The booming 1990s shook out in California with a major disparity that favored the rich over the poor while a continued decline in manufacturing jobs left the middle lagging, according to a report made public today.

In a 115-page report titled “Boom, Bust, and Beyond: The State of Working California,” the Sacramento-based California Budget Project found that over a 20-year period ending in the late 1990s, inflation-adjusted income actually dropped for 40 percent of the state’s families.

Over the same period, the richest 5 percent of Californians saw their family incomes climb by 50.4 percent, adjusted for inflation, according to the report’s analysis of U.S. census data.

Meanwhile, with the state losing more than 200,000 manufacturing jobs that paid $68,000 a year (in 2000 dollars), California’s median household income felt a drag between 1989 and 2001 that slowed its growth to well behind the national average. The state’s income over that 12-year period rose 3.9 percent, compared with a U.S. rate of 6 percent.

The Sacramento region, however, appears to be faring better than the rest of the state. Rather than decline, manufacturing jobs in the five-county area actually increased by 13,580 between ‘89 and 2001, or 30 percent, although they fell off between August 2001 and last August. (The study included Nevada, Placer, El Dorado, Yolo and Sacramento counties.) Construction jobs almost doubled in the region, and median family income in each of the five counties far surpassed the anemic growth in the statewide average.

Since the data for the report were compiled, some of the wealthiest wage-earners in the state have been staggered by the sputtering economy that has pounded the high-tech sector. Authors of the report said it is too soon to assess whether the slowdown has hindered the top end’s sprint from the rest of the pack along the state’s income spectrum. But they said the long-term prognosis for millions of California workers remains uncertain, with the bulk of job growth projected to take place in the lowest-paying sectors.

“What impressed us most was, despite the strong economic years of the late 1990s, many California workers and their families are not any better off, or are just a little better off, than they were in 1989,” said David Carroll, who co-wrote the report with California Budget Project Executive Director Jean Ross.

“There are a large number of factors contributing to that,” Carroll said. “Primarily, the economic boom of the 1990s really benefited just those at the high end of the wage and income spectrum. Another part is that the California economy continues to produce large numbers of jobs that don’t pay enough to support families.”

The California Budget Project is a statewide research organization that advocates policies that favor the working poor.

Citing state Economic Development Department projections, Carroll said that 28 percent of California’s projected job growth through 2010 will consist of jobs paying $10 an hour or less. He said that even though the state faces a budget deficit of $26 billion to $35 billion, lawmakers still should pursue policies such as a higher minimum wage, affordable housing and subsidized health and child care to assist the economy’s bottom sector.

Ted Gibson, former chief economist for the state Department of Finance, said the data in the report is correct. But, he said, it failed to address what he viewed as “impediments” to the California economy “that in the long run, I think, are going to grind us down.”

Among them, Gibson said, are the state’s high housing, electricity and fuel costs, as well as employers’ skyrocketing workers compensation rates, which are “really hitting the manufacturing industry hard.”

“California is not a place where anyone would choose to locate medium or low-wage industries,” Gibson said. “It’s just too darned expensive to do business here. It’s got to be high-value-added and high-wage to make it here. We’ve arranged our affairs so that this is the highest wage-cost place in the country to live and do business. In that sort of situation, the only kind of economic activity that makes sense for export to the rest of the world and the United States is industry that commands high wages.”

To bolster the middle and raise the bottom, Allan Zaremberg, president of the California Chamber of Commerce, said that state government needs to create a more business-friendly climate.

“Companies that have a chance to expand are expanding elsewhere,” Zaremberg said. He blasted a list of policies in California such as less-flexible work schedules and stringent environmental rules that have displeased manufacturers.

Carol Zabin, chair of the Center for Labor Research and Education at the University of California, Berkeley, said the California Budget Project report documented a change in the 1990 growth years from previous economic upsurges, a change in which there was no “significant lifting of the bottom.”
She agreed with the report’s policy prescriptions, particularly the recommendation to raise the minimum age.

“Certainly, we should be continuing to increase the minimum wage and index it to inflation so that it actually maintains a standard that can bring people above the poverty line, like it did in the 1960s,” Zabin said.

The California minimum wage is $6.75. The state Industrial Welfare Commission recently turned down a labor-backed proposal to increase it.

Zabin also advocated policies that make it easier for workers to unionize. The report said that although the wage gap between unionized and nonunion workers is shrinking, employees represented by labor organizations still earn about $4 an hour more than workers who are not.

David Neumark, an economist with the Public Policy Institute of California, said there is no disagreement that “low-skilled workers have fewer options for high-paying jobs.” He said their best bet to escape service-sector employment is to get an education and improve their skills .

“The real problem is, that is difficult to do,” Neumark said. “It’s easy to pass a minimum wage law. It’s much harder to improve school quality or get people to stay in school. But ultimately, those are the things that lead to higher wages.”

(To view the California Budget Project report, go to http://www.cbp.org/2003/r0212SWCfinal.pdf.)