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The sort-of recovery

Rochester Business Journal
August 15, 2014

Most people agree that income inequality both exists in this country and has increased in recent years. And as noted here a week ago, new research by Standard & Poor’s Financial Services LLC shows how the U.S. economy would be healthier with a narrower income gap.

Any remedy for this situation must start with this question: Why has the divide between rich and poor broadened?

A new report prepared for the U.S. Conference of Mayors by IHS Global Insight offers at least a partial answer. Released Tuesday, it highlights the longer-term damage done by the Great Recession to lower- and middle-class wage earners.

The fact that the economy finally returned to pre-recession job levels this year was headline news. Largely unreported was another fact: that many of the new jobs pay significantly lower wages than the jobs lost when the economy tanked.

Among its key findings, the report shows that the average annual wage of jobs lost in 2008-09 was $61,637, while the average wage of jobs added through June 30 of this year was $47,171.

Extensive job losses in sectors with comparatively high average annual wages—such as manufacturing ($63,000) and construction ($58,000)—were replaced by jobs in sectors with lower pay, including health care ($47,000) and hospitality ($21,000).

From 2005 to 2012, the lowest 40 percent of households received just 6.6 percent of total income gains; by contrast, the top 20 percent reaped nearly 61 percent of gains and enjoyed a 51 percent share of total income. By 2012, median U.S. household income had fallen, after adjusting for inflation, to its lowest point since 1995.

The Conference of Mayors report also examined the effects of this shift at the local level. It found that the movement of wealth toward high-income households occurred in 248 of 357 metropolitan statistical areas studied.

Rochester was one of the 248, but the shift here was not as dramatic as in many other cities. And overall, the division of wealth locally aligns quite closely to the nationwide numbers.

That may be small comfort, however, given the national trend toward greater income inequality.

8/15/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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