[The Wall Street Journal Interactive Edition]
October 1, 1999
Marketplace
Charting the Pain Behind the Gain:
Wages Barely Budged Over Decade
By JACOB M. SCHLESINGER
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- First the good news: The economic boom continues to generate
more wealth for more Americans.
The median income for households rose last year by 3.5% adjusted for
inflation, the fastest pace in three years. It's now at an all-time high of
$38,885, the Census Bureau reported Thursday. The percentage of Americans
living under the poverty line dropped to 12.7% last year from 13.3% in 1997,
the lowest level since 1979.
Gains were surprisingly widespread. Virtually every
type of household -- those headed by couples, by
single mothers, old, young, immigrants, city dwellers,
suburbanites -- saw big gains. For the first time
since 1975, every region of the country saw
significant increases in income. Poverty in the South,
long considered the country's economic backwater, plunged, and is at a lower
rate than in the West.
Now the reality check.
The census study, one of the government's best annual snapshots of economic
well-being, also offers stark proof that life is still a struggle for
millions of Americans. All the fanfare about this record-breaking expansion
-- with tales of college dropouts turned IPO millionaires -- masks
statistics showing that, overall, wages have barely budged for the decade as
a whole. Last year's poverty rate was still 1.6 percentage points higher
than it was in 1973, the twilight of America's last prolonged golden age.
The latest census numbers suggest two big reasons for this mixed
performance. First, though this expansion, now in its ninth year, is
remarkable in length, it was so slow for so long that the past three years
of hypergrowth and low unemployment haven't been enough to make up lost
ground. The pretax median income in 1998 -- the dividing point between those
households in the top half of the pay heap and those in the bottom half --
was just $1,001 higher than it was in 1989. That translates into an average
annual raise for the 1990s, adjusted for inflation, of $111.22, or a stingy
0.3%.
Second, the official statistics say that the fruits of
prosperity in this decade have been even more heavily skewed
toward the rich than in prior booms. The top 5% of households last year --
those making $132,199 or more -- had 21.4% of all income, well above the
17.5% earned by the top 5% in 1967. Income inequality rose sharply through
the 1980s and early '90s, and the level has held roughly constant since
1994. That means the disparity has locked in at a historically high level.
Signs of Improvement
True, for many once-beleaguered families, there are plenty of signs that
life is improving.
Five years ago, Geneva Haight was a part-time substitute teacher making $300
a week for the few weeks a year that she worked. Now she manages AmeriGas
Propane LP's plant in Ardmore, Okla. Her promotion from customer service at
the fuel supplier just over a year ago won her a 20% pay increase.
Mrs. Haight's brother, who had been struggling to find work, showed up one
recent Monday in booming Ardmore. He started a construction job on Tuesday.
His wife got hired at a cafe on Wednesday. "People seem to be able to
improve their lot in life," says Mrs. Haight, 51 years old.
Yet there are also many families who still don't feel that
way. "This country is still for those who have money," says
Rose Woolery, a 46-year-old single mother in Boston. "For the people that
don't have it, you're not going to get it." Her income has actually tumbled
over the past three years, from $33,000 to $26,000. She lost her salaried
position as a junior database analyst at Fidelity Investments in 1996 as her
department downsized. So far, all she has been able to find is temp work at
John Hancock Mutual Life Insurance Co. processing files for class-action
suits.
Ms. Woolery is a victim of the continuing labor market instability that has
helped keep overall wage gains muted. The 4.2% unemployment rate may mean
work is plentiful, but it doesn't guarantee that jobs are secure or
full-time.
Education and training in specific high-demand sectors still widen the
divide between haves and have-nots. "There were other jobs in other
departments at Fidelity, but I needed a college degree," says Ms. Woolery,
who has only a high school diploma. Pay for women with her level of
education rose by 1.2% last year. Those with some college rose by 5.9%.
"If you don't have computer skills, then you're out of luck," says Darcy
Walker, a 39-year-old domestic-violence counselor near San Jose, Calif., in
thriving Silicon Valley. In her field, she's seen pay gains, after
inflation, of about 2% a year. She makes $13.50 an hour. She says she went
shopping at CostCo recently and "I looked at the other women in their [new]
cars -- it's painful to watch it around you and not be able to reach it."
Wages for many low-paid workers have been rising in recent years, but they
still aren't high enough to lift significant numbers out of poverty, defined
as $16,660 in annual income for a family of four. Even though the
unemployment rate was higher in the earlier 1970s than it is today, poverty
was less widespread then.
After 10 years on welfare, Estelle Sterling, a single mother
of four, joined the millions of Americans who left the dole
in the 1990s for the private sector. Hanky Panky LTD, a New York maker of
women's clothing, has given her a paycheck, a 401(k) plan and a new
self-assurance. Welfare, she says, "was a trap. ... Now I'm just so
confident I can do anything." Yet after three years doing clerical and
quality-control work, Ms. Sterling is paid just $6 an hour, or $12,000 a
year.
In some ways, the census report may overstate the rise in living standards.
Income is up, but so are the hours many families have to work to realize
those gains. Working hours for the average family rose by about 2% from 1989
to 1998, reaching 3,149 last year, according to the Economic Policy
Institute.
Pay Doubles
Avaren Ipsen and Tom Schleis have been trying to raise their two kids in
Berkeley, Calif., on one income. She's been working on a Ph.D. in biblical
literature. He works for a construction company. Mr. Schleis's pay doubled
to $50,000 over the past six years -- "but most of that was overtime," says
Ms. Ipsen. "He was never here. Six days a week for six years, from 6 a.m. to
past 8 p.m. It was a boom, but we were so burnt out." Mr. Schleis recently
took a managerial job with a higher salary, but no overtime -- an effective
cut in pay to under $50,000.
Still, although economic progress hasn't been as rapid as many people would
like, that doesn't mean it won't keep trickling down -- as long as
unemployment stays at a quarter-century low and the pay gains of the past
four years persist.
James Duncan, a 55-year-old security guard in Warner Robins, Ga., says his
standard of living hasn't improved one bit over the past few years. If
anything, it has declined. Traveling costs, including a spike in gas prices,
forced him to give up his side business selling women's clothing at colleges
along the East Coast.
Yet Mr. Duncan is training to be a big-rig truck driver. Pay would be about
$31,000, or 25% more than he makes now. He carries a list of 45 trucking
firms, desperate for drivers. "They come every day -- there's a possibility
you can get hired before you complete the class," he says. Until now, the
1990s haven't been so great for him. As for the future, he says, "I'm
looking forward to it."
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http://interactive.wsj.com/archive/retrieve.cgi?id=SB938731965897356108.djm
Hyperlinks in this Article:
(1) http://www.census.gov/Press-Release/www/1999/cb99-188.html
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