There is a widening economic gap in the District between the city's best-off families and everyone else, according to a new study released today that said incomes of poor and middle-class families in the nation's capital have fallen behind inflation.
For the richest fifth of families in the city, average income in the late 1990s was 27 times as high as for the poorest fifth, said the study by two liberal-leaning think tanks, whose work is based on census data. A decade earlier, the richest fifth had 16 times the average income of the worst-off; two decades earlier, they had 12 times as much income on average.
The gap has widened because the incomes of the city's richest families have increased faster than inflation since the 1970s--to an average $203,110 by the late 1990s. But the incomes of the poor have not, declining to an average $7,100. The average income of the middle fifth of families--$36,920--also trailed inflation, the study said.
The pattern in the District is a sharper version of a troubling national trend that has seen income disparities between rich and poor widen for two decades, persisting even during the economic boom that began in the mid-1990s.
Economists say the well-off are reaping gains from the stock market and a competitive job market at the top. Meanwhile, advocates say, the minimum wage has not kept up with inflation, and the poor increasingly are employed in fast-growing, low-paying service jobs such as restaurant and hotel work.
Nationally, the income gap stopped growing in the late 1990s, but it has not narrowed, according to statistics. It is too early to tell whether the growth of the income gap has stalled in the District or in the states, said Elizabeth McNichol, a policy analyst at the Center on Budget and Policy Priorities, which conducted the study with the Economic Policy Institute. Both are based in the District.
The study said the income gap between the top fifth and the bottom fifth grew in two-thirds of states--including Maryland and Virginia--between the late 1980s and the late 1990s. The gap between the top fifth and middle fifth grew in three-fourths of all states, also including Maryland and Virginia.
Some conservative groups have argued that the income gap is not as wide as it seems, because low-income households have non-cash income such as food stamps and housing assistance. However, the report also does not include capital gains, which boost rich families' incomes. And because the report focuses on families, it leaves out households headed by a single person or unrelated people, a growing part of the nation's demographic mix.
Alice M. Rivlin, chairman of the city's financial control board and an analyst at the Brookings Institution, said the income gap is a major problem for the District, as for many cities. Narrowing the gap and reversing the decline of the middle class are crucial to bringing the struggling city back to life, she said.
"Everybody is focused on this being a serious problem," she said. "The question is: How fast can we fix it?"
The shrinking middle class is a problem for many big cities, she said, but "it's more important for us" because the District cannot tax people who work downtown but live elsewhere, so it must rely heavily on its resident income tax.
Rivlin and others take heart from recent signs that the city is turning around--population decline has leveled off, real estate values are soaring, government services are being repaired and crime is going down. But "it's going to take a major effort" to bring the middle class back, she said.
"Those numbers are amazing for the District, and they are pretty distressing as well," said Iris J. Lav, deputy director of the Center on Budget and Policy Priorities. "Even if they are beginning to turn around, there is such a long way to go."
Among the factors at work in the city, she said, is fallout from the crack cocaine epidemic in the late 1980s, when many working-class families fled, leaving some neighborhoods with people too poor to leave. The District's loss of federal jobs has hurt low-income people who don't have transportation to get to the suburbs where new jobs are, she said, and the city has lost some of the few manufacturing jobs it had.
The income gap in the District is even larger than in New York City, despite that city's fabled Wall Street upper class, according to McNichol. In New York, the richest families in the late 1990s had an average income 20 times as high as that of the poor, a ratio that has more than doubled in the past two decades. One reason the District's gap is larger may be because the capital's best-off families made greater gains than those in New York.
Nationally, according to the think tank report, the incomes of the richest 20 percent of American families averaged $137,500 in the late '90s--10 times the average $13,000 income of the poorest fifth.
The report is based on pretax income data from the Census Current Population Survey. Because of small sample sizes, the Center on Budget and Policy Priorities combined data from 1996, 1997 and 1998 and compared the results with data from similar years in the 1970s and 1980s.
Family Income Gap
In most states and the District, the income gap is growing between the richest fifth of families and all others, according to a think tank report based on census data. In the District, the best-off families had 27 times the average income of the worst-off in the late 1990s.
Percentage indicates change since the late 1980s
Richest fifth +37%
Middle fifth -14%
Poorest fifth -17%
Richest fifth +23%
Middle fifth +3%
Poorest fifth +4%*
Richest fifth +13%
Middle fifth -1%*
Poorest fifth -3%*
*rate change not statistically significant
SOURCE: Center on Budget and Policy Priorities; Economic Policy Institute