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Report: Pa., U.S. inattentive as wage earners lose ground
In its annual report on the state of Pennsylvania's economy, the Keystone Research Center credits the federal government with stopping the economic "free fall," but it adds that governments should pay more attention to the plight of most wage earners.
All but the wealthiest of workers have been losing ground, the group said, and that bodes poorly for consumer spending.
Stephen Herzenberg, an MIT-trained economist who is executive director of the independent center - which he described as "progressive" - said state and federal governments would need to keep stimulating the economy through 2010 "because it will take at least that long for private-sector demand to rebound."
So far, Herzenberg said, government has paid little attention to the widening gap between the earnings of the middle class and the wildly wealthy. Between 2001 and 2006, pay for families in the top 1 percent rose 37 percent, from an average of $807,661 to $1.1 million. Meanwhile, pay for the bottom 90 percent fell 4 percent.
From fiscal 2007-08 to fiscal 2008-09, inflation-adjusted pay rose less than 1 percent for the bottom 30 percent of wage earners and stayed steady for those in the top 5 percent. Everybody else lost ground. For people who make median pay - $33,000 a year - inflation-adjusted earnings fell 2 percent. Workers at the 80th percentile - about $53,000 a year - were hit hardest, with a drop of 4.5 percent.
Herzenberg said government policies should rebuild the middle class. For example, current union laws are not well-suited to the service jobs that support the core of the middle class. He also backs government investment in the green economy.
Pennsylvania will make a big mistake if it balances its budget by cutting. Jobs will be lost, Herzenberg said. It would be better to tax the rich.
"We're in the process," he said, "of winding our way to a state budget that shrinks the economy."
Contact staff writer Stacey Burling at 215-854-4944 or sburling@phillynews.com.
