The State of Working America Highlights

Commentary

By Richard E. Noble

The following are a few highlights from the 1st chapter of a text published by the Economic Policy Institute. This is a group that studies the American Economy and writes a yearly report on how working people are being affected.
Executive Summary
1) Our findings show that while faster productivity growth creates the potential for widely shared prosperity, if that potential is to be realized, a number of other factors have to be in place. Those factors include labor market institutions (such as strong collective bargaining), an appropriate minimum wage, and, importantly, a truly tight labor market, all of which are necessary to ensure that the benefits of growth reach everyone, not just those at the top of the wealth scale.
2) Despite the fact that the most recent economic expansion began in late 2001, the real income of the median family fell each year through 2004 ... Between 2000 and 2004, real median family income fell by 3%, or about $1,600 in 2004 dollars.
3) Between 1979 and 2000 ... the real income of households in the lower fifth grew 6.1%; the middle fifth was up 12.3%; the top fifth grew 69.6%; and the average income in the top 1% grew by 183.7%.
4) ... the top 1% received 37.8% of all capital income in 1979. Their share rose to 49.1% by 2000 and rose further to 57.5& in 2003.
5) ... middle income wives added over 500 hours of work to total family work hours between 1979 and 2000.
6) To what extent are children’s economic fates determined by the income position of their parents ... We find significant income correlation’s between parents and their children, implying that income-class mobility is at least partially restricted by a parents position in the income scale. For example … it would take a poor family of four with two children approximately nine to ten generations - over 200 years - to achieve the income of the typical middle-income four person family ... sons of low-earning fathers have slightly less than 60% chance of reaching above the 20th percentile by adulthood, about a 20% chance of surpassing the median, and a very slight chance 4.5% - of ending up above the 80th percentile.
7) Our folklore often emphasizes the rages to riches, Horatio-Alger like stories that suggest that anyone with the gumption and smarts to prevail can lift themselves up by their bootstraps and traverse the income scale in a single generation. The reality in the United States, however, shows much less mobility than such stories suggest.
8) ... about two thirds of children whose parents were in the lowest fifth of the wealth scale ended up in the bottom 40% as adults.
9) A historical look at wage inequality shows that it has worsened considerably over the past three decades ... Wages were stagnant or fell for the bottom 60% of wage earners over the 1979-95 period.
10) ... increases in globalization could drive up wage inequality the continuing influence of globalization, de-unionization, and the shift to lower paying service industries can explain the continued growth of wage inequality at the top.
11) Wages actually fell for all entry level workers since 2000, whether high school or college graduate, male or female.
12) The erosion of unionization (from 43% of blue-collar men in 1978 to just 19.2% in 2005) can account for 65% of the 11.1% percentage-point growth of the blue collar/white collar wage gap among men over the 1978-2005 period.
13) ... minimum wage workers, 60% are white. These workers also tend to be women (59% of the total) and concentrated in the retail and the hospitality industries (46% of all minimum wage earners are employed in those industries compared to just 21% of all workers.)
14) … wealth has become more concentrated at the top of the distribution over time. In 2004 those in the top 1% of the wealth scale held over one third of all wealth. The top fifth controlled 84% of all wealth in the United States, while the bottom 80% could claim only 15.3% of the country’s total wealth in 2004.
15) Approximately one in six households had negative net wealth.
16) The notion that a vast majority of American households are greatly invested in the stock market is erroneous. Less than half of all households hold stock in any form including mutual funds and 401(k) - style pension plans ... Moreover, of those households that held stock, just 34.9 % had stock holdings of 5,000 or more.
17) In 2004 the top 1% of stock owners held 36.9% of all stocks, by value, while the bottom 80% of stockholders owned less than 10% ... While stock performance is very important, on a daily basis is does not significantly affect average households.
18) By 2004, a middle income family spent about one fifth of their income to service their debt. Approximately one in four low-income households had debt service obligations that exceeded 40% of their income, as did 13.7% of middle-income households.
19) Approximately 30% of households have a net worth of less than $10,000.
20) After falling steeply throughout the latter 1990 poverty rates increased not only in the recessionary year of 2001 but in each year through 2005, when 37 million persons, including 13 million children were in poverty. This is the first time that poverty rose through each of the first three years of a recovery, another indicator of the narrow distribution of growth over this recovery.
21) The United States is currently enjoying an extremely productive economy (2000-05). However ... the workforce responsible for this high level of productivity has not been able to enjoy the fruits of their very productive labor ... earnings have been stagnant for the majority of workers throughout this cycle.
22) ... the gap between the richest and the poorest is largest in the United States.
23) Low income earners in the United States not only earn relatively lower incomes than their OECD (Organization for Economic Cooperation and Development) counterparts but they are also worse off because of social policy and safety nets. Access to health care is a good example ... The United States spends more on health care than any of these other countries. The United States spent 15% more of its GDP on health care in 2003 - 30% more than the next highest spender. Even with such high spending, 46 million people in the United States do not have health insurance and access to health care is much more limited than in the countries of its economic peers. In Canada, Japan and Europe there is essentially universal health care.
24) The United States has the lowest life expectancy, the highest infant mortality rates, and the highest overall and child poverty rates of all the countries studied. The relatively poor performance of the United States in these categories is symptomatic of the high degree of economic inequality and unequal access to health care in the United States.
25) The biggest challenge is not growth per se, but rather how the growth is distributed ... The growth has to reach the people.

Richard E. Noble is a Freelance Writer and has been a resident of Eastpoint for around thirty years. He has authored two books: “A Summer with Charlie” which is currently listed on Amazon.com and “Hobo-ing America” which should be listed on Amazon in the not too distant future. Most recently he completed his first novel “Honor Thy Father and Thy Mother” which will be published soon.