The Census Bureau released its annual income distribution report last Thursday. The good news is income distribution has been essentially unchanged for the last three years. The bad news is this is because every income group is worse off to about the same degree.
Between 2000 and 2003, the share of total income going to the top quintile (20 percent of households) was exactly unchanged at 49.8 percent. The middle three quintiles (the middle class) were slightly better off, raising their share of aggregate income from 46.7 to 46.9 percent. The bottom quintile was slightly worse off, falling from 3.6 to 3.4 percent.
However, the real income of every group is down significantly since 2000, including those at the top. Their income is down almost $5,000 (in 2003 dollars), about the same as for the lower 80 percent of households in total.
Needless to say, there is no reason to cry for those in the top quintile — often characterized as the “rich.” They still are doing very well, with an average income of $147,078 in 2003. However, it is doubtful very many people view this as a rich family’s income, especially when both spouses work.
That is even clearer when looking at the income needed to enter the top quintile — a mere $86,867. Almost any couple where both spouses work full time will come close to that. The Census Bureau finds the median earnings for a male working full time last year was $40,668 and those for females was $30,724, for a combined income of $71,393. So all it takes to be relatively well-to-do in this country today is to work full time and be married to someone else who works full time.
Of course, it is still appalling so many people must scrape by on a mere pittance: The average income in the bottom quintile was $9,996 last year. But this is deceptive for many reasons.
First, it excludes almost everything society does to help the poor. The Census data count money income only and exclude in-kind benefits, such as food stamps, Medicare, Medicaid and public housing. Poverty data have this same limitation.
In years past, the Census Bureau has simultaneously released estimates of how including in-kind benefits affects income levels and the poverty rate. For some reason, these data were left out of this report.
Also excluded is wealth. There are many in America, mainly the elderly, who have low incomes but are well off because they may own their homes free and clear and have other assets.
Finally, these Census data tend to imply people are stuck in the same income group year after year, when there is substantial upward mobility. Almost everyone spends some time in the bottom quintile when starting out in life or suffering a temporary loss. But people move up the income ladder and rebound from setbacks.
In previous years, the Census Bureau simultaneously released income mobility data. But it has not done so this year. Earlier data have shown a large fraction of those in poverty or a low income quintile one year were out of poverty or in a higher quintile within a year or two.
Most people know this, even if the Census Bureau doesn’t say so. A 2003 Gallup poll found 31 percent believes it is very likely or somewhat likely they will become rich. No doubt an even higher fraction believe their children have a good shot at it.
Indeed, almost every generation of families is better off than the earlier one. Not only have real incomes risen sharply over time, but most people are well aware they are better off than their parents. A 1996 Reader’s Digest poll found 18 percent considered themselves to be in the lower class as children, but only 6 percent put themselves in that class as adults.
These Census data will probably be grist for the campaign, as Democrats charge Republican tax cuts have worsened income distribution. But voters should be aware these data tell us nothing about how taxes affect incomes. Taxes are also excluded from the calculations. All figures are before taxes.
Thus not only does the Census Bureau exclude most of what we do to help the poor, it excludes everything we do to bring down the rich and equalize incomes. In truth, it tells us very little about wealth and poverty in America.
Bruce Bartlett is senior fellow with the National Center for Policy Analysis and a nationally syndicated columnist.
