Chicago Tribune, December 5, 2007: State’s wage gap growing

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By Barbara Rose

Tribune staff reporter

December 5, 2007

By many measures, the last two years have been good for Illinois workers. Job growth picked up, factory job loss slowed, unemployment declined.

But the good times failed to reverse troubling long-term trends that threaten to undermine working families’ standard of living and widen the gap between the highest and lowest earners, a new report indicates.

The trends in place here are felt across the country, but the report spotlights important changes in a prosperous state that no longer can claim to be a leader in job and income growth.

More than half of the new jobs projected for Illinois over the next 10 years will be in occupations paying less than the state’s annual median wage of $40,217, while 45.6 percent will pay more, according to the report.

The picture is much starker at the high and low ends of the spectrum. For every new job paying twice the current median wage, three will pay less than half, or $20,108 annually, which is below the federal poverty level for a family of four.

“While we’re creating a good number of jobs and our rate of job creation is keeping pace or slightly ahead of labor force growth, the higher-wage jobs are evaporating,” said Paul Kleppner, director of Northern Illinois University’s Office for Social Policy Research and the report’s lead researcher.

No region, not even job-rich northeastern Illinois, will be immune from this trend, according to the annual “State of Working Illinois” report by NIU and the Center for Tax and Budget Accountability in Chicago.

“We have a major transportation and education hub, yet we’re still struggling to create more higher-paying than lower-paying jobs,” said Ralph Martire, the center’s director. “Most of the new jobs we’re going to create in the financially wealthy northeast region are going to pay less than the current [median] wage.”

The annual report provides an in-depth look at the nation’s fifth-biggest economy in an era of rapid global change, when good-paying factory jobs that supported families are disappearing. Growth is fueled by an expanding service industry, where the pay gap is widening between lower-skilled jobs and those requiring college degrees.

“Bottom line, it means you’ve got two economies. One group is doing really well, and the other is made up of households that are living paycheck to paycheck, struggling to make their mortgage payment and really up against a financial wall,” said economist Mark Zandi of Moody’s “The overall economy can grow and expand but it can’t thrive. It will always certainly live below its potential.”

“The only way out is investment in your infrastruture and the education of your workforce,” he said. “That requires patience because the benefits are a long time in coming, and it takes discipline because you can’t spend on other things.”

In Illinois, “we’re going through a 25- to 30-year transformation,” Martire said. “The global economy is telling us loud and clear to attract high-end jobs you need a really literate workforce.”

The report notes that the state’s workforce is growing much more diverse. Hispanics, whose share of the workforce nearly tripled since 1980 to 11 percent in 2006, are the youngest and least educated group, according to the report.

About 38 percent have not finished high school, while about 11 percent have college degrees or better. The picture is reversed in the workforce as a whole: more than one-third of Illinois workers have college degrees, while about 11 percent lack high school diplomas.

The time when factories provided good-paying jobs for workers with little formal schooling is ending because the manufacturing base is eroding and the remaining jobs require more education and training.

In 1990, manufacturing employed more Illinois workers than any other sector, accounting for more than 20 percent of all jobs.

Today, though still a major employer, the sector accounts for only 13.2 percent of Illinois jobs, slightly more than the 12.2 percent employed in retail, according to the report.

Over the last six years, Illinois lost about 142,000 factory jobs, or 17 percent of its 2001 manufacturing job base, while adding about 1.6 million lower-wage service jobs, according to the report. This ongoing shift is driving the decline in the state’s median household income.

Illinois’ $49,328 median household income still is higher than that of the nation and the Midwest, but it is falling faster. In 2005-06, the median adjusted for inflation was 10.3 percent below the peak six years earlier — a greater decline than any Midwestern state except Michigan and more than the nation’s 2.4 percent decline, Kleppner said.

And the state’s job growth, despite the recent pick-up, also lags the nation.

Employment grew at a 3.8 percent clip over the last six years compared with 6.7 percent nationwide, based on Kleppner’s analysis of U.S. Bureau of Labor Statistics data.

“This is a bipartisan issue because everyone wants a sound, thriving economy,” Martire said. “Without good jobs there’s not much of a bright future.”

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