Conf Board on living standards

[Doug Henwood]

[better late than never...]

Wall Street Journal - June 29, 2000

Despite Economic Boom, More Americans
Are Likely to Fall Below the Poverty Line

By JACOB M. SCHLESINGER
Staff Reporter of THE WALL STREET JOURNAL

WASHINGTON -- The long economic boom has pushed unemployment to its 
lowest level in decades, but more jobs don't necessarily mean higher 
living standards.

A new report shows that an American holding a full-time job in the 
late 1990s was still as likely to fall below the official poverty 
line as a similar worker in the 1980s, and more likely to do so than 
a full-time worker in the 1970s.

"Working full-time and year-round is, for more and more Americans, 
not enough," the Conference Board asserts in a study titled "Does a 
Rising Tide Lift All Boats?" "This is not the outcome one would 
expect from the longest economic expansion in economic history," adds 
the report to be released Thursday by the New York-based nonprofit 
business research center.

Some economists said the Conference Board report was flawed because, 
in using the official government definition of poverty, it ignores 
the impact of the earned-income tax credit for low-income workers, a 
program that was significantly expanded in the 1990s. But others said 
the study still highlights an important point often lost amid the 
celebratory hype about the current boom: Lower-skilled workers have 
profited much less than others, and have yet to recover from the 
sharp erosion of earnings from the mid-1970s through the mid-1990s.

"Much of the reporting on the long boom is ahistorical -- those at 
the very bottom are gaining, but they haven't gained enough to make 
up for where they were," said Sheldon Danzinger, a poverty expert at 
the University of Michigan. Among other reasons, high-paid, unionized 
manufacturing jobs for unskilled workers have been replaced by 
lower-paid, nonunion service jobs. Adjusting for inflation, Mr. 
Danziger said, the average wage for a full-time worker without any 
college education was 8% less last year than it was in 1972.

According to the Conference Board report, 2.8 million Americans with 
full-time jobs -- people working at least 35 hours a week, 50 weeks a 
year -- were living below the poverty line in 1998, the most recent 
year available. A family of three earning $13,003 or less in pretax 
income was considered poor that year, the most recent data available.

That meant 2.9% of all full-time workers in 1998 were poor, a sharp 
increase from 2.5% in 1997 and the highest level since 1994, when the 
economy was still limping out of the early 1990s recession. Through 
the first seven years of the current economic expansion, the poverty 
rate for full-time workers never fell below 2.5%.

The Conference Board researchers, using unpublished Census data, 
found that the poverty rate for full-time workers stayed almost 
constant over the past 20 years, with rates hovering between 2.4% and 
3.1% in the 1980s. That conclusion tempers other data suggesting that 
lower-income families fared better in the 1990s than in the 1980s.

By this measure, the 1990s economy looks much worse than the 1970s. 
In 1973, the poverty rate for full-time workers fell to 2%, and after 
rising a bit during the mid-1970s oil crisis, fell again to 2.1% in 
1978.

The main reason cited by Conference Board economist Linda Barrington, 
the report's main author, is "the expansion of low-productivity 
jobs," even as the economy's total productivity has accelerated. The 
percentage of nonmanagement workers holding manufacturing jobs fell 
from 30% in 1965 to 15% in 1998, according to the Conference Board. 
At the same time, "combined employment in the retail and service 
sectors -- the two lowest paying sectors, on average -- increased 
from 30% to 48%," the report found.

Marisol Rivera, a full-time maid at a major Hollywood movie studio, 
has been supporting herself and two small children on about $13,000 
per year, just at the official poverty line. With no high-school 
degree, she said it's the best job she was able to find. Besides, the 
21-year-old added, the hours -- from 6:30 p.m. to 3 a.m. -- "mean I 
don't have to pay for a baby sitter" since her mother can watch the 
children after she finishes her job.

Ms. Rivera said she and her children aren't starving, but the low pay 
forces her to live in a cramped apartment, to forsake a car -- she 
has an hour-long bus ride to work -- and to skip buying the toys her 
four-year-old wants. "You have to lie and tell them you'll get it 
tomorrow," she said.

Economists also attribute the persistence of poverty among full-time 
workers to the erosion of the minimum wage from about $7 per hour in 
1969 (in today's dollars) to the current level of $5.15. A single 
full-time worker earning the current minimum wage would be above the 
poverty line, but such a worker supporting at least one dependent 
would be below the poverty line, according to Ms. Barrington.

Gene Sperling, head of the White House National Economic Council and 
an architect of President Clinton's antipoverty program, challenged 
the study's findings. It was misleading, he said, to use Census 
definitions that ignore the earned-income tax credit. The program 
"has helped push a few million people above the poverty line," he 
added, citing studies using alternative definitions of poverty.

"Nobody's disputing there's still economic hardship out there," said 
Mr. Sperling. But poverty for all Americans has fallen sharply 
through the 1990s while wages and salaries for the lowest-paid 
workers have jumped, he said. "There's a lot of evidence that the 
benefits of the expansion have reached out more to the fringes of the 
work force," he added.

The earned-income tax credit not included in the Census poverty 
definition does help offset those trends. Ms. Rivera, for example, 
said she gets about $1,000 back a year in income-tax refunds under 
the program. Ms. Barrington conceded "that's a serious problem with 
the official definition of poverty." But she added, the poverty 
definition also doesn't include Social Security taxes, which would 
lower take-home income.

The Conference Board report also looks at long-term regional and 
racial patterns in poverty among full-time workers. For nonwhite 
workers, the poverty rate was 4.42% in 1998, compared with 2.90% for 
white workers, including Hispanics. In both the Northeast and the 
Midwest, the poverty rate for nonwhite full-time workers was higher 
in the 1990s than in the 1980s. In the South and West, however, the 
rate was lower in the 1990s than in the 1980s.

The report noted that working poverty rates have fluctuated much more 
over the past three decades for nonwhites than for whites, which 
"suggests that regional cycles and shocks affecting the poverty rate 
of full-time workers have hit nonwhite full-time workers harder than 
white workers."

That trend may explain differences in long-term economic success 
between races, the report notes. "Cycling in and out of poverty makes 
it more difficult to save, accumulate wealth, and carry out long-term 
personal and financial planning," it said.