State's Economic Recovery Provides Gains for the Poor


California's economic comeback since the mid-1990s has been a substantial boon to the state's poorest residents, bucking the downward spiral of the previous 20 years, according to a new analysis.

The analysis, conducted for the nonprofit California Wellness Foundation, found that the percentage of Californians below the federal poverty line has fallen by one-quarter since the bleakest moments of the state's early 1990s collapse.

What's more, the report estimates that more than 200,000 state residents moved off the welfare rolls and into jobs over the last five years.

The analysis also determined that wages, after removing the effect of inflation, climbed nearly 10.1% from 1996 through 1999 for California workers on the bottom fifth of the pay scale. That surpassed the average increase of 9.6% for all workers in the state.

Even with that progress, the report notes that the state still is burdened with severe problems. The portion of Californians living in poverty--13.8%, by the most recent measure--is high compared with the rest of the country. It also remains above the state's poverty level of the late 1980s, before the California economy was hammered by the aerospace retrenchment.

In addition, many of the people lifted from the official poverty statistics in recent years merely have graduated to the ranks of the so-called working poor and lack the skills to move into middle-class jobs.

Yet the analysis provides strong evidence that the state's recovery has started rebuilding California's economic foundation and spread the benefits far beyond glamorous industries such as high technology and Hollywood.

It also suggests that the state and federal minimum-wage increases in the late 1990s helped the poor without undermining job opportunities for the most needy workers--an argument widely raised by foes of minimum-wage hikes.

"Five years of strong economic growth in California have made a significant impact on unemployment, wages, income and poverty. There are fewer Californians 'left behind by a changing economy' than there were," wrote Stephen Levy, the author of the report and director of the Center for Continuing Study of the California Economy in Palo Alto.

In an interview, Levy added that "a lot of people who were very poor are now marginally poor or just above poverty. That's a first step."

Further gains for workers at the bottom of the economic ladder in the future, he said, will hinge largely on the performance of the national economy and whether California improves its public education system and job-training programs. "You can't get people into the middle class unless you can get them skills to get a middle-class job," Levy contended.

Other economic analysts found little to dispute in Levy's overall assessment, although some cautioned against understating the continuing struggles of the state's poor.

"We're seeing gradual, long-term progress for people who have been in the labor force since the beginning of the economic recovery," said Daniel Flaming, president of the Economic Roundtable, a nonprofit research group in Los Angeles that has studied the effect of welfare reform.

Still, Flaming said, "a preponderance of the working poor we're studying, who have been through the welfare reform process, are still below the poverty level."

Jean Ross, executive director of a research and advocacy group that focuses on the working poor, the California Budget Project, emphasized that the latest government figures show that the wages of low-income workers still haven't fully recovered from the early 1990s collapse.

Ross added that wage increases for middle-income workers have barely kept up with inflation--or have even fallen behind--during the late 1990s. "It was a period of tremendous growth in California. If you can't move ahead in that kind of economy, when is it going to happen?" she said.

But Ted Gibson, chief economist for the California Department of Finance, said Levy's analysis was in line with "the old adage that President Kennedy used to use, that 'a rising tide raises all boats.' "

Growth in recent years in California, he said, "has mitigated a number of problems we identified in the darkest days of the early and mid-1990s." Still, Gibson said, "just as things seem brighter now, it could go the other way" if the California economy sinks into another recession. In fact, many business forecasters expect the state's economy to slow, and its unemployment rate to rise, soon.

Levy, however, said he holds out hope that widespread improvements in productivity can bring lasting benefits to workers in California and elsewhere around the country. He cautioned that the opportunity will be lost, however, if California fails to find better ways to train its work force--including large numbers of immigrants with no more than elementary-school educations--for higher-skill jobs.

The report links much of the economic progress for the state's poor to low unemployment rates, which have made employers more willing to hire minorities and other groups that traditionally have had high joblessness. It noted that, in 2000, unemployment among California blacks and Latinos hit record lows.

Overall, unemployment is down from a recessionary high of 9.7% in the early 1990s to a 31-year low of 4.5% reported for last month.

Meanwhile, the percentage of Californians living below the federal poverty line fell from a high of 18.2% in 1993 to 13.8% in 1999, the most recent year for which such data is available. But the poverty figure remains above the state's 12.9% level in 1989, and exceeds the U.S. level of 11.8% in 1999.

Levy said he anticipates that the state poverty figures for 2000, which aren't yet available, will show a further substantial decline.

The analysis also looked at the effect of recent economic trends on workers at all income levels in California. Among those findings:

* Real wage levels for all California workers--wages after the effect of inflation is removed--rose an average of 3.5% annually from 1996 to 1999. That compares with 2.8% nationally.

* From 1995 to 2000, California's job total rose 17.2%, versus a national average of 12.3%.

* Income per capita, after discounting for inflation, has climbed an average of 2.7% annually in California over the last five years. That's up from a rate of 1% during the 1980s and a rate of 0.9% from 1989 to 1994.

For low-wage workers in particular, the trend of recent years was a welcome change. From 1975 to 1994, real wages declined more than 15% for California workers on the bottom fifth of the income scale.

Levy's analysis will be delivered today in San Francisco at a conference of the California Wellness Foundation, a Woodland Hills-based nonprofit that has explored the effect of workplace trends.

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