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12.13.02
Politics and Economy:
Middle Class Squeeze
More on This Story:
The Changing Shape of Income Distribution

According to the Department of Housing and Urban Development (HUD), "affordable housing" should cost less than 30% of a family's income, either in rent or a monthly mortgage. A recent article in THE ECONOMIST observed that for many Americans, finding houses in the affordable range is becoming a challenge. There may be a link between the housing problem and other social ills, since families paying more than 30% of their income are considered cost burdened and often have to cut back on necessities such as food, clothing, transportation, and health care.

 San FranciscoBostonWashingtonSan DiegoChicagoDallas
Apartment Rent*1,362942840805762749
Income needed to pay rent**54,48037,68033,60032,20030,48029,960
Janitors' median income20,80020,98715,78716,53618,82414,810
Nurses' median income39,60339,54132,28031,99031,99038,938
Teachers' median income38,29338,58432,78138,58436,73334,861
* Monthly rent for modest two-bedroom
**Assuming 30% of income is spent on housing
Source: Joint Centre for Housing Studies, as reported by THE ECONOMIST.

From 1979 to 1997, the after-tax income of the top 1% of families rose 157%, while the gain for families near the middle was only 10%. And within the top one percent, most of the gains went to the top 1/100th of a percent.

Family Income

Some researchers believe that changes in the labor market and household composition have been the source of increased income inequality. Wage distribution has become considerably more unequal with workers at the top experiencing real wage gains and those at the bottom real wage losses. At the same time, long-run changes in society's living arrangements have taken place also tending to exacerbate household income differences. For example, divorces, marital separations, and the increasing age at first marriage have led to a shift away from married-couple households to single-parent families and nonfamily households. Find out more about Executive Excess.

Another source of changing economic equality may be the rising costs of health care. Learn about changes in health care.

The third major factor in changing income distribution is the job market. Read about Working in America. However, any conclusions about global inequality depend on what statistics analysts choose to look at. As economist Paul Krugman sees it, the broad middle class society we have gotten used to may have just been a temporary aberration of the 1950's and 60's.

Resources

Economic Policy Institute
The Economic Policy Institute is a nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy. The EPI web site includes such web features as analyses of key government data; a weekly presentation of downloadable charts and short analyses; issue guides providing data, charts, fact sheets, and links to relevant publications; opinion pieces and speeches; and tables on historical labor market, earnings, and income data.

Center for Budget and Policy Priorities
A nonpartisan research organization and policy institute that conducts research and analysis on a range of government policies and programs, with an emphasis on those affecting low- and moderate-income people. The Center web site includes reports in the following areas of research: federal budget priorities, federal tax policies, federal welfare policies, state welfare and TANF issues, health policies, state fiscal policies, food assistance, low-income housing, social security, poverty and income trends, and earned income tax credit policies.

Sources: Organisation for Economic Cooperation and Development; United States Census Bureau; The Economist; Department of Housing and Urban Development.

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