Leader Blues

Wednesday, January 18, 2006

EDITORIAL >> Wage earners still lagging

If you work for wages in the United States, chances are that the past six years have not been stellar ones, and if you happen to toil in Arkansas they have been darker still. We have Arkansas Advocates for Children and Families to thank for quantifying for us just how badly things have gone for working families in the Wonder State and why. Having lived it, most Arkansans we imagine need no reminders, but if you are interested, you will find its fact-filled report, “2005 State of Working Arkansas,” illuminating. You can find it at www.aradvocates.org.

Most of the reasons for the decline of the working family, measured by its statistical mean, have been duly chronicled: The best-paying jobs, in manufacturing and technical fields, have shifted overseas and job growth has tended to be in low-paying service businesses. The result has been that inflation-adjusted earnings have steadily dwindled even while corporate and shareholder earnings have been skyrocketing.
Health costs have been rising while millions lose their health insurance.

Energy costs have climbed far more than wages or general inflation, and thanks to the Bush administration’s regulators, Arkansans are about to be hit with another steep hike in electricity costs. Finally, the traditional protections for low-wage earners like the minimum wage and the earned income tax credit have been flat for nearly a decade.

Those are national phenomena and are owing to nothing in particular that our policy makers in Arkansas have done or failed to do.

Better national policies surely would have helped but Americans, like their major political parties, are in relentless dispute about which policies would correct those dismal trends.

But why is the picture with a few exceptions even gloomier in sunbelt Arkansas? We have made some strides in educating a greater percentage of our youngsters (the share of Arkansans with some college has risen from 17 to 29 percent in 20 years) and providing more of them with medical care through the expanded Medicaid program. We have at least kept up with the national pace of improvement even if we have not nearly caught up.

Still, since the year 2000, unemployment rose faster in Arkansas than the nation as a whole, the poverty rate in Arkansas is far above the U.S. rate, 16.4 percent compared with 12.4 percent nationally, and more people file for bankruptcy each year in Arkansas than in all but five states.

The Advocates’ report at least implies that there is a mean streak in our policies.

n For a few years now, we have allowed payday lenders to pillage the poorest working families by trapping them in rollover debt that charges them interest rates many times the constitutional limit. Pray that the state Supreme Court takes care of that this year.

n We have not raised the state minimum wage in eight years, which means that the buying power of the 120,000 or so minimum-wage workers has declined by 17 percent. An Arkansan working at $5.15 an hour, the current floor, can buy fewer goods and services than they could in all but one of the last 50 years. We will have a chance in November to correct that with a constitutional amendment that would raise the wage floor by $1 and automatically adjust it in the future to inflation.

n And then there is our tax structure, which is about the most punitive to low- and middle-income workers in the country. That is primarily because a quirk in the state Constitution forces the state and local governments to depend upon the sales tax to pay for government services. State and local general sales taxes plus specialized sales taxes stack up as some of the highest in the country. Together with personal and corporate income tax rates that have over time become virtually flat except for very low incomes. The highest marginal personal income-tax rate now applies to all income over the near-poverty wage of about $27,000 a year.
Arkansas Advocates offers the stark effect of the Arkansas tax system on various income classes: The poorest fifth of non-elderly Arkansas families — those earning $12,000 or less — pay 12.4 percent of their income in state and local taxes each year. At the other end, the top 1 percent — those taking in more than $242,000 a year — pay only 6.1 percent to government. Congress and the Arkansas Legislature have been driving this trend in the wrong direction, lowering burdens at the top, raising them for those in the middle and on the bottom.

They have raised sales and excise taxes and repealed or slashed taxes on huge estates, corporations, dividends and capital gains.

The Constitution’s three-fourths requirement to raise most taxes except the sales tax lets lawmakers take the easy course, which is to yoke the poorest families with the burden.

Next time that taxes are broached, ask your representatives to first review the Advocates’ report on workers. Better still, the Sermon on the Mount.