Labor’s Great Regression

The economic recovery hasn't reached the bottom half of the Bay Area's workforce, and unemployment, underemployment, and low wages have become the new normal.

The Financial Crisis of 2007-08 precipitated what many economists have deemed the Great Recession — the longest economic recession since World War II, topped off with the largest loss of jobs since the Great Depression of the 1930s. The Great Recession officially ended in June of 2009 when the Bureau of Economic Research — a prestigious organization of economists and statisticians — declared the “beginning of an expansion.” But while stock and real estate prices have mushroomed over the past several years, recovering and even expanding the wealth of the top 1 percent beyond pre-2007 levels, incomes are stagnating for most workers. Unemployment rates remain vexingly high, and many workers today toil in involuntary conditions of underemployment, unable to find full-time work. In sum, the Great Recession hasn’t ended for the majority.

“In a robust economic recovery, we would expect workers across the wage distribution to experience gains,” said Luke Reidenbach, a policy analyst with the nonpartisan California Budget Project. According to Reidenbach, the pace of California’s economic recovery has been too slow to make much of a positive difference for many households. “If we continue this pace of job growth, we won’t recover all the jobs we lost in the recession until January 2016.”

After sifting through the latest data from state and federal sources, Reidenbach said that employment gains are being concentrated mostly in low- and high-wage groups, and that employment for mid-wage groups continues to decline. In other words, the so-called financial recovery in California is worsening economic inequality, with most of the new jobs being generated at the bottom of the pay scale.

Locally, the rise of inequality is apparent in the worsening poverty in the East Bay’s flatlands and the glittering wealth in the hills. In 2010, EBASE, an Oakland policy group, compiled data from the Census and the Bureau of Labor Statistics showing a dramatic rise in income and wealth inequality over the previous decade, replete with a shrinking middle class, chronic unemployment and underemployment, and stagnating wages for many of the East Bay’s households. “When adjusted for inflation, real median household income in the East Bay dropped $7,267 between 2000 to 2010,” reported EBASE.

EBASE also noted how much economic inequality is influenced by race: “African-American and Latino children [experience] 3.5 times more poverty than non-Hispanic whites,” in the Bay Area, the organization reported. “African-American unemployment rates are nearly twice that of non-Hispanic whites.”

And statewide data indicate that the picture may not have changed much since 2010. According to the California Economic Development Department’s July 2013 survey, the unemployment rate for black Californians was 16.4 percent compared to 9.2 percent for whites. Unemployment was highest in Imperial County, a heavily Latino part of the state, while unemployment was lowest in Marin County, one of the whitest counties in California.

Steven Pitts of the UC Berkeley Labor Center compiles a monthly “Black Employment and Unemployment” report using statistics from the federal government. The August 2, 2013 numbers show that unemployment is 12.6 percent for blacks — double that of whites.

Last week’s one-day strike by fast-food workers comes at a time when approximately one quarter of the jobs added in the state since 2010 have been in the leisure and hospitality sector, which includes restaurants, according to the Budget Project. To anyone who’s been in downtown Oakland lately, this will come as no surprise; there’s a restaurant boom underway across much of the Bay Area. But most restaurant jobs and other service industry occupations don’t pay a living wage. “In 2012, the median hourly wage in this industry was $10.06,” Reidenbach explained. He and the Budget Project titled their recent report on California’s jobs situation “Uneven Progress.”

Data compiled by the state’s Economic Development Department echo the Budget Project’s analysis. According to the EDD, between July 2012 and July 2013, the leisure and hospitality sector added 70,000 jobs, more than any other sector of the state economy, and its pace of job creation was also the highest. The second-biggest addition of new jobs came in the professional and business services sector, where pay is higher on average, meaning that those at the top-income range are seeing more job opportunities. But jobs in the middle range of the pay scale — ones that can support a middle-class standard of living — aren’t growing.

EDD data and a recent analysis by the Budget Project show that some sectors of the economy that have traditionally provided higher paying work to those without college degrees are shrinking. The construction sector in California only added 17,000 jobs over the last year statewide — anemic growth given construction’s role in past economic expansions.

Local government jobs, which pay better on average than comparable private sector jobs, have been eliminated en masse since 2008. Over the last year, the government sector has actually shed 9,200 jobs statewide. In Oakland, the city government has eliminated 20 percent of its workforce in the past decade, according to this year’s budget.

The society-wide effect is that wages for most workers have been squeezed — a dangerous trend in the Bay Area, where the cost of living far exceeds the rest of the state and nation. The Living Wage Calculator, an online tool developed by Amy Glasmeier, a professor of urban studies and planning at MIT, estimates the wages necessary to actually live in different cities given the varying cost of housing, health care, transportation, and other factors. According to Glasmeier’s calculations, the average wages of 12 of the 22 most common occupations in the Bay Area pay below a living wage. Workers employed in health care support, protective services, sales, building- and groundskeeping, and food preparation and serving are paid less on average than what’s needed to afford housing and other essentials.

“Both the East Bay and Oakland’s household income distribution shows a pinching of the middle class,” reported EBASE in its examination of data from 2010. “There is a concentration of lower-income households — those with incomes of less than $50,000 — and a slight bulge of higher-income households over $150,000.”

The most recent data from the US Census show that this pattern of rising economic inequality continues to tear the Bay Area’s class structure into two groups: those at the very top, and those at the very bottom, with a shrinking middle class in between. The Census Bureau’s American Community Survey shows that, as of 2011, there was a heavy concentration of households in Oakland — about 60,000 of them — earning less than $35,000 a year. At the very top, there were about 13,000 households that reported income above $200,000. Rather than being shaped like a bell curve with most household incomes falling into a middle-class range of between 75,000 to $150,000, Oakland’s income distribution was shaped like a slope, with most families concentrated at the bottom and a few wealthy families at the top.

A similar pattern holds true across the Bay Area. For Alameda, San Francisco, Contra Costa and Santa Clara counties combined, there were 960,000 households whose income fell below $75,000 a year in 2011, while there were 400,000 households with incomes of more than $200,000. The shrunken middle class — households earning between $75,000 and $150,000 — added up to 540,000, a little more than half the number of low-income households.

Regarding income inequality, Chris Hoene, executive director of the California Budget Project, said the problem is long-term. “Policy hasn’t kept up with low- and mid-wage earners, particularly the minimum wage,” said Hoene. California’s minimum wage, which most cities in the Bay Area adhere to, is $8 an hour. San Jose and San Francisco’s minimum wages are set at $10 and $10.55 per hour, respectively, but still fall about $2 below a living wage for each city, as determined by MIT’s Glasmeier. The state Senate is considering a bill to increase the state’s minimum wage to $10 an hour by 2018.

“At other end of the income scale, you’ve had the increasing valuation of the jobs at the upper end — three- and four-fold increases at the top — while we’ve watched diminishing purchasing power at the lower end,” Hoene said.


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