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Economic Growth for Whom?

Commentary
April 4, 2005By Michael Leachman

In the last year, Oregon added 58,600 jobs, with gains in most major industries. Job seekers are finding more advertisements for available jobs, and fewer Oregonians are filing for unemployment benefits.

These and other statistics tell us that the economy is improving, in general. But Oregonians don’t live “in general.” We care about specific people. Is economic growth improving my life, my sister’s life, or my friend Scott’s life?

Many economists and politicians will tell you that economic growth is automatically good for everyone. “Look, the economy is growing again! Be happy, people!”

But it’s not necessarily true that what’s good for CEOs is good for supermarket checkers. Why should you care about general economic growth if your own salary remains stagnant and your health care costs keep rising?

Over the last generation, the benefits of economic growth in Oregon have gone disproportionately to families and individuals already well-off. That trend has left most Oregonians either desperately treading water in a world with more financial risks, or sinking under the weight of poverty or debt.

During our last period of economic growth, from 1992 to 2000, the richest one percent of Oregon households collected 24 percent of all gains in adjusted gross income. In total, these richest Oregonians added $7.7 billion to their incomes during the 1990s boom. The new income that went to the top one percent easily surpassed the new income that went to the entire bottom three-fifths (60%) of households.

Middle-and lower-income Oregonians would be better off today if the benefits of economic growth during the 1990s had accrued more equitably. The average middle income family would have had $3,220 more in 2000 if their income relative to the wealthiest one-percent of Oregonians had stayed the same during the nineties boom. The poorest households would have had $700 more if they had not fallen further behind. The richest one percent would have averaged $258,000 less, but they still would have had average incomes of $483,000.

There was a similar pattern during the expansion that followed the economic downturn of the early 1980s. From 1983 to 1990, the richest one percent of Oregonians increased their share of all income in Oregon from 7.9 percent to 10.6 percent. In 1990, the average middle-income household would have had $2,100 more, in 1990 dollars, if the richest one percent had not seen disproportionate gains.

“Who benefits from economic growth in Oregon?” is a policy question for both employers and elected government officials.

In the last generation, employers nationally have raised executive pay much more rapidly than worker pay. Elected government officials, meanwhile, have largely ignored the rising inequality around them. Instead, they have added insult to injury by rewarding the richest with a disproportionate share of tax breaks. State and local taxes in Oregon increased as a share of income for the lowest-income Oregonians between 1989 and 2002, stayed about the same for middle-income families, and were cut for the richest.

We can always do things differently. So far, though, it doesn’t look good. The Oregon Employment Department reported last fall that wage inequality in Oregon is on the rise again. Meanwhile, the Legislature is debating rolling back the minimum wage for some workers and cutting the income tax on capital gains for wealthy investors.

Economic growth is necessary but not sufficient to improving the financial health of Oregon’s families. When someone tells you that the economy is growing, ask, “For whom?”

Michael Leachman is a policy analyst with the Oregon Center for Public Policy, which uses research and analysis to advance policies and practices that improve the economic and social opportunities of low- and moderate-income Oregonians, the majority of Oregonians. He can be reached at mleachman(at)ocpp.org, at P.O. Box 7, Silverton, OR 97381, or by phone at 503-873-1201.