Income Gap Not Growing, Data Shows

By Fred Lucas | July 7, 2008 | 8:23pm EDT

( - The gap between rich and poor -- a rallying cry for some congressional Democrats wanting to increase mandates on business -- isn't really growing that much, according to data from the U.S. Census Bureau.

From 2001 to 2005 -- the last year data was available -- there was virtually no statistical change in income inequality, based on a statistical test by the Census Bureau, requested and released by Congress's Joint Economic Committee.

The data came out amid calls by the new chairman of the House Financial Services Committee, Rep. Barney Frank (D-Mass.) for the federal government to work to reduce income inequality by requiring companies to pay higher wages, provide better employee health care coverage, and empower unions.

Rep. Jim Saxton (R-N.J.), the top House Republican on the Joint Economic Committee, said Congress should review the actual evidence rather than react to common assumptions.

"A lot has been said about income inequality, but the fact is that it hasn't changed much in recent years," Saxton said Thursday. "Congress should consider this fact before acting on the assumption that income inequality is surging."

Democrats have already specifically pledged to raise the federal minimum wage.

Frank, who will be the most powerful House member in setting the country's economic policy, said his committee would hold hearings into why the top income earners are making so much more than lower earners and what the government can do about it.

Frank is also proposing what he calls the "grand bargain" that will tie trade bills, regulatory relief and other business-friendly legislation to mandates on increased wages, union empowerment and health care coverage.

"This is not to deny that income inequality exists due to a number of factors," Saxton said.

One key factor is a disparity in labor market participation. According to the report, of the bottom fifth of households 58.7 percent have no earners. Meanwhile, of the top fifth, 76.3 percent of households have two or more earners.

"There is often good reason not to work, such as retirement or disability, but obviously households without earners will lack earnings," Saxton said.

Income mobility is also very high, Saxton said, as low wage workers have moved into higher income brackets frequently since 1985.

Other factors should also be considered, Saxton said.

"Inequality in consumption is much less than inequality in income," Saxton said. "The level of consumption in the bottom fifth is nearly twice that of income - indicating that income is not necessarily the best measure of economic well being."

See Earlier Story:
Key Democrat Wants to 'Reduce Inequality' (Jan. 4, 2006)

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