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Working-Family Gibberish

JANUARY 01, 2001 by E. FRANK STEPHENSON, WILSON MIXON

Wilson Mixon is Dana Professor of Economics at Berry College. Frank Stephenson is an assistant professor of economics at Berry College and an adjunct scholar with the Georgia Public Policy Foundation.

Nothing was sillier in the late presidential campaign than the political rhetoric about so-called working families.

Politicians of both major parties frequently invoked working families as the intended beneficiaries of this policy or that program. A typical refrain called for “tax cuts for working families.” Implicit in such rhetoric is the notion that working families are low- or middle-income; Bill Gates does not count even if he works 100 hours per week. However, a study of work hours and income by Robert Rector and Rea S. Hederman of the Heritage Foundation reveals the phoniness of the working families rhetoric.*


* “Income Inequality: How Census Data Misrepresent Income Distribution” is available at www.heritage.org/library/cda/cda99-07.html.

The table on the next page shows the study’s findings. Households are sorted according to their 1997 incomes. Next, they are divided into five groups (called quintiles) each containing 20 percent of the households. The lowest quintile contains the 20 percent of households with incomes less than $15,396, the second quintile the 20 percent of households with the incomes between $15,400 and $29,200, and so forth.

The table also shows the average weekly number of hours worked by the working-age adults in each quintile. (Focusing on working-age adults controls for the different number of children and retirees in each quintile.) Hours worked differ substantially across income levels. Adults in the lowest quintile work an average of only 14.4 hours per week, less than one-half of a typical 40 hour workweek. By contrast, adults in the top quintile work an average of 34.6 hours per week. This difference in hours worked indicates that the true working people are not predominantly the low- and middle-income people as some politicians would have us believe. Instead, the people in the top quintile actually work the most hours per week rather than enjoying lives of leisure. Of course, political silliness notwithstanding, there is nothing surprising about this finding. More hours worked, after all, lead to more income thereby placing the harder-working household into a higher income bracket.


Hours Worked and the Income Distribution

            Income             Average Weekly       Average Working-       Average Weekly

                  Hours Worked Per       Age Adults       Hours Worked

 

                  Working-Age Adult       Per Household       Per Household

Quintile       Lower Limit       Upper Limit

1       —       $15,396       14.40       0.89       12.82

2       $15,400       $29,200       26.66       1.22       32.53

3       $29,204       $45,996       28.87       1.60       46.19

4       $46,000       $71,700       33.43       1.93       64.52

5       $71,705       —       34.56       2.15       74.30

Source: Rector and Hederman, Tables A1 and A5, and authors’ calculations.


Focusing on average hours worked per working-age adult actually understates the difference in the amount of work done by families at different income levels. This is because, as shown in the table on the next page, the number of working-age adults differs across families. On average, households in the lowest quintile have less than one working-age adult compared to over two such adults in the top-quintile households. (Evidently two-career couples with teenaged children who work are common in the upper quintile.) Households in the bottom quintile average less than 13 hours of work per week, while families in the top quintile average more than 74 hours of work per week. (One might object that this is an unfair comparison since some families in the bottom quintile may consist of retirees. This critique points to the fluidity of the American income distribution, for most retirees were in higher quintiles while they were working.) That the families in the top quintile work some six times more per week than families in the lowest quintile undoubtedly explains much, though not all, of the difference in income.

That higher income people work more than lower income people does not imply that lower income people are morally inferior or lazy. Since work is the means by which people earn the income necessary to buy goods and services, the decision to work more or fewer hours amounts to trading off between goods and services and time spent at home. A person who works fewer hours may just be someone with a weak preference for consuming goods and services or someone who places a high value on home-based activities. But while there is no reason to cast moral aspersions at those who work fewer hours, the fact that some people have lower incomes because they choose to work fewer hours does not give them a claim on the higher incomes earned by those who choose to work more hours. Hence, the politicians should abandon the redistributionist pandering and get on with a more meaningful discussion of the issues.

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January 2001

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