Herald News (Passaic County, NJ), March 27, 2006, Monday

Copyright 2006 North Jersey Media Group Inc.,
All Rights Reserved
Herald News (Passaic County, NJ)

March 27, 2006 Monday
All Editions

SECTION: WORKING; Pg. C01

HEADLINE: Working poor, middle class falling faster into the gap

BYLINE: By ANDREA GURWITT, Herald News, North Jersey Media Group

BODY:
Over the past two decades, New Jersey's poor have been getting richer. Unfortunately for them, they haven't been getting richer at the same breakneck speed as the state's rich have been getting richer.
Between the early 1980s and the early 2000s, the annual income of the bottom 20 percent of workers grew by 24 percent, from $16,397 to $20,391, according to the Association for Children of New Jersey and New Jersey Policy Perspective, a non-profit, nonpartisan research organization. Meanwhile, the yearly income of the top 20 percent of earners shot up nearly 79 percent, from $85,802 to $153,362.
The two organizations presented the state data they culled from a nationwide report on income disparity issued a couple months ago by the Economic Policy Institute and the Center on Budget and Policy Priorities, two Washington, D.C.-based think tanks.
The contrast grows even starker when comparing the bottom 20 percent to the top 5 percent of the state's residents, who earned nearly 132 percent, or $152,949, more than 20 years before, making their average annual income $268,889.
This gives New Jersey the dubious distinction of coming in first among states with the largest income gap between the top and bottom earners, according to the Washington, D.C. report, "Pulling Apart: A State-by-State Analysis of Income Trends."
Yet the income leap for those at the bottom is still not enough to allow many working families to make ends meet. Last year, a Passaic family made up of two parents, a preschooler and a school-age child would need a combined income of $46,412 to meet basic needs without having to turn to public or private assistance, according to the Poverty Research Institute of the Legal Services of New Jersey. The same family living in Bergen County would need to earn $52,557.
And yet, in 2003, nearly 5 percent or 88,804 of the state's families with at least one working parent earned less than the federal poverty level, according to the Poverty Research Institute.
Those in the middle didn't fare so well, either, according to EPI's report. The state ranks 9th for the greatest increase in income inequality between the top and middle from the early 1990s to the early 2000s.
The report's authors used Census Bureau data for their calculations.
Nationwide, the income gap between the top and bottom 5 percent widened in 39 states in the past 20 years, the report said. In 38 states, the incomes of high earners grew faster than those of low-earners.
The report's authors attribute the growing wage disparity to long bouts of unemployment, globalization, the decline of manufacturing jobs, more low-wage service jobs, fewer and weaker unions and the fact that the minimum wage buys less now than it did 30 years ago.
To that list, said Lawrence Kahn, professor of labor economics and collective bargaining at Cornell University's School of Industrial and Labor Relations, add increased imports (which negate the need for manufacturing the same goods here) and computerization and mechanization (which replaces jobs).
"The middle is shrinking. Not drastically, but it's shrinking in that the jobs in the middle are a smaller share" of the job spectrum, Kahn said.
Now, two tiers of jobs are being created, according to Kahn. Low-wage retail jobs are blossoming, but so are high-tech, high-paying jobs. This polarizes the labor market, which then reinforces barriers to upward mobility.
"The bottom has been moving so far away from the middle that the American Dream is just moving out of reach for so many people," said Eileen Appelbaum, an economist and director of the Center for Women and Work at Rutgers University. "They're stuck in jobs that have no career ladders attached to them."
"We should want to live in a place where the differences aren't so great because, in the long run, the stability of a society depends on everybody having an opportunity and everyone having a slice of the pie," said Jon Shure, president of New Jersey Policy Perspective.
A growing chasm between the haves and the have-lesses "means that you start to look like a European country in the 19th century when paths of opportunity are simply closed off to some people," Shure said.
"I don't think this data matters at all," said Gregg Edwards, president of the Center for Policy Research in New Jersey, a free-market think tank in Hunterdon County. "What matters is everyone's income is growing, which the data showed."
The top 5 and 20 percent in the income bracket rely on investments and earnings, he said, which is why their incomes have increased at a higher rate than the bottom 5 and 20 percent. But when markets are bad, their incomes drop, Edwards said.
But when those at the bottom of the economic scale earn just a bit more, while those at the top earn a lot more, it has a "horrible effect on the fabric of American society," Appelbaum said. "We end up blaming people for things they can't help."
For example, Appelbaum said, those earning the least often have the fewest benefits no health insurance, no paid sick days, no paid personal days, few paid vacation days and no pension and the fewest options. Their old car breaks down, they can't get to work and the wind up getting fired; or their kids are not well-educated because they had to stay home frequently to take care of younger siblings because child care was unaffordable.
"Today you need a much more expensive bundle of goods than you did 20 years ago, just to stand still," Appelbaum said.
Reach Andrea Gurwitt at (973) 569-7159 or gurwitt@northjersey.com.