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Falling behind

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New numbers from the U.S. Census Bureau say that the nation's median income for households rose in 2006 for the second year in a row. But the median income for individual men and women actually declined, after adjusting for inflation. That indicates that household income went up because more members of households are taking jobs or taking second jobs or working longer hours. And even the household numbers are considerably lower than they were in 2000.

The numbers suggest, in other words, that ordinary families are working harder and producing more but getting a shrinking share of America's prosperity. Median household income marks the middle class. Half of all households earn less than the median, and half earn more. Adjusted for inflation, median household income rose seven-tenths of a percentage point last year to $48,201. That's still $1,043 below its peak in 1999, inflation adjusted.

Median earnings of individual full-time workers, meanwhile, continued to fall last

year - by $482 for men and $388 for women, inflation adjusted. Compared with the median figures for 1999, men last year were earning $2,353 less, women $1,335 less.

Looking at those numbers, you'd think the nation had gone through a terrible recession. Actually, the economy has seen fairly healthy growth for six years. Gross domestic product is up 14% since 2000.

Americans also are working smarter. Productivity is up. Compared to 2000, it now takes nearly 20% fewer work hours to produce the same amount of goods or services.

Productivity used to be the key to raising the American standard of living - allowing employers to raise wages without raising prices or cutting profits - but that connection seems to have broken down.

Why isn't the American family doing better? Partly because inflation has kicked up a bit since 2003; partly because gasoline, medical care and health insurance costs have been rising faster than wages.

But other forces are at work as well. There are fewer manufacturing jobs, the result of increased efficiency and competition from overseas. Service jobs tend to pay less, and some of those also are affected by globalization, which has allowed American companies to get computer programming, call-center operations, accounting services and more performed overseas by workers earning a fraction of American salaries.

On top of that, the steady decline of unions has left America workers with less bargaining clout. Meanwhile, corporate profits have nearly tripled since 2000, according to the Commerce Department.

Add all the reasons together, and you wind up with greater skewing of income distribution in America toward the top. Since the early 1980s, the paychecks of the richest Americans have been rising much faster than everyone else's, according to federal statistics. The wealthiest 20% of Americans now earn as much as everyone else combined. The top 5% now take in 20% of the nation's income.

Such complex problems require multifaceted solutions. We can't stop globalization, but we can demand better labor and environmental rules in free trade agreements. We can make it easier to organize unions. We can change the tax code to halt what has become a shift of the burden to the middle class. And we can improve education, so that coming generations of American are qualified for high-paying knowledge work.

It's time for the balance to swing back in favor of American families.

Reprinted from The St. Louis Post-Dispatch.
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