Black workers hit by US recession

US workers are losing the wage gains of the l990s

by Steve Schifferes BBC News Online economics reporter

It's Labor Day weekend in the United States - the traditional end of the summer holidays, and a day established to demonstrate that American workers wanted nothing to do with the May Day socialist holiday in Europe.

But a new report suggests that US workers are increasingly losing out in terms of benefits and wages - with black and Hispanic workers reversing the gains of the previous decade.

The State of Working America, a new report from the Economic Policy Institute, suggests that the historic gains made by minority workers in the long boom of the l990s are being undermined by the current recession.

Full employment is a highly effective civil rights tool

Jared Bernstein, EPI

According to economist Jared Bernstein, one of the report's authors, average household income of black families rose by 17% between 1995-2000, while average Hispanic income rose even faster, by 27% in the same period, as more people from minority households got jobs.

But since then, the unemployment rate has jumped from 4% to 6%, and real wage growth has slowed to just 1% per year, in what they describe as a "jobless recovery."

According to Mr Bernstein, "full employment is a highly effective civil rights tool. Returning to full employment immediately must be the top priority of every policy maker."

Long hours

The report also highlights the fact that the higher standard of living enjoyed by US workers is partly due to the extremely long hours they work.

Union membership boosts real wages by 11.5% on average

Jared Bernstein, EPI

US workers have shorter vacations, and less paid time off, than workers in most other developed countries.

In fact, US employees now work 1900 hours each year (the equivalent of 49 out of 52 weeks), even more than the 1840 hours worked in Japan and much more than the 1200 - 1500 hours worked in Europe.

The average number of hours worked has been pushed up by the large numbers of married women with children who now work full-time, and the increasing need for single-parent families formerly on welfare to go to work.

This increased household income, because more families had two incomes.

But the average wage for men was the same in 2000 as it was twenty years ago, indeed slightly lower.

Middle-income black and Hispanic families needed to work more hours to maintain their standard of living compared with white families.

On average, black families worked 12 weeks more a year than white families, and Hispanic families15 weeks more.

Growing inequality

Despite the huge gains by low-income workers, wage inequality in the United States actually worsened.

That is because those at the top saw their total income - including capital gains on shares - rise much faster than average.

The wages of chief executives grew by 79% between 1989 and 2000, while their total compensation (including stock options) increased by 342%.

The wages of unskilled workers was held back by several factors, according to Lawrence Michel, president of EPI.

He told BBC News Online that globalisation, including the increasing migration to the US and the growing competition from developing countries for manufactured goods, could account for around one-third of the inequality.

Changes in domestic institutions, including the low level of the minimum wage and the weak unionisation among workers in the retail and service sector, explained another one-third.

Union benefits

But unions - which only represent about one in ten US private sector workers - did have a positive effect on wages, and especially benefits.

Average wages of unionised workers were 11.5% higher than non-union workers.

In addition, union workers were far more likely to have health care and pension benefits.

In general, while companies raised wages in response the low unemployment in the 1990s, they partly compensated by cutting back on pension contributions and health care payments.

And job insecurity increased as more workers were employed in short-term or contingent contracts.

Finally, the report draws attention to the worrying increase in household debt, which grew much faster than household income and now exceeds average income by 10%.

For most people, their main assets is their home, not shares, so it is the increase in house prices, not the fall in the stock market, that is cushioning the impact of the recession so far.

The State of Working America 2002-2003, by Lawrence Mishel, Jared Bernstein, and Heather Boushey, is published by the Economic Policy Institute in Washington.