The divide between the haves and have-nots is growing wider, threatening the long-term economic vitality of Jackson County and Oregon as a whole, a new study shows.
Top earners in Jackson County are making 13 times more than the lowest wage earners, a figure that’s been steadily rising in the past 10 years. Elite earners receive $1.63 to every $1 received by the county’s working poor, the study says.
"We are at a critical point in our economic history where inequality is recognized as a problem," says Bruce Weber, director of Oregon State University's Rural Studies Program, which conducted the study. "People who have money and people who don't are both seeing it as a problem. Undoubtedly it's true for Jackson County, and true for most of the state and most of the country."
"Tracking Oregon’s Progress: A Focus on Income Inequality,” funded by the Oregon Community Foundation and released in June, shows the highest earning 20 percent of all Oregonians are making nearly 14 times the income of the lowest earning 20 percent.
Oregon has consistently ranked No. 22 out of 50 states and the District of Columbia for its level of income equality since the mid-2000s, the report states. California, New Mexico, Arizona and Colorado all have a higher level of income inequality in the West.
"It erodes the vitality of a place," Weber said. "Because people at the low end can't spend and can't generate the income needed and people at the high end don't tend to spend as high of a share of their income. That's why we haven't come out of the recession in this state."
To simplify, while one person may have the ability to buy five cars from five dealers in one day, another may not be able to scrape together enough for a down payment for much needed transportation.
"People on the lower end don't have money to spend on goods and services," Weber said. "That's why it's not just an individual problem, it's a larger economic problem for the area. An economy has a certain amount of money spent on local retail, construction and buying new cars. If that money is unequally distributed, people at the top aren't going to buy as much as they can, because they tend to save more than people in general."
He adds they often tend to invest their money outside the local economy, too.
"Inequality is mostly driven by capital," Weber said. "There are huge differences in wage earnings, of course, but it's really about the distribution of asset earnings, which is much higher. Land used to be the big one. In “Downton Abbey” (the popular PBS show about life of the English aristocracy), the difference is between people living in the manor and those living outside. Those living in the manor owned land and the others didn't. Now it's financial assets."
Figures comparing net worth by state and county aren't tracked by federal agencies, but the U.S. Census shows only 2 percent of Jackson County households earn more than $200,000 in annual income, while more than a quarter — 28.2 percent — live in a lower middle class household earning between $25,000 and $50,000. About 27.4 percent earn less than $25,000.
Weber said income inequality was created by industrialization in the 19th century, checked by legislation a century ago, then was compressed by the Great Depression and World War II.
"Those events resulted in huge equalization of income distribution," Weber said. "Inequality went down in the 1940s and into the 1960s. It didn't surface again until the 1970s, and then took off in the 1980s on a trajectory that hasn't stopped."
Jackson County workers stood toe-to-toe with their Willamette Valley counterparts in the ‘70s and ‘80s, thanks to high-paying timber industry jobs.
"The wages here in 1976 exceeded the statewide average," said Guy Tauer, a regional economist for the Oregon Employment Department. "Since then, there has been a change between our average wage versus the statewide average, and we've seen how the gap has grown over time."
Manufacturing, often timber-related jobs, comprised a higher percentage of overall employment in the mid-1970s. Since then, service jobs in retail and hospitality have played an increasing role.
"They don't typically pay as well and this has helped increase the gap," Tauer said.
After the resource-based timber products jobs began drying up in the 1990s, most of Oregon outside of the Portland metropolitan area struggled to replace those incomes, said Tim Duy, director of the Oregon Economic Forum at the University of Oregon.
"When timber jobs dried up, they didn't get replaced with equivalent jobs for people in that skill set," he said.
That led to the rise of what Duy calls a polarization of jobs.
"There are jobs with routine skills and jobs with cognitive skills," he said. "Things that are routine can be basically replaced by technology. We've certainly seen workers hurt, who were relying on those kinds of routine skills jobs."
Duy further divides cognitive skill jobs into routine cognitive and non-routine cognitive categories. Accounting and bookkeeping are the routine cognitive sphere.
"Those are in decline as well," he said.
"The non-routine cognitive jobs that change a lot and you have to think about are where the income gains are coming from," Duy said.
These would include the health care industry, which joins retail as major sectors in which jobs have increased in Jackson County, thanks to the growing number of Californians retiring in Southern Oregon.
Health care and retail demonstrate the wide divide in income equality in Southern Oregon. In 2014, government figures show the average annual wage, including managers, in the retail industry was $28,244. For health care workers — including those in doctor, dentist, physical therapist and optometrist offices — the average annual wage was $58,511.
Ways to shrink the divide between the haves and have-nots are harder to come by than once thought, analysts say.
"There are a lot of dimensions, and I'm not sure there are a lot of good answers of what to do about it," Duy said.
Education, the old standby, is no longer a guarantor of increased income and wealth, he said.
"There's been some discussion that it's not enough to make significant changes in wealth gaps," he said.
There are fewer opportunities for someone to graduate from high school and step into a family-wage job, Tauer said.
"The educational requirements are higher and there is more efficiency within production type of jobs," he said. "It doesn't take as many hands to do the same work as it did 30 years ago. Mills are more efficient with equipment and can make more product with less human labor."
Runaway higher education costs and the corresponding debt load make it difficult to simply push for more education, he said. The increasing burden of student debt, calculated nationally above the $1 trillion mark, is evident in wealth inequality discussions. It's also a factor as young people move out of school into the workforce.
"When I finished getting my bachelor's degree, I thought my $5,000 student loan was a pretty heavy debt load," Tauer said.
"That's hardly a term any more. It makes it more of a barrier for folks without financial means or family support to be able to pursue an education, which certainly correlates to income and lifetime earnings."
Still, those with determination and a handle on their own spending can increase their wealth, even if it’s in relatively small increments over time.
Take Steve Ryan, a 33-year-old information technology support analyst at Asante Health System. Without making a quantum shift in earnings or social strata, Ryan is carving out a better existence than a decade ago, putting his experience to use in a field where there is always a need.
Ryan said he’s held a variety of tech-related jobs. But his present endeavor has provided both current income and a chance to retire down the road.
"I'm making more now than any other period in my life," Ryan said, noting his base pay is boosted about 30 percent because he works nights and weekends.
Ryan is frugal and participates to the full extent of his employer's 6-percent-match retirement savings account plan. He uses an Acorn app to invest "spare change" into mutual funds.
"It's free and links to my bank, so when I spend $1.50, it invests 50 cents on my behalf," he said. "I've also begun exploring buying stocks via eTrade and also the Motiff app, a bit of a different approach to investing in stocks. I also have a (health savings account) that rolls over each year that is pre-tax just like my retirement account.
“These things combined, in addition to owning a house, have helped me lower my tax bracket, save money for retirement, live debt-free outside my mortgage and enjoy a good life."
Reach reporter Greg Stiles at 541-776-4463 or email@example.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at https://www.facebook.com/greg.stiles.31, and read his blog at www.mailtribune.com/EconomicEdge.