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American poor see major gains after ’80

Of course, the day after I write up the post on ‘American poor,’ the WSJ features a piece that reexamines income growth for the poorest Americans. What follows are my takeaways from the piece, which can also be found at My one sentence conclusion is that the poor have shared in the gains of the past 25 years – especially historically oppressed groups (e.g., black females) – and that chronic American poverty is a much smaller problem demanding a more surgical solution.

When all sources of income are included and taxes paid are deducted, households in the lowest income quintile saw a roughly 25% increase in their living standards from 1983 to 2005: the poor are not getting poorer. Looking at the last two business cycles, this low-income group experienced a 10% rise in their after-tax incomes from 1983 to 1992 and then another 11% rise from 1992 to 2002. Household income gains have been underestimated for a few reasons: number of people living in the households has been shrinking (44% real income gain per capita for low-income households from ’83-’05), and EITC requirements have led to counting more poor families today than in the past. 66% of ’87 most poor have attained a higher tax bracket. Top 1% in ’98 saw a decline in their income of 52% over the next ten years. Only 3% of Americans are chronically poor (impoverished for three years or more). Since ’80, white males have seen the smallest income gains (+9%), black females the largest (+79%).


Filed under: Economic Policy

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