U.S. Income Gap Widens

From SF Gate:

Making ends meet It's tougher than ever today as the well-off become better off, ranks of poor grow and lower-income workers feel pressure of high prices
Jason B. Johnson, Chronicle Staff Writer


The gap between high-income and low-income Americans is widening, the ranks of the poor in California and nationwide are swelling, and middle-class workers have lost ground compared with the 1970s, several national and state studies show.
A disturbing new picture of low- and middle-income family incomes is emerging from U.S. Census studies and from analyses of census and other data by the California Budget Project, the Brookings Institution, UC Berkeley researchers and organizations studying specific demographic or geographic groups.
"The increase in inequality in income is a longtime trend, but the pressure on middle- and low-income workers is going up rapidly," said Alice Rivlin, an economist at the Brookings Institution and vice chair of the Federal Reserve from 1996 to 1999. "Especially if they live in an area where there are high housing and gas prices, like California."
On Tuesday, the California Budget Project, a public policy research group in Sacramento, estimated that it takes $51,177 a year for a two-parent California family with two children to afford rental housing, commuting costs, food and other basics. The figure is $71,377 if both parents work and $53,987 for a single parent with two kids.
And on Labor Day, the Budget Project reported that California's highest-paid workers -- those in the top 10 percent -- earned 5.1 times more than workers making wages in the lowest 10 percent, up from 3.8 times more in 1979.
In the Bay Area, where a family with two working parents needs $79,946 a year to eke a basic living -- no car, no vacations and no home ownership -- costs are higher than the state averages.
"In California over the past two decades, we have seen an increase in inequality," said Budget Project Executive Director Jean Ross.
To get by, people work more than one job or amass credit card debt, couples work day and night shifts to avoid having to pay for child care, and adult children move back in with their parents, according to interviews with policy experts and workers.
Aurolyn Rush, 60, and her daughter, Tifannee, 27, live together in a two-bedroom Daly City apartment. They pool their annual incomes of $23,000 each as phone operators at San Francisco's Grand Hyatt hotel.
Bare-bones budgets
"We're not living on Cloud 9, but together we make it," said Rush. "She wants her own place, but seeing how hard it is with the two of us, she hasn't tried to move. I probably couldn't make it if I had to pay everything on my own."
The Budget Project totaled the costs of housing and utilities, child care, basic transportation, food, health insurance premiums and payroll and income taxes.
"We're looking at something that is one step above a bare-bones budget," Ross said of the living expenses included in the report.
In the Bay Area, her group found, a single adult needs to make $27,901 a year or $13.41 an hour to cover those expenses. A single parent with two children needs $62,969 a year or $30.27 an hour. And a single wage earner in a family where the other parent stays home -- and provides child care -- would have to make $55,740 or $26.80 an hour.
Health care costs chew up an ever-increasing proportion of salaries. And, Ross said, the less workers earn, the less likely they are to have employer-paid health coverage.
Two reports released in August by the U.S. Census found that 1.1 million more Americans fell into poverty from 2003 to 2004. The estimated national poverty rate rose from 12.5 percent of individuals in 2003 to 12.7 percent in 2004.
An estimated 37 million Americans live below the federal poverty line, which varies by household size; in 2004, the poverty line was $18,850 for a family of four. The census estimated that the median household income was $44,648 in the United States and was $51,185 in California in both 2003 and 2004.
Middle-class workers have been hit hard by the steady disappearance since the 1970s of well-paying blue-collar jobs that high school graduates without a college degree could perform, said Steven Pitts, an economist specializing in labor issues at the UC Berkeley Center for Labor Research and Education.
African Americans in particular now face a "crisis" of low-paying jobs because those blue-collar jobs have been replaced by service-sector jobs, Pitts said.
"There were more jobs on the docks in the ports of San Francisco and Oakland," said Pitts. "In the East Bay, for instance, you saw a loss (also) of manufacturing jobs that paid well."
Blacks' wages slipping
Pitts found that the proportion of African American workers in low-wage jobs rose from 25.7 percent in 1970 to 27.8 percent in 2000. The lack of well-paying jobs makes it harder to revitalize poor urban communities, Pitts said, based on a study he released on Labor Day examining the state of African American workers in the Bay Area.
Fellow UC Berkeley economist Richard Walker said income inequality is a problem in the whole nation.
"There's two reasons: One is geographical, when you're in the middle of the fastest-growing part of the country, near these big urban centers, the richest places always have the highest costs, partly because they're successful," Walker said.
The second reason is that high-wage earners now have so much disposable income that they are pulling up prices for everyone.
"There's too much loose money," Walker said. "The world's kind of awash in capital right now."
Income inequities shrank during the late 1990s, but those gains appear to have evaporated, said Nancy Duff Campbell, co-president of the National Women's Law Center in Washington, D.C.
"We were making some progress, and that progress is faltering now," Duff Campbell said. "And when you put that together with the widening gaps between the income groups, then that's pretty alarming."
Executive Director Alissa Friedman at OPTIC, an East Contra Costa nonprofit agency that helps low-income people re-enter the workforce, echoed her.
"It's really heartbreaking when a person has been working hard and gets a job paying $13 an hour but still is not able to support themselves," Friedman said.