Wages For Most Pennsylvanians Fall Says Keystone Research Center

Narrow Slice of Population Benefits From Growth Since 2001

11th Annual State of Working Pennsylvania Shows Expanding Economic Pie Has Not Meant a Larger Piece for Most Pennsylvania Families

Harrisburg – Despite more than four years of economic growth, the inflation-adjusted wages of all but the most highly paid Pennsylvanians declined in 2005 as it has over the last several years.

“To a degree that is stunning, the benefits of a strong economy have been concentrated at the very top of the Pennsylvania income scale,” says Dr. Mark Price, co-author of The State of Working Pennsylvania 2006.

Inflation-adjusted hourly wages for typical Pennsylvanians—right in the middle of the earnings distribution—fell from $14.55 to $14.21 in 2005.  Even relatively high-wage earners, those who earn more than nine out of every 10 Pennsylvanians, saw their wages decline in 2005 for third year in a row. 

The decline of wages for all but the highest earners has occurred at a time when corporate profits, CEO pay, and productivity growth are at high or record levels.

• In 2005, corporate profits in the United States rose by 16%.
  
• The average CEO now earns more in one day than the average U.S. worker earns in a year.
  
• A recent study found that economy-wide productivity grew faster from early 2001 to early 2005 than in any period back to 1954.

  
“Recent trends look like the wage and income stagnation of 1980 to 1995,” said Dr. Stephen Herzenberg, co-author of the study, “except that the slice at the top benefiting from growth is now even thinner.  The last five years represent a sharp departure from the broadly shared prosperity of 1995-2000.” 

Pennsylvania families are also getting squeezed by falling pension coverage and rising health care costs.

• 51% private sector Pennsylvania workers had employer-provided pensions in 2005, down from 57% in 2000.
  
• The number of Pennsylvanians without health insurance rose about 300,000 from 1999 to 2005.  (There was some progress on the health insurance front in 2005 compared to 2004.  According to Census Bureau numbers released August 29 the number of uninsured Pennsylvanians declined by 143,000 from 2004 to 2005.)

Recent declines in wages have hit particularly hard those earning the least according to the report.  Taxable income for the 10th percentile Pennsylvania taxpayer (with an income greater than 10% of taxpayers and less than 90% of taxpayers) declined by an astounding 21% between 2000 and 2004.

“Not surprisingly,” adds Price, “poverty has increased in Pennsylvania.  Between 2000–01 and 2004–05 the share of Pennsylvanians living in poverty increased by roughly a quarter.  Today, nearly one out of every six Pennsylvania children live in poverty.”

“Well-educated Pennsylvanians are not immune to recent wage and income trends,” adds Herzenberg.  “Contrary to what many have assumed, more education is not, by itself, a guarantee of a rising income or a solution to the problem of stagnant wages.” 

• The median wages of college-educated Pennsylvania workers fell from $22.76 per hour in 2002 to $21.72 in 2005.
  
• The median wages of Pennsylvanians with some college education fell from a peak of $13.75 in 2004 to $12.97 in 2005.

“There is no good reason,” Price concludes, “to believe that the current labor market will automatically mend the broken link between productivity growth and the living standards of most Pennsylvanians.”

“If the United States or Pennsylvania wants the majority of workers and businesses to benefit tangibly from growth,” says Price, “civic and political leaders need to develop a business plan for the Commonwealth that will ensure that outcome.”

The State of Working Pennsylvania 2006 is available for download, free of charge, from www.stateofworkingpa.com Additional information about the Keystone Research Center, a non-partisan public policy think tank based in Harrisburg, Pennsylvania, is available from www.keystoneresearch.org.