Rich Get Richer, Poor Stagnate

Two think tanks report the booming stock market is widening the income gap between the poorest and richest U.S. families, reports CBS News Correspondent Dan Raviv.

The Wall Street factor makes New York the state with the biggest gap between rich and poor. But that gap grows in almost every state.

That's according to numbers, crunched by the Economic Policy Institute and the Center on Budget and Policy Priorities.

Income for the poorest families - defined as two or more relatives living together - rose $110 to $12,990 during the 10-year period, ending in 1998. For the richest families it increased by $17,870, to $137,480, more than 10 times that of the poorest sector, the report found.

"The benefits of this (economic) growth have not been evenly distributed," said the Center's Elizabeth McNichol, one of the study's authors. "The incomes of the poor and middle class have fallen or stagnated."

She said in the 10-year period, the rich, on average, had an income-rise of 15 percent.

"Incomes of families at the top of the scale - the richest one-fifth - increased significantly (15 percent in the 1988-1998 period) while the incomes of the poorest families barely increased, less than 1 percent in the 10 years," she told CBS Radio News.

McNichol attributed the widening gap to Wall Street's long-running bull market, which favors wealthy investors; lower-paying service jobs replacing manufacturing jobs; and the largely stagnant minimum wage.

The gap between rich and poor was widest in New York, with the poorest fifth earning $10,770, down $1,970, while the wealthiest group earned $152,350, up $19,680. Income was most evenly distributed in Utah, where the poorest families had incomes of $18,170 and the richest $125,930.

The income gap narrowed in just three states: Alaska, Louisiana and Tennessee.

But the libertarian Cato Institute says these numbers are distorted to make a "spectacular economy" look bad. It adds that the rich and the poor are getting richer.

"The rich are getting richer but the poor are getting richer too in this expansion," said Stephen Moore, director of social policy for Cato.

The Center on Budget and Policy Priorities and the Economic Policy Institute are nonprofit, nonpartisan organizations, pushing for changes in tax laws and other federal policies to benefit low-and moderate-income families.

The study used before-tax data from the U.S. Census Bureau. The figures were adjusted for inflation.

The income gap has made its way into presidential politics. Last weekend, Arizona Sen. John McCain lashed out at the tax plan of his Republican rival, Texas Gov. George W. Bush, saying it would do nothing to alleviate the widening gap between the "haves and the have-nots." The Bush campaign countered that McCain was engaging in "class warfare."

Democrats Al Gore and Bill Bradley also have talked about the need to ensure that the naion's poorest residents aren't left behind by the booming economy.

McNichol said increasing the minimum wage would help bridge the gap. Ten states and the District of Columbia currently have minimum wages above the $5.15 national rate. The Senate last year passed a $1 minimum wage increase over three years but the House failed to act on the measure.

McNichol also suggested strengthening states' and social safety net programs for low-income workers, such as providing transportation and child care.

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