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Income Inequality Grows in Oregon

News Release
December 16, 1997

The Rich Get Richer While The Poor and Middle Class Lose Income Over Last Two Decades

"Income inequality" has been increasing in Oregon for nearly two decades according to a new study by the Washington, D.C.-based Center on Budget and Policy Priorities (CBPP), a national nonpartisan research organization and policy institute. Low- and middle-income families in Oregon are receiving a steadily smaller share of Oregon's income pie.

The study compares average incomes of families with children in five income groups ("quintiles") adjusted for inflation to 1997 dollars. The poorest families ("low-income" families) have incomes in the bottom 20 percent of the income distribution, the "middle-income" families are those in the third quintile, and the "highest-income" families are those in the top quintile.

"While Oregon's economy has grown over the last 20 years, the benefits have been realized primarily by those who have the highest-incomes," noted Charles Sheketoff, Executive Director of the Oregon Center for Public Policy. "The results of this study echo those of a 1996 report by Oregon Employment Department economists that showed growing income inequality in Oregon," said Sheketoff.

Oregon is one of 16 states with an income decline of more than 20 percent for the lowest income families from the late-1970s to the mid-1990s. During that same time period, the highest-income families saw their income increase by 15 percent.

"Even though Oregon raised the minimum wage in 1991, low- and middle-income Oregonians lost income from the mid-1980s to the mid-1990s when adjusted for inflation," said Sheketoff. Sheketoff noted that the CBPP study shows that the average income of Oregon's lowest income group declined by over $1800, or 16 percent from the mid-1980s to the mid-1990s, and that middle-income Oregonians' income declined by over $3,250, or 8 percent, during that same period.

Sheketoff noted that in addition to falling income, low- and middle-income Oregonians earned a smaller share of the state's total family income. "Low-income Oregonians saw their share of income decline over the last 20 years, as well," said Sheketoff, "from 5.4 percent of the state's total family income to 4.3 percent. Middle-income Oregonians saw their share of the state's income decline from 18.1 percent to 16.9 percent, while the highest-income Oregon families enjoyed an increasing share of the state's income, from 37.8 percent to 43.9 percent."

"Low-income Oregon families with children saw a $2,580 loss in income from the late-1970s to the mid-1990s, a 21 percent decline," said Sheketoff. "If low-income Oregonians had maintained the same share of income -- 5.4 percent instead of 4.3 percent -- the loss would have been only $190," he added. During that same time period, middle-income Oregon families lost $4,850, or 11 percent of their income, while the highest-income families with children saw their incomes climb by $12,500, or 15 percent.

"As the Employment Department economists noted in 1996, this income inequality data shows that the economic health of Oregon cannot be assessed by looking at total, per capita or other measures of 'average' income," said Sheketoff. "Benchmarks and other measures of 'average' income do not paint an accurate picture of the economic health of many Oregonians," he added.

"As the Governor and others study our tax system, income inequality should not be ignored," commented Sheketoff. Sheketoff urged the Governor and those studying Oregon's tax system to consider the distributional impact of taxes and tax code changes. "To reduce after-tax income inequality, policymakers must have accurate tax incidence information," said Sheketoff.

Sheketoff pointed out that government policies can help reverse the trend of increasing income inequality. "Oregon's newest minimum wage increases and state earned income and child care tax credits can help moderate and offset the income inequality trend and allow all Oregonians to more fully enjoy the benefits of a growing economy," said Sheketoff. "The growing disparity between high-income families and low- and moderate-income families should give policymakers cause for concern about abandoning job training and education efforts for welfare recipients. The 'education premium' is more important today than ever before. Putting thousands of untrained workers into the workforce will only exacerbate the income inequality trend," he added.

Sheketoff noted that the report understates the income of both high- and low-income families. The study does not take into consideration capital gains income or earnings in excess of $100,000 for any one job. Thus, an executive with $500,000 income is listed as having only $100,000 income, $400,000 less than the actual income. To a lessor degree the study understates the income of low-income families by excluding non-cash income such as food stamps, school lunches and housing subsidies.

The study, Pulling Apart: A State-by-State Analysis of Income Trends, is available from the Center on Budget and Policy Priorities. The Oregon Center for Public Policy, a non-partisan think tank that analyzes budget and tax issues and their impacts on low to moderate income Oregonians, can provide a summary of the Oregon data.

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