"the facade of economic prosperity"
Workers in California at a near standstill
Flat wages, weak job growth despite jump in corporate profits during past 5 years
Carolyn Said, Chronicle Staff Writer
Sunday, September 3, 2006
California workers experienced stagnant wages and weak job growth during the past five years despite a surge in corporate profits, according to a report set for release this Labor Day weekend.
"We're five years into an economic recovery and we're not seeing the kinds of gains in wages that you'd expect," said Jean Ross, director of the California Budget Project, the nonprofit research group that produced the study. "The old saying is that a rising tide lifts all boats, but this rising tide has only lifted a few at the top."
Many California workers are losing purchasing power as inflation outpaces their earnings.
Low-wage workers -- those in the lowest 20 percent of income distribution -- made $10 an hour in 2005, or 0.9 percent less than in 2003, after adjusting for inflation, according the report.
Workers at the median income level made $17 an hour in 2005, up just 0.1 percent from 2003. Those in the 80th percentile made $30 an hour, a 0.9 percent increase from 2003.
The report was based on a variety of state and federal data sources, including the Bureau of Labor Statistics and the Census Bureau.
Ross said the reasons for the sluggish wage growth include globalization, which spreads competition around the world; technology advances and productivity increases, which allow companies to produce more with fewer workers; and a decrease in union representation, which leaves fewer workers with an organization to bargain on their behalf for better wages and benefits.
Michelle King of San Francisco is among the many California workers losing purchasing power.
My salary "is stuck in reverse," she said. King, who is in her late 40s, has received a total of $150 in annual raises during the past five years at her job doing administrative work for a government-funded institution. At the same time, an Ellis Act eviction forced her to move into a new Mission District apartment, increasing her rent by 50 percent.
King, who makes less than $50,000 a year, has taken a second job as a theater house manager on nights and weekends but she's looking for even more sources of income.
"I'm thinking, do I babysit?" she said.
The report found that the gap between high and low earners is widening. While high-wage workers boosted their earnings by 20.3 percent from 1979 to 2005, low-wage workers experienced an income decline of 3.7 percent. Those at the median level had a modest 2.3 percent growth during those 26 years. (All numbers are adjusted for inflation.)
The result of the wage squeeze is likely to be a vicious circle. With less purchasing power, workers won't buy as much, the economy won't grow as fast, and there will be fewer jobs and less money circulating in local economies, Ross said.
King says she's cut back on luxuries such as vacations and eating out. She's worked out a payment plan with her vet to pay for her two cats' care.
"My furniture is from garage sales, I gave up cable TV when I moved two years ago and I don't have a cell phone or car," she said. "I try to take my lunch to work and basically have stopped drinking coffee, only tea."
Even while wages have failed to grow, corporate profits have soared. California corporations enjoyed a 368.9 percent increase in income between 2001 and 2004, the report said, while income for personal tax statements (which often excludes very low wage earners) rose 10.7 percent in the same period. Employment grew 1.2 percent from 2001 to 2004.
Why aren't corporations sharing the wealth?
"Employers have not had to aggressively keep pace with other employers' offers," said David Card, a professor of economics at UC Berkeley. "The labor markets have not been outstandingly strong, although the unemployment rate is low."
From employers' perspective, he said, other labor costs such as health care and pensions are rising quickly, so their overall workforce tab is increasing.
The California data mirrors the sluggish growth in wages and jobs in the nation as a whole.
Ross said she wonders how people in "middle-of-the-road jobs put all the pieces together. How do you plan for retirement, save for your kids' education? What do you do about the rising cost of health coverage? People feel like things should be easier than they are."
Another concern is how people will cope when the economy takes an inevitable cyclical downturn.
"When you have good times, you want to build a little in reserve for when the economy turns down," Ross said. "This time we don't have those gains to fall back on."
Corporate income jumped from 2001 to 2004 in California, while wages,
personal income and employment barely budged.
Net corporate income - 368.9%
Median hourly wage - 13.3%
Personal income - 10.7%
Employment - 1.2%
.
Source: California Budget Project
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CHART (2):
Slow
wage growth
Wages in California showed scant gains from 2001 to 2005. Hourly wages by
percentile are in 2005 dollars.
Year 20th Median 80th
2001 $9.65 $16.55 $28.68
2003 10.09 16.99 29.73
2005 10.00 17.00 30.00
Year 20th Median 80th
2001-03 4.5% 2.6%
2.6%
2003-05 -0.9 0.1 0.9
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