By DON McINTOSH, Associate Editor
Once every two years, researchers at the Economic Policy Institute
produce The State of Working America, a fact-filled summary of the
problems and challenges that face American workers. EPI is a pro-labor
think-tank based in Washington, D.C., that researches the impact
of economic trends and policies on working people.
An advance version of the 2008-2009 edition was released Labor Day
weekend, and the story it tells is that America is getting more
productive, but the gains in wealth that result are not being shared
with the workers who produce it.
EPI economists studied the most recent business cycle, and say it’s
unlike any other in modern times.
“For the first time since the Census Bureau began tracking
such data back in the mid-1940s, the real incomes of middle-class
families are lower at the end of this business cycle than they were
when it started,” write the report’s authors —
Lawrence Mishel, Jared Bernstein and Heidi Shierholz.
Plus, a smaller share of the adult population was working at the
end of this cycle than at the beginning.
“When it comes to efficient, profitable production, the men
and women of the American workforce have a lot to be proud of. But
when it comes to being rewarded for the work they do, the skills
they have sharpened, and the contributions they make … well,
that’s a different story. Their paychecks have been frozen,
their health coverage is being cut back, their jobs are at risk
of being shipped overseas, and their pensions are more precarious
than ever.”
The top 1 percent of wage earners now hold 23 percent of total income.
Using data on income concentration that go back to 1913, EPI found
that that’s the highest inequality level in any year on record,
bar one: 1928.
How well is the top 1 percent doing? That one in a hundred earners
in 2006 had average annual earnings of $576,000. Of course, the
top one-thousandth fared far better, seeing their annual earnings
grow 324 percent since 1979 to reach over $2.2 million in 2006.
For most of the rest of the 140 million Americans who go to work
every day, not only are wages not keeping up, but employer-provided
benefits are eroding, most notably pensions and health insurance.
Employer-provided health care coverage eroded from 1979 until 1993-94,
and then began falling again after 2000 through 2006. Coverage dropped
from 69.0 percent in 1979 to 55.0 percent in 2006, with a 3.9 percentage-point
fall since 2000.
Employer-provided pension coverage tended to rise in the 1990s but
receded by 2.8 percentage points from 2000 to 2006 to 42.8 percent,
7.8 percentage points below the level in 1979. Pension plan quality
also worsened as 401(k)s come to replace traditional pensions. The
share of workers in the traditional “defined benefit”
plans fell by half — from 39 percent in 1980 to just 18 percent
in 2004. Correspondingly, the share of workers with a 401(k) style
“defined-contribution” plan (and no other plan) rose
from 8 percent to 31 percent.
In 1965, U.S. CEOs in major companies earned 24 times more than
an average worker. This ratio grew to 298 at the end of the recovery
in 2000, fell due to the stock market decline in the early 2000s
and recovered to 275 in 2007. In other words, in 2007 a CEO earned
more in one workday (there are 260 in a year) than the typical worker
earned all year.
Income is one thing, wealth is another. Wealth is net worth —
the total dollar value of what you own minus whatever you owe. EPI
found that the wealthiest 1 percent of all households have a larger
share of national wealth than the entire bottom 90 percent. And
over the 1962-2004 period, the share of wealth held by the bottom
80 percent of the wealth distribution fell from 19.1 percent —
already an extremely small share — to 15.3 percent. Today,
about 30 percent of households have a net worth of less than $10,000,
and one in six households have zero or negative net wealth.
Inequality is reflected in health, as well. While today’s
Americans, on average, are healthier and living longer than previous
generations, more are being left without adequate insurance coverage
or access to the health care system. As a result, the poorest increasingly
die earlier than the richest. Between 1980 and 2000, the life expectancy
gap between the socioeconomically best- and worst-off grew from
2.8 years to 4.5 years.
And it doesn’t have to be so. The United States spends by
far the highest percentage of its Gross Domestic Product on health
care, but is the only one of its peers without universal health
insurance, and it has the lowest life expectancy and the highest
infant mortality rates of its peers.
The State of Working America doesn’t provide a policy roadmap
away from inequality, but makes clear that the current set of policies
are creating the current set of outcomes. The authors say what’s
behind the growing inequality is the rise of a YOYO (You’re-on-Your-Own)
economic philosophy that has guided economic policy makers.
“The YOYOs are market fundamentalists,” EPI says. “They
believe that unfettered market outcomes are always the best outcomes.…
The YOYOs want to replace Social Security with private retirement
accounts, kill the minimum wage, weaken unions, and force everyone
to buy health insurance in the individual market.”
“The past few decades, and especially the past few years,
reveal the impact of this approach on the living standards of working
families,” EPI concludes. “The results are unequivocal:
Families are ill-served by this set of policies.”
