The pretax income of a typical middle-income American family with children shrank by $3,152 over the past 11 years after accounting for inflation, according to a congressional study released yesterday.
Last year, that family had $25,836 in income before taxes. In 1973, the typical middle-income family with children had a pretax income of $28,988, calculated using the buying power of 1984 dollars, the report by the Joint Economic Committee said.
The decline in inflation-adjusted income affected all income classes, but was most severe for low-income families and less so for the wealthy, the report said.
"While the reversal that has taken place since 1973 has affected middle-income families, both with and without children, it has been considerably more severe for families with children," the report said. The average loss for all families since 1973 has been $1,724, or about $157 a year.
One reason for the reduction in real income since 1973 has been the poor performance of the economy, compared with economic growth in the 1950s, 1960s and early 1970s, the report said. Since the end of World War II, the inflation-adjusted growth in the gross national product -- the nation's output of goods and services -- averaged 3.4 percent. However, between 1972 and 1985, growth in GNP averaged only 2.7 percent, the report said.
"While there were a number of good years during the period, there have been many poor and mediocre years providing little progress for any but a few small sectors of the economy," the report said.
The study also said that the annual wages and salaries per worker dropped by almost 1 percent each year in a 10-year period ending in 1983. Additionally, although the presence of second wage-earners in families has increased in recent years, their incomes have contributed only modestly to household income because these second earners generally work part-time at low wages, the study said.
The study also said that virtually all of the loss in real income occurred between 1979 and 1985.
However, a study published last year by the Urban Institute showed that from 1980 to 1984 the typical middle-class family's aftertax income rose by about 1 percent. A Republican staff economist on the committee said an analysis of aftertax income per individual would have been a more accurate measure of family income, because it would have reflected the individual tax cuts since 1981 and the reduction in the size of families in the 1980s.
According to the JEC report, the smallest loss occurred in the wealthiest families with children, which lost 1.7 percent in income between 1973 and 1984, although income rose 1.5 percent between 1979 and 1984.
The greatest income loss affected the poorest families, which lost 34 percent of income between 1973 and 1984, the report said.
"This trend is particularly surprising in light of the fact that the period was one in which many women entered the work force and two-earner households grew rapidly among families with children," the study said.
The average income of all black families with children declined from 10.6 percent since 1973, from $20,708 to $18,504, the JEC said. The income of Hispanics fell 6.9 percent from $23,280 to $21,663, while that of whites declined 7.6 percent, from $33,859 to $31,298.
Families with children headed by women fared worse than two-parent families with children, the study said.