To inform an effective poverty reduction plan, we need to have a better understanding of the underlying causes that result in so many families struggling financially. It helps to put these in the context of general economic trends in Oregon and the United States.
Oregon’s economy is a story of opposites. Gross state product grew three times faster than the U.S. economy between 2001 and 2012, but unemployment rates exceed the national average. Though some metro areas are seeing promising growth in high wage jobs, most of the new jobs elsewhere in the state pay only low wages, or are part-time only. Corporate profits soar and the rich are getting richer, but most families saw their real incomes drop over the past decade. Over 1 million Oregonians received food stamps in 2013 and over half the students in Oregon public schools are eligible for free or reduced-price lunch.
How is it that the economy is growing but most Oregonians are getting poorer? The answer is that economic gains are going not to workers but to boost corporate profits, which go mostly to wealthy shareholders. Corporate profits are at record highs. The top 1%, who own more than half of all corporate stocks, reap the benefit. Corporate profits quickly recovered from the 2008 crash, but most of the good jobs that were lost have not returned. As a result, the recovery from the 2008 recession has been one of the most lopsided in American history. From 2009 to 2012,“top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4%… Hence, the top 1% captured 95% of the income gains in the first three years of the recovery.” The top tenth of 1% of the U.S. wealth distribution (that’s 1 in 1,000) now hold over 20% of the nation’s wealth.
In Oregon, total personal income for full-year tax filers increased by $6 billion between 2011 and 2012, but more than half of the increase ($3.4 billion, or 56%) was claimed by just the wealthiest 1%. These dramatic gains in income came not from rising wages, but from capital gains and other unearned income. The top 1% claimed 73% of all capital gains in Oregon in 2012. Because federal taxes on capital gains are much lower than taxes on earned income, the wealthy pay much lower tax rates than the bottom 99%.
Skyrocketing corporate profits aren’t being shared with workers who generate them, as evidenced by relatively flat or falling wages. In fact, one of the main reasons for record-high profits is that workers are not getting their fair share. The less corporations pay their workers—the more they cut hours, salaries, and benefits—the more they deliver to their shareholders in the form of higher dividends and stock values. In Oregon the share of personal income from wages, salaries and benefits is shrinking, while corporate profits as a share of the gross state product are growing. While corporate profits are at record highs, employee compensation is at its lowest level in 65 years.
Other papers discussing Oregon’s economy — chiefly the Path to Prosperity report from the Oregon Business Plan—don’t tell this side of the story. Instead, they claim that over the past 25 years, “Economic gains have been largely limited to skilled workers.”(Page 1) The data does not show this to be true. While it is true that earnings of some professionals like doctors have increased over time, these are dwarfed by the gains going to the top 1%. Most skilled workers lost ground in the new economy, having to settle for lower wages and part-time jobs.
The Path to Prosperity report blames technology for the loss of jobs. “Technology and globalization continue to enforce a long-term trend: medium-wage jobs involving routing tasks, once plentiful in our state and nation, have declined in good times and bad over the past three decades.” (Page 2) Clearly, advancing technology has made some jobs unnecessary, that is not the main reason big corporations have slashed wages and benefits and outsourced so many American jobs overseas. The Wall Street Journal reported that between 1999 and 2009, U.S.-based multinational companies cut their U.S. labor force by 2.9 million people while creating 2.4 million jobs in other countries. Cutting labor costs was done to boost corporate profits. Meanwhile, the erosion of jobs, wages and benefits has left the U.S. economy in bad shape.
While the rich get richer, most Oregon families are struggling. Between 2002 and 2012, inflation-adjusted income fell for the bottom three quarters of Oregon’s income distribution. Even though many people are working, the erosion of wages and benefits is keeping people from getting ahead. The households receiving food assistance in January 2014 have seen their real incomes decline by an average 29% over the past five years, after adjusting for inflation. (Author’s analysis of data from 2014 High Poverty Hotspots Report)
So, what can be done? First and foremost, improving wages for Oregon workers must be a high priority. When workers earn more, they spend that money locally, growing the economy and creating jobs. Higher incomes also generate more tax revenue to fund education, infrastructure and essential public services, which also promote economic growth. In addition, raising wages means fewer working people will need assistance through safety net programs, saving taxpayer money and freeing up those resources for other needed investments.
We propose several policy options to raise wages in Oregon.
• Raise the minimum wage. Minimum wage jobs aren’t just for teenagers—many working adults make the minimum wage or not much more. The erosion of wages in Oregon has hurt our economy and slowed the recovery from the recession. To improve Oregon’s economy for all we need to raise wages. Oregon should start by phasing in a significant minimum wage increase, to bring the minimum wage up to a living wage. As time goes on we should strive to create jobs and set standards that allow families to support themselves.
• Hold corporations accountable when they take advantage of the safety net. Profitable corporations like Wal-Mart and McDonald’s maintain a part-time, low wage workforce, boosting corporate profits while paying workers so little they must rely on taxpayer-supported safety net programs to get by. We should make the largest employers profiting off low wages pay a fee to offset the costs of safety net services to make sure their employees can provide for their families.
• Provide paid sick leave. Getting sick shouldn’t mean losing your job. Nationwide 39% of private-sector workers and 80% of low-income workers have no paid sick days from their job. Only 31% of Oregon employers offer paid sick leave to full-time, non-management employees. Allowing people to earn sick time while working will benefit many workers and their families, strengthen Oregon’s economy, and keep everyone healthier.
• Preserve workers’ rights. When workers can organize and advocate for themselves, they earn better wages and improve working conditions. Wealthy CEOs and big corporations are trying to erode workers’ rights in order to boost profits that are already at record levels. Rejecting efforts to eliminate workers’ rights are crucial.