Wage gap in state widens, study says

Times Staff Writer

The divide between rich and poor in California has been growing for decades, with most of the jobs created in the state paying wages at opposite ends of the spectrum and the top earners pulling down the biggest gains, according to a report from a nonprofit research group.

The California Budget Project said in the report, to be released today, that wages for people toiling at the bottom of the pay range dropped 7.2% over the 27 years studied, while Californians at the other end of the range saw their pay rise 18.4%.

Most of the jobs that will be added to the economy well into the next decade probably will pay either quite well or relatively little, the report said, at either about $83,000 a year or $21,000 a year.


The findings underscore “the extent to which inequality in California exists,” said Jean Ross, executive director of the Budget Project, which focuses its research on matters that affect low- and middle-income households. “A significant fraction of the California workforce is falling behind.”

Most of the new jobs that have been generated in recent years have been for engineers, executives, lawyers and scientists at the highest tier -- paying more than $22 an hour in 2006 dollars -- and for store clerks, cashiers, nurses’ aides and farmworkers at the lowest tier, paying less than $11 an hour, the report said.

In fact, from 1999 to 2005, according to the report, 43% of new jobs paid less than $11 an hour.

Jobs have been relatively scarce for factory workers, bookkeepers, secretaries and other middle-level earners, the report said. Many of those kinds of positions were lost when 464,700 manufacturing jobs in the state disappeared from 1990 to 2006, accelerating a shift to a more service-sector job economy. The contraction of the aerospace industry in the early 1990s cut deeply into local payrolls.

“It concerns everybody when you’re living in a society that is increasingly bifurcated, and that’s definitely true of Southern California,” said Lisa Grobar, a Cal State Long Beach economist.

But Sung Won Sohn, an economist and chief executive of Hanmi Bank in Los Angeles, cautioned against drawing “alarming conclusions.” Although there may be an expanding wage gulf, he said, “net worth has gone up significantly even for people at the low end of the income spectrum,” because homeowners have seen the value of their houses increase.

The report, titled “A Generation of Widening Inequality: The State of Working California, 1979 to 2006,” also carried some positive news.

The value of a college education, in terms of wages, is greater now than it was three decades ago, and the disparity between what women workers and their male counterparts earn has diminished. Asian American workers have seen their wages skyrocket, and the percentage of households living at the poverty level has remained relatively flat.

But many findings weren’t upbeat. To stay financially afloat, many Californians have had to work harder and longer while receiving fewer benefits from their employers, the report said. And despite the economic recovery that began after the recession ended earlier this decade, advantages that some workers might have expected to “trickle down” never did.

“Typically, such trends provide ripe conditions for broad-based increases in living standards,” the report said. Instead, soaring productivity gains led to “skyrocketing corporate profits.”

The report didn’t attempt to explain the causes but pointed to factors that may have played a role, including globalization, immigration and technology.

The effect has been that “the gap between the top and the middle has emerged more strongly over time,” the Budget Project’s Ross said. “I think most of us believe that the middle is probably a good benchmark for society as a whole and that broad middle is not doing well in California.”

Education can make a difference. The hourly wage of a typical worker with at least a master’s degree jumped 34.4% over the 27 years studied while the typical worker with less than a bachelor’s degree failed to keep pace with inflation. Those who didn’t graduate from high school saw wages sink 23.7%.

Viewed from a different time frame, the findings varied significantly.

Between 2000 and 2006, California workers who didn’t graduate from high school saw their hourly wages rise 8.5%, more than triple the increase of the typical worker with at least a bachelor’s degree and more than twice the increase of the typical worker with a master’s degree or more, the report said. That was because the minimum wage increased, and workers with relatively low levels of education tended to work in sectors that experienced strong growth in California during the first half of the decade, such as retail and the leisure and hospitality industries.

Conversely, young, highly educated workers saw their entry-level wages slip by 4.9% during that period, when college graduates were disproportionately represented in sectors associated with the high-tech industry, which had little or no job growth during that period.

When it came to purchasing power, the report said almost everybody lost ground from 2000 to 2006. The typical worker’s inflation-adjusted hourly wage dropped 4.4%. For low-wage workers the decrease was 4.6%, while for high-wage workers it was 1.1%.

Most recently, the slumping housing market has taken its toll.

“When you look at how much of the recent job growth in California has been driven by the housing sector, that certainly is troubling,” Ross said.

A number of long-running trends continued. Geographically, many of the state’s jobs shifted inland over the last 15 years, following the population. From 1990 to 2005, jobs in inland counties jumped 46% -- almost five times the increase along the coast.

The number of manufacturing jobs has shrunk by almost 24% since 1990 across the state, although jobs in that sector have mushroomed in high-growth areas such as Riverside County. In that same period, California increased its share of U.S. jobs in the high-tech and service sectors.

Almost 27% of Californians age 65 to 69 were still working last year, compared with nearly 20% in 1995. Almost half of the state’s women age 55 to 69 were still employed in 2006, up 9.2 percentage points from 1995.

The typical Asian American worker’s hourly wage swelled 25.4%, compared with a 13% rise for the typical white worker.

But Latinos -- who make up a third of the state’s workforce -- lost ground. The typical Latino earned 58 cents for every dollar that the typical white worker made, down from 71 cents in 1979.



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Gains and losses

The state lost 464,700 manufacturing jobs from 1990 to 2006 -- a 23.6% decline.

At the same time, the number of service-sector jobs, including salespersons, cashiers and food workers, grew by 28%. And in 2006 these kinds of jobs accounted for 83.6% of all jobs in the state.

The typical worker’s hourly pay in 2006 was $17.42 in California, compared with $16.05 nationwide.

For every dollar earned by a high school graduate in 1979, a Californian with a bachelor’s degree earned $1.33. In 2006, the so-called college premium was $1.67.

Women earned 87 cents for every dollar made by male counterparts in 2006, up from 63 cents in 1979.

In 2006, 18.9% of California workers were represented by unions, a drop from 24.8% in 1989. And the typical union member earned less in 2006 -- $1.27 for every dollar earned by a nonunion worker, down from $1.29 in 1989.

The median household income in the state in 2005 was $51,755, up 3% from 1989.

More than 11% of the jobs that will be created through 2014 will pay more than $40 an hour in 2006 dollars but 1 in 4 jobs will pay $10 an hour or less.


Source: “A Generation of Widening Inequality: The State of Working California, 1979 to 2006” by the California Budget Project