U.S. family battered, report says Economy is on 'low-wage path'

September 07, 1992|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau

WASHINGTON -- The U.S. economy is on "a low-wage path" that is battering the American family with weak earnings growth, longer working hours and greater financial inequality, according to a report on "The State of Working America."

"No one in government or business has explicitly announced a program of lowering American wages and working conditions in order to become 'competitive'; nevertheless, the cumulative impact of both government policy and business strategies has achieved a lowering of wages and the standards of living of most Americans," said the report issued by the liberal Economic Policy Institute.

The report coincided with last week's announcement by the Census Bureau that median family income, after adjustment for inflation, dropped in 1991 by $1,077 to $30,126, and that 35.7 million Americans last year were living in poverty (incomes under $6,932 for individuals, $13,924 for a family of four), the highest number since 1964. One in seven Americans is now officially classified as poverty-stricken, a rate that rises to one in four children under age 6.

The report is one of three new studies in recent days to paint a dismal picture of the average family's economic present and a bleak prospect for its future.

The Economic Policy Institute's study found that while Americans still enjoy the world's highest per capita income in terms of relative purchasing power, they are falling behind industrial competitors in several areas:

* Productivity growth was only 67 percent of the average of other industrial powers in the period 1979-1989 and was lower than in all major developed countries except Australia and the Netherlands.

* U.S. manufacturing workers' real wages fell at an average annual rate of 0.6 percent against a general increase in other advanced countries during the same decade.

* Wealth and income inequality is more marked here than in other major industrial powers.

* The United States has the highest and most persistent poverty rate, after taxes and benefits.

Income growth in the U.S. during the 1979-1989 decade was the slowest for any similar period since World War II, but it did not affect all income groups equally. The richest 1 percent of families saw their incomes increase a whopping 62.9 percent, while the bottom 60 percent of families suffered real income declines.

In a state-by-state breakdown of income disparities released late last month, the Washington-based Center on Budget and Policy Priorities, which specializes in low-income issues, found that during the 1980s the poorest fifth of families grew poorer in 32 states. Maryland was one on them.

The poorest fifth of Maryland families suffered a drop of 1 percent, or $139, in inflation-adjusted income during the 1980s. This was less than the national average decline of $350 for the poorest fifth of all families.

The middle fifth of families in Maryland enjoyed a 9 percent increase, or $4,171, far more than the national average of $140, and the richest fifth advanced 3 percent, or $3,603, less than the national average of $7,200. Together, the shifts restrained income divisions in Maryland, which had the 13th smallest gap between rich and poor and the smallest between the rich and the middle class.

"In most states, middle- and low-income families treaded water or lost ground over the course of the 1980s, while upper income families secured large income gains," said Isaac Shapiro, co-author of the center's report.

The erosion of real wages has spread in recent years from blue-collar to white-collar workers, who experienced a 4.4 percent decline between 1987 and 1991, according to the Economic Policy Institute's study. During the same period the real wages of college-educated workers fell 3.1 percent.

Women workers have seen the 5.3 percent wage gain they enjoyed during the 1980s eroded by 2.8 percent since 1989. Many women have been forced to begin work, or work longer hours, to compensate for the fall in family incomes. The average wife with children was employed almost a third longer in 1989 than in 1979, meaning she put in an extra 268 hours, or almost an additional seven weeks of full-time labor.

The downward trend in white-collar wages largely reflects the end of the 1980s boom in the finance, retail trade, banking and real industries. Its onset predated the 1990-1991 recession which was unique in costing more white-collar than blue-collar workers their jobs, said the institute, which issues its state-of-the-American-family report every two years.

Worst hit by the wage decline have been young workers entering the job market without a degree, who make up almost 75 percent of the work force. According to the report, a young male high school graduate earned 26.5 percent less, after inflation, in VTC than in 1979, with 7.5 percent of that drop occurring in the last five years.

Picking up the same theme, a staff study last week from the Joint Economic Committee, chaired by Sen. Paul S. Sarbanes, D-Md., found that today's young workers face lower entry wages, slower wage progression in their middle years and steeper income decline in old age, than their father's generation.

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