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San Jose Mercury News, September 04, 2006
The cooling housing market threatens to derail the state's modest recovery from the recession and technology bust earlier this decade, researchers at the University of California-Berkeley warn in a new report.
A separate study -- also timed for Labor Day -- highlights how that recovery has not benefited all wage groups, with low-income workers failing to keep ahead of inflation even as those with bigger paychecks have prospered.
The two doses of bad news come at a critical time for the state's economy, which has seen jobs rebound in the last few years, although still lagging behind the highs of 2000, even as rising gas prices take a bigger bite out of consumers' wallets.
Essentially, the Berkeley researchers argue that the white-hot real estate market has helped conceal some underlying problems in the state's economy.
``A year ago, we asked the question whether there would be a slowdown in real estate and construction that would bring down jobs and wages,'' said Arindrajit Dube, an economist with the university's Center for Labor Research. ``Unfortunately, the answer was yes.''
From 2003 through 2005, growth in real estate-related construction jobs grew at an annual average of 4.5 percent in California -- well ahead of the private sector pace over the same period of 2.1 percent a year, according to Dube.
But over the first six months of this year, the growth rate for construction jobs -- which can be viewed as a proxy for the entire real estate industry -- has slowed to roughly the same rate as private jobs statewide, Dube reported.
Even during the recovery, California workers have struggled to keep up with inflation, according to both the Berkeley report as well as a separate study by the Sacramento-based California Budget Project.
That's no surprise for workers such as Noel Salvador, a Dublin resident and information technology professional.
``Gasoline, the price of food, entertainment, dining, even a casual lunch out, all of that is more expensive,'' said Salvador. ``Wages dropped after the tech downturn, and they have not really caught up.''
The reports seem to confirm that view. Workers in California have not equally shared the wealth created by the rebound.
``During this economic recovery, the rising tide has lifted only a very few number of boats, those at the top of income distribution,'' said Jean Ross, executive director of the budget project, a think tank.
Inflation has chewed up just about all of the wage gains for middle-income workers and more than erased gains for low-income employees.
Adjusted for inflation, the pay of low-wage workers, those in the bottom fifth of income earners, decreased by 0.9 percent between 2003 and 2005, the budget project reported. Over the same period, the inflation-adjusted wage of the typical California worker increased 0.1 percent. Wages of those in the top fifth rose 0.9 percent.
``Wage trends between 2003 and 2005 mark a reversal from the prior two-year period, when the wages of workers (across the board) gained considerable purchasing power,'' the budget project reported.
Yet in the most recent year, things do look a bit brighter. The budget project said that household income for all workers, adjusted for inflation, rose 1.7 percent in California in 2005 compared with 2004. And that was faster than the nationwide gain of 1.1 percent, Ross said.
As wage growth stagnates in California, some workers have simply eliminated activities they cherish, while others look for more income. ``I used to drive to games in my softball league,'' said Victor Sample, a construction worker who lives in Richmond. ``Now I don't go with gasoline costing so much.''
``You cut back on things and you do a little side work,'' said Tom Bonnell, a Pleasanton resident who owns three East Bay companies, including a trucking operation. ``I know one truck driver who embroiders shirts in his spare time.''
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