Let's Allow Economic Growth to Benefit All

June 18, 2002 | Newark Star-Ledger |

JERSEY CITY, NJ -- Release of the latest round of data from the 2000 Census attracted a lot of attention, and not because the news was good. The figures showed that poverty had increased over the course of the last decade, and that all too many other people were falling behind. For example, men who worked full-time and year-round saw median individual earnings decline, adjusted for inflation.

To many who heard the news it didn't seem to make sense. How could this have happened during the booming 90s?

The answer is that they were booming for a few, but not for everyone. Inflation-adjusted wages declined for the bottom half of all workers, for all education levels except college-educated women and for all racial groups of men. Not even a college education was enough to boost men's wages. Hardest hit were those lacking a high school diploma: their wages fell by 17.6 percent (for women and men combined).

Improved earnings for college-educated women were encouraging, but they came in part from factors like marrying later, having fewer children and working more, rather than a 'better' market.

Things got worse by other measures as well: the share of workers increased making less than a 'living wage' of $12.75 an hour, or 150 percent of the poverty line for a family of four in New Jersey. Nearly half of Latinos, one-third of African Americans and a quarter of whites didn't make this 'living wage' at the end of the 90s. Women were 40 percent more likely than men to make less than a living wage.

What could explain all these counter-intuitive trends? After all, the indicators seemed headed in the right direction: total production of goods and services grew, employment grew, unemployment fell and productivity increased. According to these vital statistics, New Jersey's economy prospered in the 90s.

But this is not the whole picture. First, unemployment did not reach its pre-1990s-recessionary low of 3.8 percent until the year 2000, fully 12 years later and on the cusp of the current downturn. This meant that the tightening of the labor market that helps increase wages at the bottom, and even in the middle, came too late and did not last long enough to have a major impact on wage growth.

Second, the state's output and employment growth in the 90s were not as strong as in the 80s. Nor were they as strong in the 90s as the rest of the country in the 90s. The rate at which the New Jersey economy expanded was especially strong in the second half of the 90s and in service industries, but average year-to-year growth was no more than half that of the 80s.

Though less easy to document, another important piece of the explanation has to do with how corporations have been distributing the return on this growth. Readers of the business pages know that employers respond to increased competition by restructuring in ways that give management more flexibility. Deregulation, a drop in the number of workers represented by unions, privatization, outsourcing and other similar factors all facilitate this trend. The result: employers have more latitude to cut costs by cutting wages-and workers have less power to demand raises. The fact that strong wage growth occurred only for workers at the top fifth of the earnings distribution exposes the fact that employers have been redistributing earnings upward.

Although reasonable people can disagree over what exactly explains increased poverty, declining earnings and increased inequality, and despite the fact that a lot has changed for the better in aggregate terms, the central fact can no longer be avoided: it is simply not true that everyone can be assured of benefiting from economic growth. It's the fundamental message of the new data, and the new economy.

With the dust settled on the booming 90s, this is the reality that must be addressed, on Capitol Hill, in the State House and in the workplace. In terms of public policies, we know what reduces economic insecurity: raising the minimum wage, making unemployment and disability benefits available to more people, allowing paid family leave and expanding child care and health care.

But just as important is the need for a new focus on equity. In the arena of corporate accountability, this includes a return to greater equity in the distribution of corporate profits from the top of the ladder to the middle and the bottom, something that could help productivity on the front line. In education, this means greater equity in the access to high-quality schooling and to programs that facilitate the kind of skill development that will land high-skill, high-wage jobs for those who can't afford it. An example of the latter would be the kind of joint public-private ventures that seek to solve the shortage of nurses by helping to finance a nursing education. These types of programs need to be expanded and extended into other areas of public responsibility, such as education and child care, where the demand and need for quality care is urgent.

 

 

In terms of public policies, we know what reduces economic insecurity: raising the minimum wage, making unemployment and disability benefits available to more people, allowing paid family leave and expanding child care and health care.

But just as important is the need for a new focus on equity.