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State's poor are getting poorer: Gap with rich is growing, study says

By Dale Kasler and Clint Swett

Bee Staff Writers (Published Feb. 9, 1999)

The gap between California's rich and poor has continued to widen in spite of the state's robust economic recovery, according to a report by the Public Policy Institute of California. The growing disparity in wealth is being fueled largely by immigration and a drop-off in wages paid to those at the bottom of the educational ladder, the report said. "It's not about the rich getting richer, it's about the poor getting poorer," said economist Deborah Reed, who wrote the report. "For people with less than a college degree, wages have really deteriorated."

The report, to be released today, is a follow-up to a study in 1996 by the San Francisco-based institute that suggested income inequality was growing at a faster pace in California than the rest of the nation. The new report extends the study to take in 1995-97.

The new report shows a slight narrowing of the gap in 1997 -- "a little bit of (income) growth at the bottom," Reed said -- but otherwise indicates that the income gap has been growing despite California's latest economic boom.

The top 10 percent of wage earners have more than recovered the ground they lost during the recession, she said. But despite some recent gains, the bottom 10 percent are still earning less than they did (in inflation-adjusted dollars) before the recession, she said.

While Reed said she expected a widening gap during a recession, she was taken aback by the lack of progress among the poor during a recovery. "The state's poor have been losing income ground steadily, in good economic seasons and bad, since the late 1960s," the report said. Among those feeling left behind in the recovery is Kaleen Kasten of Marysville. She said she, her husband and two sons live on about $17,000 a year her husband earns at the Beale Air Force Base commissary and at the Army National Guard. "We just can't make it on that," said Kasten, who supplements her family's income by occasionally selling art work.

Kasten's plight isn't unusual, said Lee Pliscou, a lawyer with the non-profit California Rural Legal Assistance. "There's no doubt the economy is helping a number of folks, but there's a substantial core group of people unhelped by the upswing in the economy," he said. "Our office is filled with them every day."

The Public Policy Institute study stops at 1997 data, and recent unemployment statistics did show that the economic recovery is starting to pay dividends for some groups that tend to lag the rest of the country economically. Unemployment rates for Latinos and African Americans, though still higher than the national average, fell last month to the lowest rate on record, according to the U.S. Labor Department. S

till, economists aren't sure whether those recent gains are doing much to erase the gap between rich and poor. Many of the new hires "presumably would not be high wage," said economist Tom Lieser of UCLA. The income gap is continuing to widen more quickly in California than the U.S. average, the Public Policy study said. Thirty years ago the top 25 percent of male wage earners made not quite twice as much as those in the bottom 25 percent, the study said. That was true for California as well as the rest of the nation.

In 1997, those at the top of the California pay scale earned almost 3 times as much as those at the bottom, while for the U.S. the discrepancy was about 21/2 times. Reed said immigration accounts for much of this difference. Newcomers often lack the education and job skills to get a high-paying job, she said. Not only that, they often compete with people already living in California for the menial jobs, which "drives down the wages of the natives," she said. Immigrants' share of the work force grew to 36 percent in 1997 from 29 percent 10 years ago, the report said. Reed said disparities in education play a larger role than they used to in creating a society of haves and have-nots.

In 1969 a college-educated male earned 50 percent more than a male without a college degree; in 1997 the degree was worth a 70 percent increase in pay, the study said. The differential becomes even more pronounced among those without high school degrees, Reed said. "The study points to education and training being more important than ever," Reed said. That's particularly true for immigrants, she said. T

he institute's report was consistent with other findings, said UCLA's Lieser. "We've noted that California was good at attracting greater-than-average numbers of people at both ends of the educational spectrum," Lieser said. "It's a magnet for all kinds of people; we're in a growth mode again." He said an economic boom can actually exacerbate the situation. While something like 70 percent of newcomers to the Bay Area have college degrees, a growing economy also attracts "a lot of people taking entry-level jobs," he said. A

t the same time, a significant chunk of the middle class has disappeared, he said. The recession wiped out 200,000 middle- and upper-middle-class aerospace jobs in Southern California, which in turn destroyed thousands of middle-income positions in real estate and other services that depended on aerospace, he said. Despite the recovery, aerospace hasn't come back, and neither have those service jobs, he said.

Bee staff writer Loretta Kalb contributed to this story.