It's Better to be Poor in Norway Than in the US

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Published on Thursday, April 14, 2005 by the Christian Science Monitor
It's Better to be Poor in Norway Than in the US
by David R. Francis

Find credit: Mathom

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Except for the citizens of a few tiny oil kingdoms and Luxembourg, Americans on average live better than anybody else.
Germans? Forget it. Americans' standard of living is 30 percent higher. The British? The gap's even wider.

But if the United States is so rich, critics ask, how come its poor are poorer than almost anywhere else in the developed world?

Consider Canada. Its median per capita gross domestic product (GDP), that is, the output of goods and services for the typical Canadian, is 19 percent below the median in the US. Nevertheless, the poorest 18 percent of Canadians remain better off, on average, than the poorest 18 percent of Americans.

The contrast is even starker in oil-rich Norway, where the poorest 38 percent of the people fare better, on average, than the poorest 38 percent of Americans, despite a lower median per capita GDP.

The reason? America's woefully unequal distribution of income.

The US House of Representatives is poised this week to stretch that inequality still further by repealing completely after 2010 the already diminished estate tax. Relatively few estates today are taxable. By 2011, heirs to the richest 600 or so estates would no longer owe any inheritance taxes either.

Caught between liberals who decry the obvious inequality and conservatives who could, correctly, point out that the top 62 percent of Americans are considerably better off than the top 62 percent of Norwegians, the US Senate may resist such a sweeping change in estate taxation.

But beyond the political debate, raw numbers tell the story.

The US has the worst distribution of income of any well-to-do country. In a list of 30 prosperous nations, including smaller economies such as Taiwan and Israel, only Russia and Mexico have a greater maldistribution of income than the US.

"We choose to let the market determine most everything," says Timothy Smeeding, a public policy professor at the Maxwell School of Syracuse University, who compiled these inequality numbers. "We do far less on the social side. We have not as good a safety net. The priorities aren't there. Other countries make other choices."

Under Prime Minister Tony Blair, for example, Britain has made a costly and concerted effort to help its poorest families have a more equal chance for the education and other benefits that money can provide. Now, 5 percent of Britain's poor are better off than America's poor. Before 1995, none were.

In the US, both Republicans and Democrats voted several years ago to reform the welfare system - a change that Professor Smeeding generally approves. As a result, the number of those on welfare, often women with children, declined from 5 million in 1994 to 2.2 million in 2000.

But that reform "transformed the welfare poor into the working poor," he adds. They earn minimum wage, or just a bit better, and receive insufficient support from the government in the way of child care, earned income tax credits, cheap housing, and other assistance to rise out of poverty.

That lack of government support makes them poorer than those in countries with stronger safety nets. At the request of the Monitor, two of Smeeding's colleagues, Lee Rainwater and Markus Jantti, calculated the point at which residents of several other wealthy nations are better off in purchasing power than those similarly placed on the US income ladder. Besides the Canadian and Norwegian examples above, 12 percent of the poorest Finns, Swedes, and Dutch do better on average than the poorest 12 percent in the US; 15 percent of the German poor outdo 15 percent of the American poor; and 20 percent of Belgian poor beat the US poor.

Smeeding also compared the poverty of American children (using the income of their families) with that of children in the world's 19 richest nations. He finds that the US stands among those with the highest child-poverty rates when the comparison is made on the basis of purchasing power. In most cases, foreign poor children are far better off.

"Our low-income children are at a serious economic disadvantage compared to their counterparts in other nations," he concludes.

Of course, well-to-do American families, far ahead of most prosperous families in the other nations, can provide their children with all the benefits their good incomes can provide - nutritious food, computer courses, travel, expensive universities, etc. They get a degree, develop a good career, find a suitable educated marriage partner, and have probably one or two kids.

These advantages can put them well ahead in life - reinforcing what some observers see as a growing class structure in the US as the income distribution has worsened in recent decades.

But what about the poor children in America? Are they being left behind?

Whatever one thinks about income inequality, if the US doesn't do a better job in supporting the children of low-income families, says Smeeding, the nation faces "a rough future. They will be a drag on themselves and on our whole economy."