ECONOMY WATCH : American Canyon

It comes as no surprise to learn that the gap between rich and poor families is greater in the United States than in other industrialized countries. The enormous disparities between rich and poor are only too plain here in the Los Angeles Basin, home of both wealthy movie moguls and impoverished Mexican immigrants living in squalor only a few miles away.

Though it documents the obvious, a new report from the European-based Luxembourg Income Study provides a useful tool in the American debate over revamping welfare. It found that the top 10% of households with children had average annual incomes of $65,536 a year compared to $10,923 for the bottom 10%--a gap of nearly $55,000. Only in Israel and Ireland did the poorer families earn less, the study found. The figures were adjusted for government benefits and differences in spending power.

Such international comparisons are problematical. Less generous American social welfare programs are not the only explanation. European countries are not nearly as racially divided as the United States, nor have they experienced so huge a surge of poor immigrants and families headed by single women.

Income disparities have been reduced in Europe by generous social programs that have slowed overall economic growth. The challenge for the American government is to reduce welfare dependence and encourage work. This country should not emulate Europe, but experience there suggests that widespread day care for parents is an important factor in raising family income.