Closer to Home - The Hour Glass Economy
MARCH 4, 2005
Santa Rosa Press Democrat.
by Martin Bennett

Dark clouds are gathering on the horizon as the North Bay moves unevenly into the economic recovery.

The collapse of Telecom Valley and the slashing of 4,500 high-tech jobs have cooled the robust economic growth of the late 1990s, a period when regional job growth outpaced the state and national rates. Now a sober assessment of the boom years reveals the dramatic growth of income inequality and working-class poverty in the North Bay.

This week the nonprofit New Economy, Working Solutions (NEWS), released a report, "The Limits of Prosperity: Growth, Inequality and Poverty in the North Bay," by University of California researchers Nari Rhee and Dan Acland.

The report examines the transformation of the regional economy over the last two decades and calls for new public policy to address the crisis of low-wage employment and the polarization of wealth and income in Marin, Napa, Sonoma and Mendocino counties. The spreading economic insecurity and the structural weaknesses of the regional economy could undermine renewed prosperity.

The report argues that the emergence of an "hourglass economy," with job growth concentrated at the top and the bottom of the labor market while middle-income jobs are shrinking is driving the current economic insecurity.

Income inequality grew at "staggering rates" in the 1990s compared to the 1980s. In Sonoma and Napa counties during the 1990s, the income of the top one-fifth of working families grew six times as fast as the bottom one-fifth. In Sonoma County income for the upper one-fifth ballooned by 24 percent, from $144,476 to $179,615 in inflation adjusted-dollars. For the bottom one-fifth family income was stagnant and grew by only 4 percent, from $23,001 to $23,991.

The hourglass economy spurs the rapid growth of the working poor, families for whom wages and incomes are not sufficient to pay for basic necessities such as food, housing, transportation, child care and health care. The report documents how incomes at the bottom have failed to keep pace with spiraling housing, medical and other costs of living.

More than 30 percent of the workers in the North Bay do not earn wages sufficient to enable two parents working full-time to support two children. Adjusting for the cost of living in each county, the self-sufficiency or living wage for two parents working full-time to support two children is $9.75 in Mendocino, $11.48 in Napa, $12.46 in Sonoma and $15.05 in Marin.

Most alarmingly, job growth projections for the North Bay indicate that the base of the hourglass is continuing to widen. Service sector jobs such as janitors, child-care and home-care workers, security guards and retail sales will account for much of the the 62 percent of new jobs paying an entry wage of less than $12 an hour.

Latinos, who are clustered in industries that offer the least pay, training and job security, are twice as likely to be poor as whites. More than 43 percent of the Latino working family population in Sonoma and 60 percent in Mendocino do not earn a living wage. The California Budget Project suggests that Latinos will constitute over 43 percent of the state's population by 2020 and low levels of educational achievement for Latinos will limit upward mobility and could choke off future economic growth.

The NEWS report warns of dangerous consequences if the hourglass economy persists:

+A mismatch between jobs and housing will mean longer commutes for low and middle-income workers who cannot find affordable housing. +The increased demand from low-wage workers for health and human services will erode the public sector. +The rapid turnover and diminished levels of training and skills among low-wage workers will lead to declining productivity.

The authors conclude with a set of recommendations to address the deepening income inequality. They advocate for a higher state minimum wage indexed to inflation, more protections for workers seeking to form unions, increased access to affordable housing and health care, and ensuring that good jobs with benefits are created when public funds are provided for new commercial development.

Ultimately, the report suggests that shared prosperity, which enables all income brackets to grow together, is the basis for a healthy and sustainable regional economy.

Martin Bennett teaches American history at Santa Rosa Junior College and is the board chair of New Economy, Working Solutions. The report can be downloaded at: http://www.neweconomynorthbay.org