San Francisco Chronicle - August
23, 2007
Surprise: The rich get
richer and the poor get more numerous
By Sam Zuckerman
teven
Bustin lives with his wife in a four-bedroom, 2,600-square-foot house in
Novato. He drives a gray 2006 Audi A4. He earns more than $200,000 a year in
salary and commissions from his job as head of sales for Podaddies, an
Internet startup that sells online video ads.
Tamara Johnson lives with her three children in a two-bedroom apartment
in the Sunnydale housing project in San Francisco's Visitacion Valley. She
drives a used 2003 Buick Sebring with 74,000 miles on it. Last year, she
brought in just under $12,000 from her job as a home health care worker,
supplemented by disability payments for two of her kids.
Bustin and Johnson represent California's increasingly polarized economy.
The gap between the state's rich and its poor is getting bigger. The bulk
of job growth in California over the last generation took place at the top
or bottom of the pay scale, a trend that has accelerated since the beginning
of this decade. Jobs in the middle are scarcely growing at all.
The changes are documented in a report based on census and tax data set
for release today by the California Budget Project, a liberal research and
advocacy group.
"The story of the past generation is one of widening income inequality,"
the group says about the state.
It's well documented that the gulf between highly paid and low paid
people is growing across the country. But it is more pronounced in
California, according to census and tax records.
The divisions suggest that poverty will persist despite California's
growing economy. And the erosion of middle-income jobs could make the
American dream of climbing the economic ladder harder to achieve in the
state, the budget project warned.
"You're in essence taking steps out of the ladder," said Jean Ross, the
group's executive director. "These are troubling signs for our society."
The growing disparity between the wanting and the well-to-do shows up
starkly in pay data.
Since 1979, 26.9 percent of new positions created in California were in
such categories as food service and retail trade, which paid hourly wages in
the bottom fifth of all jobs, the report finds. At the other end of the
spectrum, 28.1 percent of new jobs were in such categories as administration
and management, which paid in the top fifth.
The breach has expanded this decade. From 1999 to 2005, 43.1 percent of
California's job growth occurred among jobs at the lowest 20 percent of the
pay scale. About 54.4 percent of new jobs were in the top 40 percent of pay.
Only 2.6 percent of growth came among jobs at 20 to 60 percent of the pay
scale.
"We're having a hollowing-out of job growth," Ross said.
As a result, California's population is polarizing. A large group at the
top enjoys a standard of living significantly higher than it did three
decades ago. Another large group is living worse. A shrinking fraction of
people in the middle is getting squeezed, according to the budget group's
study.
— From 1979 to 2006, the hourly pay of California's low-wage workers fell
by 7.2 percent after adjusting for inflation. High-wage workers saw gains of
18.4 percent, while those exactly in the middle edged up 1.3 percent.
— The richest Californians are capturing a growing share of wealth.
Income reported for tax purposes of the top 1 percent of the state's
taxpayers jumped 107.7 percent from 1995 to 2005, after adjusting for
inflation. During the same period, income of the middle fifth of taxpayers
rose 9.3 percent.
— California households are losing ground compared with their
counterparts elsewhere. A California household in the middle of the scale
saw inflation-adjusted income from wages, investments and other sources grow
3.1 percent between 1989 and 2005. Nationwide, income for a typical
household rose 5.4 percent.
Jobs are growing at the top and bottom for many reasons. But those
factors can be summed up in a word — globalization. California lost
464,700 manufacturing jobs — many of them paying middle-class wages —
between 1990 and 2006, much of that work moving overseas.
Meanwhile, the service sector boomed. The category includes low-paid
jobs, such as retail clerks, and well-paid jobs, such as lawyers and
accountants. The California employee head count of Walgreens, the rapidly
expanding drug store chain, surged to 14,900 in August 2007 from 8,000 five
years before, a company spokeswoman said.
Other trends are intensifying the income gap. California has lots of
immigrants willing to accept low-wage jobs. Fewer of the state's workers
belong to trade unions, which historically have given workers bargaining
power.
An increasing proportion of the nation's income is going to corporations,
which benefits households that invest in stocks and bonds. And federal
policies have reduced the tax burden on upper-income households.
Education is the main factor separating winners and losers. From 1979 to
2006, California workers with bachelor's degrees saw real wage gains of 19.8
percent. Wages of workers with master's degrees or higher jumped 34.4
percent. But high school graduates' wages fell 4.4 percent after adjusting
for inflation, while the wages of those who did not graduate high school
plunged 23.7 percent.
Some experts believe California is losing middle-income jobs because of
the high cost of doing business and public policies that drive employers out
of the state.
Many of the state's middle-income manufacturing and service-sector jobs
have moved to states such as Arizona and Texas, where wages are lower and
government policies friendlier to business, said Joel Kotkin, an expert on
California's cities and a presidential fellow at Chapman University in
Orange.
The budget project's report "didn't deal with infrastructure, didn't deal
with competitiveness," Kotkin said. "You have to look at tax climate and
regulatory climate. Business climate matters in terms of job creation."
Of course, Steven Bustin and Tamara Johnson aren't bits of data, nor do
they want to be poster children for California's rich and poor. Neither fits
stereotypes of suburban affluence or inner-city poverty. Still, both live
lives that are, to a very considerable degree, reflections of the means they
have at hand.
Bustin, 55, doesn't have a particularly lavish lifestyle. He and his
wife, Gigi, give several thousand dollars each year to Catholic charities
and other causes. He recently wrote a book about the cruiser on which his
father served during World War II. He and Gigi prefer kayaking in San
Francisco bay to a weekend in a fancy hotel.
"We are mindful of the budget," Bustin, a native of Baltimore, said.
Still, they have the income for luxuries, such as a vacation last year in
Hawaii's Big Island and the occasional dinner at fancy restaurants. San
Francisco's pricy Boulevard is a favorite.
Johnson, 35, who grew up in Berkeley, doesn't have many choices. She is
raising an 8-year-old son and 9- and 15-year-old daughters in crime-ridden
public housing, where $744 in monthly rent eats up most of her paycheck. She
does the best she can for her kids, taking them to parks and the zoo on
weekends. Her oldest daughter has developed a passion for all things
Japanese, so the city's Asian Art Museum is a frequent destination.
She has considered a move to the Dublin area or even to Sacramento, safer
environments than Sunnydale, but can't find the time to make arrangements.
Her life "is very difficult," she said. "I have to squeeze, squeeze,
squeeze every penny. And there's no resources to help."
What to do about California's income gap
How to address growing economic inequality in California is hotly
disputed, based on politics and ideology. Here are two views:
JEAN ROSS
Jean Ross, executive director of the California Budget Project, a liberal
advocacy group, argues that it's futile to try to stop globalization by
backing protectionist measures. Instead, she favors "public policies that
soften the impact of the market." These include tying the minimum wage to
inflation, extending health coverage to all Californians and making sure
schools turn out well-trained workers.
JOEL KOTKIN
Author and scholar Joel Kotkin, often linked with conservatives but who
describes himself as a "Pat Brown Democrat," contends California must work
to retain middle-class jobs by improving its business climate. He calls for
better maintenance of the state's infrastructure and for review of business
regulations and tax policy.
Sources: California Budget Project and Joel Kotkin
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