The Census Bureau's annual report on family incomes and poverty is the national score card on the American Dream. The latest report has something for everyone. Optimists can focus on median family income. In 1986 it rose (after adjusting for inflation) 4.2 percent to $29,458. Pessimists can cite the poverty rate -- the proportion of people below the official poverty line. The current rate of 13.6 percent is down from its recent high of 15.2 percent in 1983. But except for the 1980s, it's still higher than any year since 1967.
Here's a statistical snapshot of a two-tiered society: a general prosperity sitting atop a stubborn poverty. The underlying message is that economic growth, powerful as it is, won't cure everything. It won't turn low-skilled workers into engineers or technicians. It won't mend broken families or eradicate crime. Prosperity is not a tonic for every social ill. The implications are sobering. Part of the American Dream is the vision of everyone getting ahead. But everyone isn't. Are we condemned to a permanent social schism?
The best that can be said is that the stark contrast between poverty and prosperity is overdrawn. For all its vigor, the 1980s' economic expansion has been uneven. Parts of the Farm Belt, industrial Midwest and oil patch remain depressed. Poverty rates have risen sharply in states like Iowa, Michigan and Ohio. As regions recover, poverty should subside somewhat. But that caveat doesn't alter the basic picture of a two-tiered society. It's hard to read this year's poverty report optimistically.
Many, of course, blame poverty's persistence on the Reagan administration. True, it cut benefits for unemployment insurance, job training and Aid to Families with Dependent Children. Lower benefits tend to raise the poverty rate by leaving more people below the poverty line -- $11,203 for a family of four in 1986 and $7,138 for a family of two. But the effect isn't huge. Poverty specialist Sheldon Danziger of the University of Wisconsin thinks the Reagan welfare cuts raised the poverty rate by less than 1 percentage point.
The real poverty story is more complex. It involves a lot of statistics, but they're worth wading through to get a complete picture. In the 1960s people believed that strong economic growth and (for those who couldn't work) more generous government payments would progressively eliminate poverty. For awhile, that's what happened. Rising living standards pulled more workers above the poverty line. Higher government payments helped others. Danziger estimates that bigger Social Security checks have accounted for more than two-thirds of the decline in the elderly's poverty rate, from 35 percent in 1959 to 12 percent now.
The unraveling became apparent in the mid-1970s with an explosion of poor, unwed mothers. Some have blamed this on welfare itself, arguing that it enables unwed mothers to survive alone and eases the pressure on the fathers to marry. Others see different causes: more premarital sex; fewer good jobs for unskilled men, making them less capable of supporting a family. Whatever the truth, the rise of unwed mothers and their children kept the poverty rate stable. Between 1959 and 1969 the poverty rate had declined from 22.4 to 12.1 percent. In 1979 it was 11.7 percent.
Now, two other developments make matters worse.
First, the retreat from "full employment" (defined as an unemployment rate of 4 percent or less) has hurt less-skilled workers. The quest for full employment raised inflation by creating excess demand. But that excess demand helped less-skilled workers to get jobs. Consider some figures. In 1959 workers with only an elementary-school education had an unemployment rate six times that of college graduates. In 1973 the ratio was only 3 to 1. Now it's jumped again. In 1986 the rate for elementary-school graduates (12.7 percent) was five times that of college graduates (2.5 percent).
Second, Hispanic poverty is rising rapidly. Although the Hispanic population is only 8 percent of the U.S. total, it's increasing five times faster than the average. Hispanics have always had an above-average poverty rate, but it's risen recently from 21.6 percent in 1978 to 27.3 percent last year. As a result, Hispanics account for about a third of the increase in poverty since 1978. Because they are younger than average and have more children, they represent an even larger proportion (42 percent) of the rise of poverty among children.
Our ignorance of these matters is vast. Does the jump of Hispanic poverty simply reflect the normal pattern of poor first-generation immigrants, who will gradually move into the middle class? Or does it signify a permanent expansion of the underclass? We don't know. Indeed, Hispanic poverty itself is a misnomer. The experiences of Puerto Ricans, Mexicans and others vary.
Nor are there many promising solutions at hand. Congress is now grappling with "welfare reform." The proposals would, among other things, require more work training for welfare mothers. But even Democratic Sen. Daniel P. Moynihan of New York, a principal sponsor, claims only modest benefits for the program. Raising the minimum wage is another proposal. Unfortunately, it would worsen inflation while aiding only a tiny fraction of the poor. In 1986 only 14 percent of the adult poor had year-round work.
Government's power to change personal and family behavior is limited. Everyone knows what has to happen to reduce entrenched poverty. Children need to acquire better basic skills. Long-term unemployment and low earnings are concentrated among the low-skilled. There need to be fewer poor, unwed mothers. Making these good things happen is something else. It's easy to advance ideas: better schools, more tax relief for the working poor, more police (to make poor neighborhoods safer and deter crime as an alternative to work). But how much would these measures help, even if the public were willing to pay for them?
Four years of strong economic recovery should have lowered the poverty rate more. The census report is bound to be used selectively. The family-income statistics will be used to show that living standards aren't stagnating and the middle class isn't disappearing. True. But the poverty figures will be advanced to indicate that the American Dream -- the promise of a better tomorrow -- is bypassing a big part of the population. That's also true. It's a dispiriting picture.