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Workers Going Bust As Economy Booms Labor-Oriented Institute Finds Wages Have Been Stagnant

Sun., Sept. 1, 1996

Americans are suffering from a long-term erosion in wages, deteriorating job quality and greater insecurity despite undisputed improvement in the overall economy, the liberal-oriented Economic Policy Institute said Saturday.

In a 402-page report titled “The State of Working America,” economists at the institute surveyed available wage data to determine how workers are faring in what is now the sixth year of economic recovery since the 1990-91 recession.

Their conclusion was that the wage stagnation that has plagued America since the mid1970s has grown worse, not better, in the 1990s.

“The changes in the economy have been all pain, no gain for most workers. The economy is clearly in transition but it is far from certain that it is headed to a better place,” wrote the authors, economists Lawrence Misehl, Jared Bernstein and John Schmitt.

They found that average hourly earnings have lost ground in the 1990s, despite the recovery, standing in 1995 nearly 3 percent below where they were in 1989, after adjusting for inflation.

And median family incomes have been weak as well, standing 5.4 percent below the 1989 level. For 1994, the most recent year for which family income data is available, the median, or midpoint, for family incomes was $39,881, compared to $42,049 in 1989, after adjusting for inflation.

The report noted that while it is normal for incomes to drop during a recession as the unemployment rate climbs, the 1990s have been marked by continued weakness even though the recession ended in the spring of 1991.

The institute blamed this deterioration on a number of factors - the failure of Congress to increase the minimum wage until recently; a continued decline in high-wage manufacturing jobs, falling levels of union membership and increasing wage pressures from the globalization of the U.S. economy.

In addition, the institute said the overall wage statistics are no longer benefiting from further increases in the number of working wives, whose entry into the labor force in record numbers during the 1980s helped to offset the lower earnings of their husbands.

The institute said its analysis of the income data called into question the belief of many economists that stagnant wages had been offset in large part by a growth in fringe benefits such as better health insurance and pensions.

In fact, hourly compensation, which includes wages and benefits, has grown only 0.1 percent faster than hourly wages since 1979. Between 1979 and 1993, the number of workers with employer-provided health benefits actually fell from 79 percent to 64 percent while pension coverage declined from 48 percent to 45 percent.

The institute, which is partially funded by labor unions, was founded in 1986 by a group of liberal economists including Lester Thurow, Robert Kuttner and Robert Reich, who is currently labor secretary in the Clinton administration.

Both President Clinton and GOP candidate Bob Dole have sought to address workers’ economic anxiety in the presidential campaign.

Dole says his $548 billion package of tax cuts would put money back in families’ pockets and spur businesses to create more jobs.

Clinton is offering a more modest package of about $110 billion in tax relief targeted at families with small children and education expenses. Clinton argues that Dole’s tax cuts would cause the budget deficit to skyrocket and end up hurting families by pushing up their borrowing costs.

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