Inequality Continues to Widen


By Jim Lobe

Inter Press Service
September 3, 2000

Despite low unemployment and the longest uninterrupted economic expansion in US history, the incomes and wealth of middle-class and poor families are falling further and further behind those of wealthy households, according to a new report released here Sunday.

Indeed, adults in most families are working harder than ever just to stay in place, according to the report, 'State of Working America,' issued by the Economic Policy Institute (EPI). It found that an increase in the number of hours that families, especially middle-class families, worked each year was the primary factor contributing to income growth over the past decade.

And, while more households than ever gained from owning shares of stocks in the booming stock markets of the past decade, those gains were far surpassed by a huge run-up in household debt during the same period, according to the 454-page report. Typical household debt grew by almost 12,000 dollars over the period, while household stock ownership grew by only 5,500 dollars.

''Persistent low unemployment and increases in the minimum wage have helped workers at the bottom recover from 15 years of wage stagnation and decline,'' says Lawrence Mishel, co-author of the EPI report. ''But some alarming trends persist as wage and income inequality remain high, families are working more hours than ever and are saddled with the highest levels of debt in history.''

The report, released every two years on the eve of the annual Labour Day holiday, offers a host of measures on how the working population in the United States is faring in an era of globalisation. This year's report also comes amid a presidential campaign in which the incumbent vice president, Al Gore, is running with a populist, anti-corporate message seemingly out of tune with the conventional wisdom that US families ''have never had it so good.''

EPI's findings, however, suggest reasons why conventional wisdom may be wrong. While they show that wages have risen sharply across the board since 1995, when middle-class and poorer families began to reap the benefits of the boom, most wage-earners have had to work harder than ever just to keep up.

Moreover, inequality of both wages and household wealth continued to grow despite the strong gains, particularly by poorer workers, during the same period of record low unemployment.

This does not augur well for the much-touted ''new economy,'' according to the report's authors. While investments in information technology have clearly led to higher labour productivity, they conclude, they have not contributed significantly either to job growth or to meaningful wage gains for workers outside the hi-tech sector.

Experts have been predicting for years that the big winners in the ''new economy'' will be well-educated workers, and, indeed, recent Census Bureau figures show that the US workforce is better educated than ever before.

According to a report by the Population Reference Bureau (PRB) issued last week, more than a quarter of young adults have bachelor's degrees, almost three times more than their counterparts of 40 years ago.

But women and African-Americans account for almost all of that improvement. The percentage of college degrees received by white males - the largest demographic group in the workforce - and Hispanic men has remained mostly stagnant over the past 25 years, and real wages for those groups have failed to improve.

''The fact is a majority of people are still not college- educated,'' says John Haaga, co-author of the PRB report. ''In the last couple of decades, only those with a college education have seen their incomes rise.''

As a result, women, who are expected to make up the majority of new workers over the next decade, have narrowed the wage gap with men, although there remains a 25-percent difference in the median full-time wage between the two groups.

But if that gap has narrowed, the same is not true for lower- and middle-income households vis-í -vis high-income families. While low unemployment since 1995 permitted low-wage earners and the poor to close the gap with the middle, the top continued to pull away from the rest of the pack, according to the EPI report.

Perhaps most dramatic in that respect was the 62.7 percent rise in the real wage of the median corporate executive officer (CEO) between 1998 and 1999 alone. The typical CEO earned 107 times than the typical worker last year, according to EPI - almost double the difference of a decade ago.

Real incomes of low-income families grew at a 1.9 percent annual rate from 1995 to 1999; those of middle-income families grew at a 2.3 percent rate; while those at the top grew by 3.2 percent.

Over a longer time span, from 1979 to 1999, however, real hourly wages for high-wage earners increased 17.6 percent, while wages for low-wage earners fell during the same period by 9.3 percent, according to the report which noted that those in the middle saw real wages stagnate.

What gains have been made in family income were largely due to a sharp increase in family working hours, according to the report. The average middle-class, married-couple family, which increased its income by 9.2 percent from 1989 to 1998, worked 182 hours more per year over that period, roughly equivalent to a full month of work.

For middle-income African-American families, the difference was even more dramatic. To maintain similar increases in income, African-American parents increased their work by almost 500 hours - or close to 12 weeks. Other gauges of wealth included in the EPI report also show yawning gaps.

While much has been made in recent years about growing stock ownership across the entire population, the top one percent of stock owners in the United States still hold almost half of all stocks, while the bottom 80 percent own just 4.1 percent. Almost two-thirds of all households have stock holdings worth 5,000 dollars or less.

The huge stock market gains achieved during the past decade were similarly concentrated among the richest households. Nearly 35 percent of the gains went to the wealthiest one percent of households over the past 10 years. Only 2.8 percent of the total went to middle-income households.

The net worth of the typical household rose about 2,200 dollars in the same period - from 58,800 in 1989 to 61,000 dollars in 1998. The wealthiest one percent of households now controls about 38 percent of the national wealth, while the bottom 80 percent control only 17 percent.

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