Did America's Have-Nots Double in 20 Years?

Larry Elder

10/11/2007 12:01:00 AM - Larry Elder

Thirty-four percent of Americans say they belong to the "have-nots." Twenty years ago, only 17 percent of Americans defined themselves this way. What happened?

Apparently party affiliation, race and self-perception play a greater role than one's actual economic condition. The Pew Research Center, the organization conducting the poll, writes that one arrives at this belief, " . . . whether grounded in objective facts or not. . . . Analysis of polling data over the years," writes Pew, "also strongly suggests that the growing perception of societal divide is driven as much by political factors as by economic ones."

Take a look at the lot of the "have-nots." By virtually any criterion, Americans, even poor ones, live considerably better lives than they did even a decade or two ago. In 1995, 66 percent of poor households had air conditioning. Just 10 years later, in 2005, 80 percent of the poor had air conditioning at home. In 1995, 70 percent of poor households owned a car, and 27 percent owned two or more cars. By 2005, almost 75 percent owned cars, and 31 percent owned two or more. About 25 percent of the poor owned an automatic dishwasher in 1995. In 2005, more than 33 percent have a dishwasher. Microwave ownership jumped from 64 percent in 1995 to 89 percent by 2005.

The lowest-income one-fifth of households spend, per person, as much today as the median American household in the early 1970s, after adjusting for inflation. Robert Rector of the Heritage Foundation writes, "Most of America's 'poor' live in material conditions that would be judged as comfortable or well-off just a few generations ago."

What about the rest of America? According to the Congressional Budget Office (CBO), from 1991 to 2005, earnings for families with children increased for the poorest 20 percent by 78 percent, after adjusting for inflation. The second 20 percent saw a 23 percent increase. The middle 20 percent had an 18 percent increase, and the 20 percent above them saw a 22 percent increase. The richest 20 percent enjoyed a 54 percent increase, still less than the very poorest 20 percent. The CBO's stats do not include government benefits, pensions and investment income. It focuses solely on wages and salaries, as opposed to total compensation, which also includes things like health care.

Economics professor Steven Landsburg writes, "By the 20th century, per capita real incomes, that is, incomes adjusted for inflation, were growing at 1.5 percent per year, on average, and for the past half century they've been growing at about 2.3 percent. If you're earning a modest middle-class income of $50,000 a year, and if you expect your children, 25 years from now, to occupy that same modest rung on the economic ladder, then with a 2.3 percent growth rate, they'll be earning the inflation-adjusted equivalent of $89,000 a year. Their children, another 25 years down the line, will earn $158,000 a year."

Yet despite this long-term, across-the-board upward economic mobility, the number of Americans who describe themselves as belonging to the "have-nots" has doubled in two decades. What does all this mean? It says that the offensive and divisive claims of an economic "societal divide" work. When Democratic presidential candidate John Edwards speaks of "two Americas," people buy into it.

The drumbeat that "race plays a part of everything in America" doubtlessly affects the vision of blacks. A 1995 poll found blacks earning $50,000 or more were less likely to say "everyone has the power to succeed" in America than low-income whites.

Edwards and his ilk yap about the gap between the rich and the poor. Yes, the rich do get richer. But so do the poor. This is really about envy. A professor who taught business students once told a story something like this. He asked his class which scenario they preferred. In the first option a country, say, Japan, grows at approximately 7 percent a year, with the United States growing at 4 percent. Option two: Japan growing at 3 percent, and the United States growing at 3 percent. Most students preferred option two, even though it meant America grew less rapidly! Students happily accepted being less well off, so long as nobody else out-gained them.

As for actual, persistent poverty, Edwards and fellow naysayers refuse to face up to a couple of things. The failure to invest in oneself -- to get at least a high school education -- increases the chances of poverty. Similarly, a child born to a poor unwed mother as opposed to a poor married couple faces a far greater chance of growing up poor. We call this behavior.

Government policies like food stamps, AFDC, day care vouchers and health-care programs reward poor behavior. This hurts, not helps, the poor. But as economic demagogues like Edwards demonstrate, terms like "economic divide" and "two Americas" make great sound bites.