State of Working America: Working Harder, Earning Less

by James Parks, Sep 8, 2006

America’s workers are the hardest working and most productive on Earth. But the wages they’re getting for their labor don’t keep up with the rising costs of gasoline, health care and housing. Meanwhile, their bosses take all the profits from their work and put it in the corporate pockets.

The latest edition of the biannual State of Working America 2006–2007, by the Economic Policy Institute, reveals the economic expansion that began in late 2001 has resulted in workers having less real income now than a typical family in 2000, while the incomes of the wealthiest families have grown rapidly.

According to the report, released over the Labor Day weekend:

…there are clearly aspects of today’s economy that make it historically unique. Some of these tilt against the bargaining power of American workers: increased global trade, less union membership, and more low-skilled and high-skilled immigration. There are fewer favorable social norms that guide employer behavior or support policies that provide adequate safety nets, pensions, and health care arrangements

…. if our enhanced productive capacity continues to benefit mostly the wealthiest Americans—we risk sacrificing bedrock principles that have historically defined the American economic experience.

The report includes a host of examples on the unequal economic recovery:

• The richest 1 percent of the nation, on average, owns 190 times as much as a typical household.
• Between 2000 and 2004, real median family income fell by 3 percent—$1,600 in 2004 dollars.
• After achieving historically fast progress in lowering racial and ethnic income gaps in the 1990s, these gaps have begun to widen again in recent years.
• The American Dream of working hard and moving up the economic ladder has become a myth. In today’s economy, sons of low-income fathers (with income in the lowest 10 percent) have only a 4.5 percent chance of reaching the top 20 percent and only a 22.5 percent chance to even reach the median income as adults.
• The correlation between the income of parents and their children is so high that at this point, it would take a poor family of four with two children nine to 10 generations—more than 200 years—to reach middle-income status.
• While wages are declining in real terms, the price workers must pay more for necessities, such as health care, are rising. In 1992, employees paid 14 percent of the cost of job-based health care premiums, while last year, they paid 22.1 percent—and that doesn’t even include the higher deductibles or co-pays most employees have to pay.
• The government has done little to end poverty. The child poverty rate in the United States is the highest of 16 other industrialized nations. In 2004, the poverty rates for African Americans was 24.7 percent and 21.9 percent for Latinos, more than twice that of whites (10.8 percent).
• The average CEO earns more before lunch in one day than the average minimum wage worker earns all year. In fact, the average CEO is paid in just one workday what the average worker spends nearly 10 months (260 workdays) working to earn.

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