Study finds widening poverty gap in Connecticut

The gap between Connecticut’s top wage earners and others continues to grow in the aftermath of the Great Recession, according to a new study that also warns the “have-nots” make up an increasing share of the state’s population.

Connecticut Voices for Children, a New Haven-based nonprofit public policy group, also used its annual Labor Day weekend report to highlight shrinking manufacturing jobs and to outline growing economic problems for black, Hispanic and younger workers.

“The recession and recovery have worsened opportunity gaps and set us on an economically devastating course,” said Orlando Rodriguez, senior policy fellow at Connecticut Voices and co-author of the report, which was released Thursday morning. “We can no longer afford to delay action.”

The state’s median hourly wage has declined since the recession began, from $20.61 in 2008 to $20.29 in 2011, after adjusting for inflation.

Most of the growth recorded over that period involved Connecticut’s highest wage-earners. Workers in the top 10 percent of earners saw their average hourly rate rise from $46.10 to $47.87. Among the top 20 percent, the hourly rate rose from $35.09 to $36.08.

Some workers are taking home less money because their hours were cut.

Average weekly hours worked in private-sector jobs declined from 34.3 hours in 2007 to 33.9 hours in 2011. The report also found that part-time employees increased from 26 percent to 28 percent of the Connecticut workforce.

Connecticut’s unemployment rate was 8.5 percent in July, slightly above the national rate of 8.3 percent.  And the report notes that Connecticut had 74,000 fewer jobs in 2011 than it had in 2007.

For other workers, household income fell as Connecticut’s higher-paying manufacturing jobs disappear and are replaced by lower-paying jobs in health care, hotels and restaurants, the study concluded.

The state shed 27,448 manufacturing jobs between 2006 and 2011, a drop of 14 percent. By contrast, the biggest gain was in the health services sector, which grew by 25,733 jobs, or 11 percent. It was followed by accommodations and food services, which grew by 4,577, or 4 percent.

But weekly wages rose in the shrinking manufacturing sector over the same period, from $1,420 to $1,479. By comparison, health services dropped from $926 to $918 and accommodations and food services — the lowest-paying sector — fell from $371 to $358.

The public sector in Connecticut is faring worse than the private sector is, a trend common in many states as governments shed jobs to close budget deficits.

While the private sector at least experienced some job growth, gaining 21,000 jobs over the last year, the public sector has lost jobs for the last three years.

Connecticut Voices also reported “dramatic disparities” between the state’s white workers and its minorities, who “have not had a recovery.”

The state unemployment rate for whites was 3.3 percent in 2006, compared with 8.2 percent for Hispanics and 8.3 percent for blacks. By 2011, the rates for Hispanics and blacks had risen to 17.8 and 17.3 percent, respectively, while 7.1 percent of whites in the workforce were out of jobs.

The median hourly wage was $22.23 for whites in 2011, compared with $15.96 for blacks and $13.19 for Hispanics, according to the report. That means for every $1 earned by a white worker, a black worker earned 72 cents and a Hispanic worker earned 59 cents.

“What emerges is a picture of a state that is losing its middle class and becoming increasingly divided into the ‘haves’ and the ‘have-nots,'” the report states. “The recession and its aftermath have exacerbated trends of inequality, further concentrated wealth in the hands of some, and limited opportunities for Connecticut’s youth.”

The state’s youngest workers are most likely to be unemployed, the study found. The unemployment rate for workers age 16-24 was 18.2 percent in 2011, more than double the statewide rate.

Connecticut’s oldest workers, though, have been most likely to face long-term unemployment. For those age 55 and older who were unemployed and seeking jobs, nearly 62 percent had been unemployed for more than 26 weeks.

“This is particularly troubling in Connecticut, which had the sixth-highest long-term unemployment rate nationally” among workers age 55 and older, the report adds.

Connecticut Voices also recommended several steps state officials can take to reverse these trends, including:

  • Guarantee high-quality universal preschool;
  • Adequately fund local public schools and closing achievement gaps;
  • Support public community colleges and universities;
  • Further strengthen the state’s earned income tax credit;
  • “Substantially” raise the minimum wage;
  • Increase investments in job training in growth industries;
  • And shield vital social services from “punishing budget cuts.”

State Sen. Toni Harp, D-New Haven, co-chairwoman of the legislature’s Appropriations Committee, who has been warning officials against any further cuts to the social services safety net, said the report’s recommendation in this area is not a surprise.

“If we do any more to erode the safety net, I think we will end up having to pay more in other places,” Harp said. Two areas that could grow more expensive if social services are cut further are the prison system and state payments to cover emergency room treatment for uninsured patients.

Another recommendation that drew an endorsement involved the state’s new earned income tax credit.

James Horan, executive director of the Connecticut Association for Human Services, said the new credit lawmakers added to the state income tax system this year helped more than 177,000 poor, working households save an extra $106.5 million this year.

The new state credit is available to households eligible for the federal EITC, and is equal to 30 percent of the value of the federal credit.

Technically families earning up to $49,000 per year can qualify for a federal Earned Income Tax Credit, depending on the number of children they have. But most EITC recipients earn less than $20,000.

The average federal EITC claimed by Connecticut families over the past three years is about $1,800. Based on that number, the average state EITC — had it existed during that time — would have been $540.

Connecticut’s 30 percent rate tops that in most other states that offer a credit, but Horan noted that a few states have gone to 35 percent or higher.

But he noted if Connecticut officials feel the state can’t afford a higher rate now, they still could strengthen the state EITC system relatively cheaply by expanding outreach efforts.

For example, he said, preliminary tax data shows about 198,000 Connecticut households received the federal EITC this year, about 21,000 more than the level of state credit recipients.

“There are still more people we could reach,” he said.