Economic boom is a bust, says study
By Stephanie Ebbert, Globe Staff, 09/06/98
<Picture>he plummeting unemployment rate, climbing consumer confidence - was it all just a dream? A new study, produced in conjunction with a labor-backed economic research group, would have Massachusetts residents believe that they were not, in fact, enjoying the best economic times in recent history.
They were duped again.
The State of Working Massachusetts report, to be released today, shows that, as of 1996, only the wealthiest 5 percent of families in Massachusetts benefited from the economic boom of recent years. The rest of the population, on average, has been blissfully unaware that when adjusted for inflation, their earnings have slipped since the late 1980s, the study claims.
Produced by the education arm of Tax Equity Alliance for Massachusetts, in conjunction with the labor-backed Economic Policy Institute, the study says that the robust economy has not restored families' buying power since the recession of the early 1990s. That delay in recovery is historically unprecedented, and Massachusetts is running even farther behind the rest of the nation, said James St. George, the TEAM Education Fund's executive director and the report's author.
''In every postwar recession up to this point, after five or six years, people would have recovered what they lost,'' said St. George. ''What's surprising about this recovery is that people haven't recovered what they've lost.''
Take a look at the median income, he said - the point in the middle of the high and low ends of family wages. Between 1989 and 1996, it fell 5 percent, leaving families of four with incomes $3,100 lower than when they started.
''What is most disturbing about this trend,'' St. George said, ''is that wages for both median-wage workers and low-wage workers have fallen even since 1992, when the state was out of the recession.''
Jose Juves, spokesman for Acting Governor Paul Cellucci, called the report a partisan study.
''Democrats are the only ones who don't want to cut taxes and Democrats are the only ones who think tax cuts hurt working families,'' he said.
Massachusetts families are enjoying a period of low inflation and prosperous times, Juves said. State unemployment is at 3.1 percent, the lowest among big industrial states, he said.
''We've come a long way from the dark days of [former Governor Michael S.] Dukakis and 1989,'' he said.
But the study suggests otherwise, showing the benefits are isolated largely to the wealthy. Over two decades, the 5 percent at the top of the ladder surged far ahead of the 20 percent at the bottom rung - from earning 11.4 times their wages in 1970 to 16.3 times in the mid-1990s, the study says.
The disparity is growing not just between the rich and poor, but the rich are outdistancing the middle class, the study says. Back in the 1970s, the richest 5 percent of Massachusetts families earned 3.7 times that of the average middle class family. During the 1990s, they moved forward, averaging 4.4 times that of the middle class, the report states.
The data runs only to 1996, but St. George contends that the thriving economy since then has still not restored Massachusetts families to pre-recession earnings.
''Nationally, EPI guesses that when the new data from 1997 are available, median families will have just gotten back to where they were in the late 1980s,'' he said. ''Because Massachusetts has fallen so much more, it's quite unlikely that one more year of data will have us catching up.''
The study says policy makers have broadened the gap by targeting tax cuts to the wealthy. But since the study runs only to 1996, it does not reflect this year's tax cut of almost $1 billion, primarily through increased exemptions and reduction of unearned income tax rates.
Cellucci has also filed for a reduction in the earned income tax and an increase in the minimum wage but has not yet been able to move those through the Legislature.
This story ran on page B03 of the Boston Globe on 09/06/98.
c Copyright 1998 Globe Newspaper Company.
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