invenice.net - As rich reap tax breaks, poor struggle to break even

Florida is growing jobs and adding population at breakneck speeds, but the state's burgeoning economy also is creating a greater and greater divide between its wealthy and poor residents.

It is not a phenomenon unique to the Sunshine State. The blame, some economists say, lies at the feet of globalization, a struggling labor movement, an unchanged minimum wage and immigration.

Others think it is merely the by-product of a shifting economy -- one that values intellectual achievement and innovation over manual labor.

The Economic Policy Institute, a liberal-leaning think tank, reports that the wage gap between the rich and poor has not been as pronounced since the Great Depression, while recent growth mirrors the post-World War II baby boom era.

But the numbers even in Southwest Florida -- an area where the economic vagaries plaguing the nation are often muted -- tell the broader story.

The differences in Manatee, Sarasota and Charlotte counties are being exacerbated by the region's skyrocketing cost of living, experts say. While the region continues to be at the forefront of job growth in Florida, most of the positions it is adding do not pay exceptionally well.

Median household income for Charlotte, Manatee and Sarasota counties is down about 6 percent from 2000, with Sarasota at the top of the wage drop at about 9 percent, the U.S. Census Bureau reports.

Meanwhile, the number of well-heeled residents continues to rise.

In 2000, Sarasota was home to 19,058 families earning more than $100,000 annually. As of last year, that number had grown to 24,562, an increase of nearly 29 percent.

As a Realtor, Arthur Broslat of Venice has participated in the region's booming real estate economy. The 61-year-old earned more than $100,000 last year from those efforts.

But Broslat also is a small-business owner with employees who sees the downside to the increasing wage gap.

He believes there is a direct correlation between the fall of the labor movement and the downturn in wages for blue-collar workers. He remembers a time when striking steel and automotive workers would literally shut down the nation's commerce when leveraging for better pay and benefits.

Many of those jobs have since gone overseas, and average U.S. wage earners have been relegated to more retail jobs, earning less and paying more out of their pockets for health benefits, Broslat said.

"Taxes on capital have gone down tremendously, and the poor bastards who have to work for a living are getting screwed six ways 'til Tuesday, and their taxes aren't going down," Broslat said. "That's what's happened to this country."

Recently, Broslat made a stab at providing health benefits to his employees and faced a predicament he thinks is symptomatic of the growing division between the poor and the wealthy.

He was required to get 75 percent employee participation to be accepted into Blue Cross/Blue Shield. Only 30 percent opted to join because the plan involved a $20 co-pay. Many of his workers said they could not afford the co-pay and received the majority of their care at local emergency rooms.

"People like that used to have a system that, if something came up, would protect them," Broslat said.

"Now, they've got screwed-up credit, and they are not a part of the system."

Not buying it

Murray Weidenbaum has heard Broslat's kind of arguments for years.

The former chief economic adviser to Ronald Reagan and a man credited with helping to come up with Reaganomics says focusing on the wage gap and not the overall rising standard of living and cost of benefits is misleading.

"If they included the total labor compensation package, the disparity wouldn't disappear, but it wouldn't be quite as big," Weidenbaum said.

"They only talk about wages, but you have to be concerned about the total flow of income."

Folks pushing the wage gap issue need to consider the rising cost of health care to employers and the value for employees that represents. That is adding considerable overlooked value to the wage scenario, said Weidenbaum, chairman of the Weidenbaum Center on the Economy, Government and Public Policy at Washington University in St. Louis.

James Sherk, a spokesman for the conservative-leaning Heritage Foundation, also acknowledges the disparities between the rich and poor, but he points to other indicators of Americans' prosperity: a rise in home ownership and college enrollment. They must also consider luxuries commonplace in many American homes that did not exist 25 years ago -- cell phones, DVD players, laptop computers and iPods.

"We are by no means where we should be, in closing that gap, but we are moving in the right direction," Sherk said. "They are trying to say the economy is structured in such a way that workers are not going to get their fair share of productivity, and that is not true."

But other economists say Florida has its own specific issues that are exacerbating the economics of wages.

The Sunshine State has poverty rates that are traditionally higher than most of the nation, wages that are lower and labor that is disorganized compared with the union bastions in the North.

For decades, the draw of pleasant temperatures and low-cost living has been enough to lure workers to the Sunshine State despite the wage factor.

But now housing is proving to be an enormous expense for workers making a move to the state.

In the Sarasota-Bradenton market, the median home price has almost doubled in the past three years from $169,300 in July 2003 to $338,100 in July 2006.

Florida's low-cost tag is becoming less and less applicable, said Dave Denslow, a well-respected economist in the University of Florida's Department of Economics.

"Florida has had very rapid job growth, but the job quality has declined," Denslow said.

"You face that puzzle of why do you have so many workers moving to the state? Why do you continue to have so much growth?"

Last year, Angelic Smith, 33, was a gainfully employed homeowner making about $50,000 per year. Now, she lives with friends and waits tables at the Hob Nob drive-in in north Sarasota.

"I came into work one day, and the doors were locked. I had no idea it was coming. The company just went out of business," Smith said. "I lost my house. I couldn't afford it anymore."

Smith moved to Southwest Florida from Philadelphia six years ago, spending the last three years at MVI Marketing making $15 per hour, plus several thousand dollars per month in commission.

Now, her base salary is about $75 per week, plus tips.

"It's depressing considering the money I was making and now what I'm making," Smith said. "I used to have a bank account. I don't have any money to put in a bank account now. I have no insurance. When I tried to get Medicaid, they told me I made too much money last year. I can't even get state assistance, if I tried."

The South has historically had a broader wage gap and more people living at or below the poverty level today at 14 percent, compared to 12.6 percent nationwide, according to the U.S. Census Bureaus population report.

"The gap between the South and rest of the country has lessened somewhat in recent years," said Arloc Sherman, a researcher for the Center on Budget and Policy Priorities, a liberal think tank. "But ironically, that's not been because things are getting better in Florida or the South, but because the rest of the country's getting worse."

No simple solutions

Sherk, the Heritage Foundation spokesman, said too many people are looking at simple solutions to the wage gap issue, such as boosting the minimum wage.

"Correlation and causation are not the same thing," said Sherk, noting that fewer than 2 percent of the nation works at the minimum wage.

Increasing the minimum wage would only isolate the low-skilled entirely from the work force, Sherk said.

As for globalization, it has largely been a trade-off for the United States.

"Sure, we are sending call center jobs and tech support jobs overseas," Sherk said. "But look at what Americans are doing: The research and development, the creative end of the process, the knowledge and information jobs that reward skills and reward high levels of education."

The issue is access for the unskilled and uneducated, Sherk said.

"Manual labor is not going to take you into the upper end of the income distribution," he said. "You have to be able to think, innovate and add value for hundreds of thousands of people."

High productivity, an expanding economy and strong gross domestic product -- a measure of all the goods and service produced in the United States in a given year -- clearly speak to a healthy economy, Sherk said.

In contrast, the wage gap speaks to a shifting economy and the need for more education and retraining.

"The economy is not broken. The issue is providing access for people into this turbocharged economy."

But other economists note that workers already are participating. They are generating more product in less time.

There has been a 16.7 percent increase in productivity during this most recent economic recovery period, according to the Economic Policy Institute, while at the same time wages have stagnated. Debt for many Americans has increased while corporate profits have swelled to historic levels.

That all speaks to a growing inequality, said the Economic Policy Institute's Jared Bernstein.

"In an economy with this much growth, when that growth's not going to working families, it's going somewhere," Bernstein said.

"You have these economic cheerleaders going around touting higher productivity and low unemployment. But it doesn't mean anything without real wage growth," Bernstein said.

"The economy may look good from 40 feet up, but it's got to look good on the ground."

Real wages rose a tick in 2005, but primarily for elderly households, the EPI reports.

After calculating for inflation, wage growth in 2005 was about 2 percent compared with 2004, down 1.6 percent from previous post-World War II recoveries.

Wages and salary income now make up the lowest share of the nation's GDP since 1947.

The one thing both camps agree on in this debate over the wage gap is that wage disparity is only indirectly related to public policy. Nonetheless, many think it will be a major force come Election Day.

This month a CNN/Opinion Research poll asked 1,004 Americans what issue was most important to their congressional vote: 28 percent said the economy, 25 percent said Iraq, 18 percent said terrorism, 15 percent said moral issues and 14 percent said immigration.

The same poll showed voters giving the economy failing grades.

"We have converted to a country of predatory capitalism," said Broslat, the Venice Realtor and small businessman. "Most of the rewards of this economy are going to capital, not labor."

Broslat, who runs his family's Broslat Furniture in Port Charlotte, notes that nearly every piece in his store is from China. It speaks to the loss of jobs to overseas markets.

Former furniture-producing states like North Carolina now resemble former steel-producing states like Pennsylvania.

The loss of those kinds of jobs has left workers relegated to retail and other low-paying jobs, Broslat said.

"These guys used to make $20 per hour, with benefits and pension plans. Now, the only people with pension plans work for the government."

Sunday, 06 July 2008

Home Florida News As rich reap tax breaks, poor struggle to break even

Falling income sign of a growing divide