Setting the Context: CBP Testimony on Key Economic and Wage Trends

November 14, 2013

As we blogged about, the University of California, Berkeley’s Institute for Research on Labor and Employment (IRLE) last month released a major report on the social and economic costs resulting from low-wage work in the fast-food industry. Yesterday in Sacramento, the Assembly Labor and Employment Committee and the Senate Labor and Industrial Relations Committee held a joint informational hearing on fast-food industry employment and the policy challenges presented by low-wage work.

CBP Policy Analyst Luke Reidenbach led off the meeting with invited testimony on California’s current job market and what the latest wage and employment trends mean for the state’s residents. Luke’s remarks were based on his analysis in a recent CBP report — Uneven Progress: What the Economic Recovery Has Meant for California’s Workers — and highlighted the fact that recent job growth has not translated into wage gains for many workers.

If economic growth were broad-based, workers across the wage distribution would be seeing real gains in their wages.  However, so far in this recovery only high-wage workers — which we define as those falling into the top 20 percent — have seen any significant wage gains over the last few years.

Read the full testimony.

To further assess how well California’s economy is working for families across the state, the CBP later this year will release an analysis of what it takes to make ends meet in California, including a look at how typical wages stack up to the costs of basic necessities.

— Steven Bliss

Federal Brinksmanship Threatens Economic Recovery

September 30, 2013

One year ago this week, I left Washington, DC, for California to join the CBP as its new executive director. As I shared the news of my impending departure with my friends in the state/local policy community in DC, many of them would say something like “Are you crazy? Things in California are so broken.”

Fast-forward a year. California’s economy is growing. California’s voters approved a set of temporary tax increases last November that are providing new revenues to a state budget that had been confronted by several years of severe shortfalls. State policymakers have approved a 2013-14 budget that reinvests in education, expands access to health insurance as part of federal health care reform, and begins to pay down state debt incurred amid the economic struggles of the past decade. More recently, state policymakers passed an increase in California’s minimum wage, providing a financial boost for low-wage workers, who have seen their earnings decline in recent years.

Meanwhile, back in Washington, federal policymakers have been playing political football with the nation’s economic recovery and the full faith and credit of the US government. They have yet to negotiate an agreement that funds the federal government, threatening a government shutdown if an agreement isn’t reached by the start of the new federal fiscal year tomorrow. Federal brinksmanship is also in play over whether to raise the federal debt ceiling or default on US debt – a prospect that would threaten economic performance and job creation in the midst of a fragile economic recovery. These debates follow closely on the heels of a vote in the House of Representatives a couple weeks ago that would slash funding for federal food assistance – the Supplemental Nutrition Assistance Program (SNAP) — eliminating benefits for 3.8 million people in 2014. This is about the same number of people that the program lifted above the federal poverty line in 2012, according to US Census figures. Federal policymakers will have another opportunity to make the wrong decision come December when, lacking federal action, emergency unemployment insurance benefits will expire.

Poor policy choices at the federal level hurt California workers and their families. And despite the strides made in California in the past year, our state’s continued economic recovery will depend, in part, on actions taken — or not taken — in Washington. Our latest analysis shows that despite a general upswing, California’s recovery has yet to reach large segments of workers and their families, and the job market remains deeply challenging. Federal policy will also have a profound effect on the state’s fiscal outlook, with federal dollars comprising the second-largest piece of the state budget. (A prior CBP report details how federal dollars are spent in California.) A federal government shutdown, a decision to make an increase in the debt ceiling contingent on another round of federal spending cuts, or a default on US debt will threaten the nation’s and California’s already-fragile economic recovery. Failure to extend federal emergency unemployment insurance in December would place additional strain on those in California and elsewhere who are seeking work amid a weak job market.

The economy in California and nationally is beginning to come back, but our prospects are threatened by federal politics that appear “crazy” and “broken,” where some members of the US Congress are willing to jeopardize the recovery and imperil families and communities for the sake of political gain. Smarter choices by policymakers at all levels — like those made by California’s voters and policymakers in the past year — present an alternative way forward.

— Chris Hoene

New Data Highlight the Nation’s Uneven Recovery

September 12, 2013

A new analysis from the University of California, Berkeley’s Emmanuel Saez shows that income inequality at the national level has grown during the economic recovery, with only the wealthiest seeing significant income gains. The data can be downloaded as a Microsoft Excel file here. Here are some highlights:

  • Income gains were uneven. Between 2009 and 2012, the last full year for which data are available, the average inflation-adjusted family income grew by 6.0 percent. However, incomes grew by 31.4 percent for the top 1 percent of families and only 0.4 percent for the bottom 99 percent.
  • These uneven gains come after severe drops during the Great Recession. According to Saez, the average inflation-adjusted income per family declined by 17.4 percent between 2007 and 2009, the largest two-year drop since the Great Depression. The top 1 percent saw even greater losses of income, with a decline of 36.3 percent.
  • For high-income earners, the impact of the Great Recession was temporary. Even though the top 1 percent of families saw far more severe drops in average income during the recession than did other families, this was only temporary. As Saez writes, “Overall, these results suggest that the Great Recession has only depressed top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s. Indeed, the top decile income share in 2012 is equal to 50.4%, the highest ever since 1917 when the series start.”

These new data show a trend we highlighted last week in our annual Labor Day report: Large groups of workers are not yet seeing a recovery. Here in California, wages remain depressed relative to their pre-recession levels for all but high-wage earners, and wage inequality continues to rise even as the labor market has grown for more than three years.

— Luke Reidenbach

New CBP Report – Uneven Progress: What the Economic Recovery Has Meant for California’s Workers

September 4, 2013

Earlier this week, we released our annual Labor Day report, taking a look at the latest employment and wage trends, what they mean for workers and their families, and some key implications for public policy. This new report shows that even after more than three years of job gains, California’s recovery from the Great Recession thus far has left many workers behind.

Uneven Progress: What the Economic Recovery Has Meant for California’s Workers finds that Californians continue to face a deeply challenging job market, with long-term unemployment down only slightly from a record high, much of the state still stuck in double-digit unemployment, and wages among low- and mid-wage workers still below where they were prior to the recession, after adjusting for inflation. Here are some key findings from the report:

  • Even after three years of job growth, California has about 600,000 fewer jobs than it did prior to the recession, and unemployment remains high in many parts of the state. During the first half of 2013, most California counties — 34 out of 58 ­— had an average unemployment rate in the double digits.
  • The share of unemployed Californians who have been seeking work for six months or longer is down only slightly from a record high and stands at 43.1 percent. In other words, more than two out of five unemployed Californians have been looking for a job for at least half a year. What’s more, many workers who do have jobs are unable to obtain full-time employment. Involuntary part-time employment — when workers cannot obtain a full-time schedule even though they want one — is currently a reality for more than 1.3 million workers, or 8.0 percent of all employed Californians.
  • Compared to prior recoveries in California, the current recovery is more heavily reliant on service industry growth that typically pays lower wages. For example, the leisure and hospitality industry accounted for nearly one-quarter (24.4 percent) of total job growth between February 2010 and June 2013, a much larger contribution than this industry had made to earlier economic recoveries.
  • Due to recent gains, high-wage workers — those at the 80th percentile of California’s earnings distribution — have seen inflation-adjusted hourly earnings nearly return to their 2006 level. Meanwhile, inflation-adjusted wages of low-wage workers (those at the 20th percentile) remain 5.9 percent below their pre-recession level, while those for mid-wage workers (with earnings exactly in the middle of the distribution) are 3.8 percent below the pre-recession level.

Uneven Progress highlights the importance of state policymakers taking actions to support workers and their families and foster broadly shared prosperity over the long term. These include raising the minimum wage, boosting support for child care and the CalWORKs Program, and reinvesting in education across the spectrum — early education, K-12 schools, and colleges and universities.

In the coming weeks, the CBP will issue additional analyses on California’s job market recovery and how the state’s workers and their families are faring. Stay tuned to this blog and our website, and be sure to join our email list to receive all the latest updates.

— Steven Bliss

The Lost Decade?

August 22, 2013

Yesterday, researchers at the Economic Policy Institute (EPI) released a new analysis of wage trends in the United States, and they found that a majority of US workers have endured more than a decade of wage stagnation. For example, wages for the bottom fifth of earners fell 4.5 percent between 2000 and 2012, while the median earner saw her wages remain virtually unchanged. In fact, during this period, the entire bottom 70 percent of the wage distribution saw wages either decline or stagnate. EPI’s research confirms that the economy has failed to provide real wage gains for all but high-wage earners in the periods before, during, and after the Great Recession.

It is a sobering — but worthwhile — read, and it highlights a serious economic challenge that is confronting workers here in California. As part of an upcoming report to be released for Labor Day, we will be looking at recent wage trends for California’s workers. In the meantime, our 2011 chartbook A Generation of Widening Inequality provides a detailed look into what’s been going on with Californians’ wages over the past three decades.

— Luke Reidenbach