Following Lost Decade, Pennsylvanians Earning Less Despite More Productive Economy

HARRISBURG, Pa., Aug. 29, 2012 /PRNewswire/ -- Most middle-class Pennsylvania families have seen their wages and income stagnate since 2000 even though productivity in the economy has grown, according to the Keystone Research Center's annual State of Working Pennsylvania report. View the full report at http://keystoneresearch.org/WorkingPA.

Growth in the size of the overall economic pie could have supported rising living standards for all Pennsylvania workers, Keystone's researchers wrote, but an outsized share of the benefits went to the top 1 percent of earners, preventing board-based prosperity and slowing down the economic recovery.

Neither the "lost decade" for working families since 2000 nor a recent increase in unemployment and the shortage of jobs in Pennsylvania occurred by accident. They were the result of poor policy choices that have been unfriendly to working families, the report concludes.

"Policymakers are hitting the economic brakes when they should be hitting the accelerator," said co-author Stephen Herzenberg, PhD, an economist and executive director of the Keystone Research Center. "Policymakers are also tilting the rewards of economic growth to the top. Fix those problems and we can have broadly shared prosperity again."

A Lost Decade

The State of Working Pennsylvania is Keystone's annual report of how working Pennsylvanians are faring in today's economy.

This year's report had little good news for most working Pennsylvanians, following a decade in which most workers experienced stagnant or falling wages and a recession that made family-sustaining job opportunities harder to come by.

For a four-person family, median income grew nearly twice as fast in the 1990s as it did in the 1980s, but it actually declined by $6,136 over the course of the "lost decade"— going from $82,818 in 2000 to $76,682 in 2010.

This decline occurred despite growth in the Pennsylvania economy because the benefits of growth went disproportionately to the top 1 percent of earners. The 1 percent captured more than half of all income growth in Pennsylvania between 2002 and 2007. After a brief setback, top incomes were on the rise again in 2010, capturing three out of every four dollars in income growth in Pennsylvania in the first full year of the economic recovery.

With economic forecasters predicting continued high unemployment in the nation and in the state, workers face the danger of another lost decade, Keystone researchers wrote. That would continue to claw back the wage gains of the second half of the 1990s, the only period of broad-based wage growth in the past 33 years. 

"We remain stuck in the most extended period of high unemployment since the Great Depression," said Mark Price, PhD, co-author and labor economist at the Keystone Research Center. "The longer we have this high a jobless rate, the greater the risk to middle-class wage gains made in the 1990s."

Policies that Work for the Middle Class

Pennsylvania enjoyed a jobs advantage over most other states coming out of the recession in 2010, but that advantage has slipped. Budget cuts cost 25,000 teachers, first responders and other public servants their jobs in 2011, contributing to the state's fall from the top 10 to 38^th in state job-growth rankings.

Pennsylvania needs a new direction, researchers wrote, led by policymakers who will commit themselves to broadly shared prosperity and advance policies that promote the American Dream, the idea that people who work hard and play by the rules should be able to share in our nation's expanding economic pie, and a democracy that is responsive to people rather than wealth and money.

The report also recommends an "Investment in the Future" plan that bolsters our infrastructure, manufacturing sector, education, skills, and scientific research in a way that grows jobs in the short run and lays the foundation for long-run growth.

Finally, it recommends wage and incomes policies that restore a level of equity in America that is compatible with widespread mobility and a strong economy.

"In the end, its about values," Dr. Herzenberg said. "What kind of Pennsylvania do you want? We want one with widespread opportunity, improved living standards across the board, and a democracy responsive to the middle class and what benefits all Pennsylvanians. We think that's what most other Pennsylvanians want."

The State of Working Pennsylvania: At a Glance

• In the 1990s, Pennsylvania experienced the strongest job growth it has seen since the 1960s.
• The period from 2000-2010 was the only one in the last seven decades with negative job growth.
• Pennsylvania's jobs deficit – the difference between the number of jobs the state has and the number it needs to regain its pre-recession employment rate – stood at 301,300 in July and is 74,000 jobs higher now than a year ago.
• Median four-person family income in Pennsylvania declined by $6,136 over the past decade, going from $82,818 in 2000 to $76,682 in 2010.
• Despite being better educated and more productive, the typical worker in Pennsylvania in 2001 earned only $16.43 per hour, or 63 cents more than in 1979 – for a full time worker, that's just $1,310 more per year.
• During the short economic expansion from 2002 to 2007, the top 1 percent in Pennsylvania (62,000 taxpayers) captured 54 percent of all income growth in the commonwealth. While average incomes grew by 15.4 percent, the incomes of the top 1 percent grew by 50 percent.
• For the roughly 620 Pennsylvania taxpayers who make up the top 0.01 percent, KRC estimates that average incomes grew by $1.7 million in 2010, to $18,480,207. 

Read the State of Working Pennsylvania 2012 at http://keystoneresearch.org/WorkingPA.

The Keystone Research Center is a nonprofit, nonpartisan research organization that promotes a more prosperous and equitable Pennsylvania economy.

SOURCE Keystone Research Center