New study reports rich-poor gap shrinking in California

The Associated Press
Wednesday May 09, 2001

SAN FRANCISCO — The rich are getting richer in California – but so too are the poor, and they’re getting there faster. 

The gap between the two shrank during the late 1990s, though it’s still far greater in the state than the nation as a whole, according to a new study. 

Those conclusions suggest that after years of falling behind, the recent rising economic tide has lifted the poor faster than the rich.  

The study, based on 1999 income data from the Census Bureau, was released Wednesday by the Public Policy Institute of California, a San Francisco-based think tank. 

The study focused on households that earn $25,000 and $88,000 – a range above and below the state’s average $51,000 salary for a family of four.  

Researchers concluded that income grew 18 percent at the bottom, compared with 11 percent in the top. 

That’s to be expected – the poor generally gain more during good times and lose more as the economy bottoms out. But while every segment of the population has earned more since California’s economy troughed in 1994, not everyone has reached a golden state. 

“While inequality has declined in California, it remains higher than it was in previous decades, and it remains higher than in other parts of the country,” said study co-author Mary C. Daly, a senior economist at the Federal Reserve Bank of San Francisco. 

Indeed, upper-middle class Californians earn 3.5 times more than their lower-middle class peers.  

That compares with about three times more nationally. One reason for California’s skewed numbers: since 1969, real income fell 9 percent for those at the bottom of the income ladder, while it rose 37 percent for those at the top. 

Recent waves of immigration explain much about these trends. 

A majority of immigrants to California in the last two decades took up low-skill, low-pay jobs, the study said. Nearly 40 percent of California’s 33.9 million residents lives in a family headed by an immigrant, the Census Bureau reports. 

Will the income inequality grow as the economic surge of the last few years appears to be slackening?  

That appears likely. 

“We can expect, if we do indeed have a downturn, inequality will rise,” said study co-author Deborah Reed, a research fellow at the Public Policy Institute of California. “Hard times are harder at the bottom.” 

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