988 dollars (Corporate income tax allocated to capital income) 
  
                                      Percent change: 
Decile     1977       1977 - 80     1980 - 85      1990        90         90        90 
1st        $4,277         3,852          3,568          3,805    -11.0%    -1.2      6.7 
2nd         8,663        7,982           7,717          8,251     -4.8         3.4       6.9 
3rd        13,510      12,530         12,230        13,110     -3.7         4.6      7.2 
4th        18,980      17,240         17,010        18,200     -4.1         5.6      7.0 
5th        24,520      22,380         22,070        23,580     -3.8         5.4      6.9 
6th        30,430      28,100         27,620        29,490     -3.1         5.0      6.8 
7th        36,880      34,370         34,620        36,890      0.0         7.3      6.5 
8th        44,820      42,050         43,370        46,280      3.3       10.1      6.7 
9th        56,360      53,660         56,190        59,860      6.2       11.6      6.5 
10th      111,100   107,900      123,200       133,200    19.9      23.4      8.2 
top 5%  149,500   146,000      172,100      187,400     25.4     28.3      8.9 
top 1%  319,100   321,400      415,700      463,800     45.4     44.3     11.6 
All         34,830     32,850        34,480         37,050      6.4      12.8       7.4 
As you can see, the majority of American families were worse off in 1990 than they were in 1977, at the beginning of Carter's presidency!  

When supply-siders talk about family income in the 80s, they are always careful to use 1980 as a benchmark for their comparisons, and never 1977. This is because the recession of 1980-82 was the worst since World War II -- perfect for comparing the later Reagan years in their best light. But comparing the Reagan recovery to the non-recession year of 1977 puts everything in perspective: most Americans lost ground, even at the end of the recovery.  

Which leads to the question: are presidents responsible for creating recessions and recoveries? If yes, then Reagan deserves credit for rescuing the economy from Carter's mismanagement. But if not -- which is what almost all mainstream economists believe -- then the supply-sider's praise of the 80s rings hollow. In that case, it is natural for recessions to be followed by recoveries, and supply-siders might as well take credit for the incoming of the tide. In reality, the Chairman of the Federal Reserve Board is far more responsible for influencing recessions and recoveries.  

Supply-siders have a partial rebuttal to the above chart. They point out that family size decreased during the 70s and 80s, which means that less family income would cover fewer people, and therefore not lower their standard of living. The following chart shows the long-term decline in average family size:  

Average Family Size12 
1970   3.58 persons 
1975   3.42  
1980   3.29 
1985   3.23 
1990   3.17 

But this counter-argument runs into a few others. First, falling individual income is responsible for declining family size, so to say that families are maintaining their standard of living despite everything is missing the point. Second, the rather small decline in family size does not explain or justify the massive income gains seen by the top 1 percent, while 80 percent of all families are treading water.  

The following chart shows how large a slice of the economic pie everyone is getting. More specifically, it shows how much of the total national income that each 20 percent of American families are making. As you can see, everyone's slice of the pie grew smaller in the 80s except the top 20 percent, which grew. And the top 1 percent was responsible for most of that quintile's growth, as the last chart reveals.  

Percent of National Aggregate Income Received by Each Quintile (by Family, in 1992 dollars) 
Quintile             1980   1992 
Lowest 20%      5.2%   4.4 
2nd 20%           11.5   10.5 
3rd 20%           17.5   16.5 
4th 20%           24.3   24.0 
Top 20%          41.5   44.6 
Top 5%           15.3   17.6 

Shares of Pretax Adjusted Family Incom 
Quintile            1977     1980    1985    1988    1989 
Lowest 20%     4.7%      4.3      3.7       3.5      3.5 
2nd 20%         10.8       10.5      9.5       9.1     9.2 
3rd 20%         16.3       16.0     15.1     14.6    14.7 
4th 20%         22.9        22.9    22.2     21.7    21.7 
Top 20%        45.6       46.7    50.1     51.4    51.4* 
Top 1%           8.3         9.2     11.6     13.4    13.0 
*Table reads that 51.4 percent of all adjusted pretax family income in 1989 belonged to families in fifth or highest quintile. Quintiles are weighted by persons.  

A common defense of these charts runs something like this: "How equally the pie is sliced is not as important as the fact that the pie itself is growing. Our GDP grows almost every year, so everyone benefits." But this argument becomes incoherent when paired with the claim that America should be an unrestricted meritocracy. If competition is the primary basis of American society, then how equally the pie is sliced becomes significantly more important than the size of the pie itself.   

An even stronger refutation is that, over the 80s, as the pie has grown, 70 percent of the extra growth has gone to the top one percent, with the rest going to the next 5 percent or so. The middle class share has simply stayed the same size.15 This means that the average American worker is working harder, producing more, and creating overall growth, but is not seeing any of the rewards. And this largely explains why middle class anxiety, voter anger and economic uncertainty are gripping the nation today.  
___________________  
1 Internal Revenue Service.  
2 U.S. Bureau of the Census, Current Population Survey.  
3 U.S. Bureau of Labor Statistics. The "before tax" column is Measure 1 of the Gini Index. The "after tax" column is Measure 15, which measures inequality after all taxes and government transfers.  
4 U.S. Bureau of Labor Statistics, Bulletin 2445, and Employment and Earnings, monthly, June and March issues.  
5 U.S. Department of Labor, Employment Standards Administration, Minimum Wage and Maximum Hour Standards Under Fair Labor Standards Act, 1981, annual and unpublished data.  
6 Kevin Phillips, Boiling Point (New York: HarperPerennial, 1993), p. 251.  
7 Internal Revenue Service.  
8 The statistics and estimates for millionaires are drawn from multiple sources, according to Kevin Phillips in The Politics of Rich and Poor (New York: Random House, 1990), Appendix A, p. 239. The decamillionaire data for 1982-88 comes from Thomas J. Stealey, Marketing to the Affluent (Homewood, Ill.: Dow Jones-Irwin, 1988). The remaining data comes from Forbes and Fortune surveys of the richest Americans during the 1980s.  
9 Internal Revenue Service.  
10 Calculations based on L.F. Katz and K.M. Murphy, Changes in Relative Wages, 1963-1987: Supply and Demand Factors (Cambridge, Massachusetts: National Bureau of Economic Research, 1990).  
11 Congressional Budget Office, House Ways and Means Committee, 1992 Green Book.  
12 U.S. Bureau of the Census, Current Population Reports, P20-477.  
13 U.S. Bureau of the Census, Current Population Reports, P60-184; and unpublished reports.  
14 Congressional Budget Office tax simulation model, cited in U.S. House Ways and Means Committee, 1992 Green Book, p. 1521.  
15 This is the so-called "Krugman calculation," which has successfully resisted various statistical challenges by supply-siders. See Paul Krugman, Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations (W.W. Norton & Company, 1994), p. 138.  

EXPLORING THE GINI INDEX OF INEQUALITY WITH DERIVE 

Robert Leslie 
Department of Mathematics 
Agnes Scott College 
Decatur, GA 30030 
RLeslie@agnescott.edu 
Abstract 

The Gini index of income or resource inequality is a measure of the degree to which a population shares that resource unequally. It is based on the statistical notion known in the literature as the "mean difference" of a population. The index is scaled to vary from a minimum of zero to a maximum of one, zero representing no inequality and one representing a maximum possible degree of inequality.  
In order to begin a derivation of the Gini index, consider the lowest 20% of the population, ranked by per capita income, and ask what portion of the total income is attributible to this 20%? If the corresponding proportion of total income as a percentage is also 20% we will call this fair. If it is less than 20% we will say there is income inequality. It cannot be more than 20%. In general, to measure this, we define a function, g(a), to be the fraction of the total value of a certain resource belonging to the lowest (100a)% of the population as ranked by per-capita ownership of that resource. This curve is defined on the interval [0,1] and is referred to as the Lorenz curve of the resource distribution. Here I'll always convert the resource into money, usually dollars. Then the Gini index of inequality is a measure of the difference between g(a) and the ideal which is assumed to be a, (ie. same percentage of the resource as portion of the population).  

Presented at the 8th International Conference on Technology in Collegiate Mathematics, Houston, Texas, November 1995. 

MEASURES OF INEQUALITY 

Consider the distribution of income.  
How can we characterize the inequality of such a distribution?  
Begin by considering the distribution of the population and the distribution of the income.  

Can partition the population by wealth, and then ask what percentage of the total income earned in the population is earned by the top x%, where x is usually 5 or 10%.  

Another measure focuses on the median income, then finds the midpoint of the top tenth income earners, and then computes the ratio of the median income of the top tenth income earners to the median income of the population.  The same is done for the bottom tenth income earners.  One can then compute the “index of inequality” by taking a ratio of the two numbers: median income of top tenth (expressed as a percentage of the popoulation median) to the corresponding value computed for the bottom tenth.  (Hacker, p.53-54.)   

How to calculate:  
Take the income midpoint of each decile of population and multiply by the number of the population in that decile.  That gives the total income generated, if not directly available.  
Then compute the proportion of the total found in each decile.  
Need a distribution of population and income.  

Gini index  

Coefficient of Variation  

Sources  
Freeman, Richard. 1999. The New Inequality.  
Galbraith, John Kenneth. 1998. Created Unequal: the Crisis in American Pay.  
Garvey, George. 1952. “Inequality of Income: Causes and Meassurement.” Studies in Income and Wealth 15:27-47.  
Hacker, Andrew. 1997. Money: Who has How Much and Why.  NY: Scribner.  
IRS Statistics of Income Bulletin.  
Jencks, Christopher. 1972. Inequality: A Reassessment of the Effect of Family and Schooling in America.  NY: Basic Books.  
Levy, Frank. 1999. The New Dollars and Dreams. (revised 1987 ed.)  
Shutz, Robert R. 1951. “On the measurement of income inequality.” American Economic Review 41:107-122.  
  
LOTTERY, NOT SAVING, SEEN AS THE TICKET TO WEALTH 

Most low- to middle-income Americans believe they have a better chance of accumulating $500,000 by winning a lottery or sweepstakes than from savings and investing, according to a national poll released Thursday. 

Such financial ignorance and excessive consumer debt have resulted in half of the nation's households building up less than $1,000 in net financial assets, warned Stephen Brobeck, executive director of the Consumer Federation of America. 

"Most Americans are now aware of the consumer debt trap and the need to build wealth but don't believe they can do so," said Brobeck. "There is a failure to appreciate the time value of money." 

The non-profit consumer federation and the financial services firm Primerica released the poll and a related study of household wealth. 

The research showed that millions of Americans are spending as much as they make, and often more, rather than taking advantage of widely available ways to build up financial worth. 

The study, "American Family Wealth," is based on 1995 census data, the latest available. It showed that a family with the median annual income of about $29,000 had net financial assets of only about $1,000.  These assets were calculated by adding the value of money in the bank, stocks, bonds and other securities and subtracting consumer loans, credit card debts and other unsecured debts. Home equity and mortgagedebt were not included in the calculation. 

The median net wealth of all families--which includes home equity, other real estate and vehicles--is about $35,500, the study found. 

Neither net assets nor net wealth included any pension funds that a family might have either in 401(k) accounts or defined benefit accruals. 

Not surprisingly, family wealth is closely associated with family income. The fifth of families with the lowest incomes ($13,000 or less) had zero net financial assets and a median net worth of $3,000.  The top fifth, families with incomes of $55,000 or more, had median net financial assets of $18,000 and median net worth of $118,000. 

However, Brobeck said this disparity could be eased if low- and middle-income families understood the benefits of saving and investing small amounts of money over a long period of time. For instance, he said, saving $50 a week for 40 years and investing it at 9 percent annually would accumulate over $1 million. 

The poll found that 51 percent of people with household incomes of $35,000 or less thought they stood a better chance of winning a lottery than of saving and investing enough to accumulate $500,000 over a lifetime.   

YOUR PAYCHECK AND YOUR BOSS'--YOU JUST DON'T WANT TO KNOW 

Geneva Overholser 

Here's a remarkable fact: The average U.S. top executive makes 419 times what he pays his average worker. Disproportionality on such a scale is what historical movements are made of. But no such movement stirs the America of 1999--perhaps because the good economic news is so abundant. 

The Census Bureau reported recently that rising incomes have lifted 1.1 million Americans out of poverty in the last year. The percentage of people below the official poverty line fell to its lowest level since 1989. Yet the galling lopsidedness of the resources remains: Economic inequity is resistant to the happy effects. The income gap 
between rich and poor is bigger than at any point in 20 years. And the gap between the pay of the average worker and the pay of big executives has grown astonishingly wide. 

A study earlier this fall by the Center on Budget and Policy Priorities examined data from the Congressional Budget Office on income disparities. It found that the richest 2.7 million Americans will get as much after-tax income this year as the lowest-income 100 million. Even more imbalanced than disparities in income are disparities in wealth. While the top 1 percent of households receive 13 percent of the after-tax income, they hold almost 40 percent of the nation's wealth. 

The closer you look at the difference between the lives of the haves and the have-nots--or between the have-a-lots and the have-a-littles--the more out of whack it appears. A pro-labor think tank took a look at the pay gap between top executives and the average worker recently, and found that the ratio of the pay of top executives 
to that of workers has zoomed from 42-1 in 1980 to that eye-catching 419-1 last year. 

As the Institute for Policy Studies noted, if worker pay had risen at the same pace as executive pay, workers today would average more than $110,000 year--instead of the $29,000 they do average. The minimum wage, if workers had kept pace with big shots, would be $22.08 an hour--instead of $5.15. 

Much as we like to focus on what has trickled down, what has pooled at the top is far more impressive. The Wall Street Journal reported last summer that the number of Americans with adjusted gross incomes of $1 million or more in 1997 was 142,556--nearly double the total for1995. 

When the average chief executive of a large company is making $10.6 million--last year's figure--and his pay is going up 36 percent--as it did in 1998 alone--talk of the value of hard work is empty talk. At least it must seem so to the average blue-collar employee, whose pay rose 2.7 percent last year. 

In good times, people put up with a lot. But it's hard to imagine such imbalance can go on forever; the resentment-breeding potential is too great. 

Meanwhile, it breeds worse than resentment for a remarkable proportion of America's kids to whom poverty brings unhappiness, hunger and hopelessness. Perhaps this is where the income inequity will most forcefully connect with the political campaign now before us. 

We've heard a little bit about poor kids from our politicians--specifically on providing them with health insurance. But we haven't heard nearly as much as the challenge demands. Nearly one in four of America's kids below 6 is growing up in poverty. Between ages 6 and 18, the number is one in five. Add to that the number of 
kids growing up in "near poverty," and almost half of America's kids are in the pool--more than in any other Western nation. 

This is the inexcusable truth, prevailing even in our boom times, to which a new book seeks to draw our attention. 

"Lives on the Line: American Families and the Struggle to Make Ends Meet," by Martha Shirk, Neil Bennett and J. Lawrence Aber, profiles 10 poor families with children and seeks to challenge our assumptions about what makes--and what keeps--them poor. 

It's a compelling experience, reading these stories of struggle and defeat and juxtaposing them with the lives of America's mega-rich--so 
many galaxies away, in the very same country. 

Could it be that we hear so little of these needs in the campaign because this campaign itself is inordinately shaped by money, the higher the sum, the better--just like America?