Genevieve,
Thanks for posting that LA Times article about the growing income gap in
California. For those interested, here's an article in today's Oakland
Tribune about the same subject. By the way, the statement in the last
paragraph by economist S Levy is not confirmed, in fact it's contradicted
pretty sharply, by research done among Mexican and Latino immigrants by
sociologists like Jorge Durand. Most of these low skill immigrants may
eventually work their way up from a $5/hr to a $7/hr job, but they rarely
work their way up to the levels of unionized industrial workers (in
California cities, I would put that at about $15-$20 hr nowadays, and of
course the union contract comes with some kind of benefits, like medical
insurance). There has been a clear structural ceiling in the US economy
for low wage workers since the depression of the 1970s, and these
immigrants have been trapped under that ceiling, with no signs of
change. That means that you can't buy a house, ever, unless you pool
resources with a big network of people, and even then, it's got to be a
"fixer-upper," which means spending countless hours, between
multiple low-paid jobs, in remodeling.
Of course, the "rate of growth" of low wages, starting from an abysmal
baseline of $5 or $6/hr looks big in relative terms (from $5 to $7 reflects
a 40% growth), but we must live on absolute wages ( who can live on
$7/hr?) As the cost of living rises steadily with the contemporary rate of
inflation, even dramatic pay raises from such a low baseline will not catch
one up with a decent standard of living.
By the way, the Cato Institute is a well-funded,right wing think tank in DC
Pete Farruggio
http://www.newschoice.com/newspapers/alameda/tribune/default.asp
California's rich become richer, as poorest lag
FROM WIRE REPORTS
WASHINGTON -- The gap in income between rich and poor families is greater in
California than in all but four other states -- and it is continuing to
grow, according to
a new study.
The study, to be released today by the Economic Policy Institute and the
Center on
Budget and Policy Priorities in Washington, D.C., said the disparity
between the rich
and poor grew in 46 of the 50 states between the late 1970s and late 1990s.
It said that gap was slightly bigger in California than in the rest of the
nation in the
1970s, and the disparity was even greater in the late 1990s.
Nationally, income for the poorest families -- defined as two or more
relatives living
together -- rose $110 to $12,990 during the 10-year period. For the richest
families it
increased by $17,870, to $137,480, more than 10 times that of the poorest
sector,
the report found.
"The benefits of this (economic) growth have not been evenly distributed,"
said Elizabeth McNichol, one of
the study's authors. "The incomes of the poor and middle class have fallen
or stagnated."
McNichol attributed the widening gap to Wall Street's long-running bull
market, which favors wealthy
investors, lower-paying service jobs replacing manufacturing jobs, and the
largely stagnant minimum
wage.
The gap between rich and poor was widest in New York, with the poorest
fifth earning $10,770, down
$1,970, while the wealthiest group earned $152,350, up $19,680. Income was
most evenly distributed in
Utah, where the poorest families had incomes of $18,170 and the richest
$125,930.
The income gap narrowed in just three states -- Alaska, Louisiana and
Tennessee.
Economist Stephen Levy, director of the Center for the Continuing Study of
the California Economy, said
he didn't dispute the accuracy of the study's 20-year comparisons, but
described them as "warmed-over
stuff" that doesn't reflect more recent trends.
"If they had used 1994 to 1999, they wouldn't have a story," Levy said.
"There is reason to believe that
gap has stopped growing and may actually be declining in the last five
years. Incomes at the bottom are
growing faster in the last five years. But does it offset the previous 15
years? No, it doesn't."
The study used two principal measurements of the increase in the gap
between the late 1970s and late
1990s -- inflation-adjusted income and a ratio.
It found that the average family income of the poorest 20 percent
nationally declined by $900 to $12,990,
while in California it declined by $2,880 to $12,240. For the richest 20
percent average, family income
nationally increased by $17,870 to $137,480, while in California they
increased by $12,020 to $146,070.
Stated as a ratio, the richest 20 percent nationally had 7.4 times the
average income of the poorest 20
percent in the late 1970s and 10.6 times the income in the late 1990s.
In California the richest 20 percent had 7.6 times the average income of
the poorest 20 in the 1970s and
11.9 times more in the late 1990s.
Only four states had greater disparities in the latest figures, the study
said: New York, where it is now
14.1-to-1; Arizona, 13.1-to-1; New Mexico, 12.8-to-1; and Louisiana, 12-to-1.
The study found that the growth in income disparity comes primarily from a
growing gap in wages, but
that the disparity is also growing in investment income.
"Wages at the bottom and middle of the wage scale have been stagnant or
have declined over the last
two decades. The wages of the very highest paid employees, however, have
continued to grow," it said.
Stephen Moore, director of social policy for the Cato Institute, said the
study contorted data to put a
negative face on a "spectacular economy."
"The rich are getting richer but the poor are getting richer too in this
expansion," said Moore, who
nonetheless suggested cutting the tax on capital gains income to further
spur investment and job
creation.
Kevin Aslanian of the Coalition of California Welfare Rights Organizations
said the report "is not surprising," because of the decline in welfare and
other income transfer programs.
"The government programs are growing, but families have less money to meet
their immediate needs --
housing, food and clothing," he said.
The report said the real disparity between rich and poor is probably even
greater than its figures indicate, since the income data does not include
capital gains, which are overwhelmingly enjoyed by upper income
families.
That is especially true in California, where capital gains last year
accounted for 20 percent of all taxable
personal income. Most capital gains income was reported by taxpayers in the
state's top tax bracket.
State economists say salary trends which are widening the disparity between
the top and bottom income
groups are also especially pronounced in California, where high-paying
technology and low-paying service
industry jobs are both growing at much faster rates than middle-income
manufacturing jobs.
Jean Ross of the California Budget Project said that problem is vividly
illustrated in California's labor
market, where half of the 10 occupations to post the largest growth in
recent years pay less than $10
per hour.
But Levy said that only reflects a more important trend which has some
positive implications.
"We have a large number of recent immigrants with limited skills and
commensurate incomes. They are
starting at a very low level, ... but they are making their way up the
economic ladder," he said.
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