Benefits gap increasing for unskilled laborers Their health insurance, vacation time, pension plans decline, study says


Since the 1970s, the gap in wages between skilled and unskilled workers has widened sharply. But new research shows the inequality doesn't stop there.

Discrepancies in job benefits and the quality of work life have also grown, pointing to a bigger chasm than previously recognized.

"Unskilled workers get the short end of the stick -- and it's getting shorter," said James Heckman, an economist at the University of Chicago.

Study after study has shown that the gains from post-1970s economic growth have eluded unskilled workers. The median wage of those with only a high school diploma fell by 6 percent, adjusted for inflation, from 1980 to 1996, while the earnings of college graduates rose by 12 percent. Though there have been indications in recent months that a scarcity of workers in the surging U.S. economy has begun raising wages for those on the low end, the gain has been modest so far and not enough to counter the decades-long trend.

Besides, wages alone provide an incomplete picture of a worker's standing. Though economists have long recognized the need to incorporate working conditions and fringe benefits in any comprehensive analysis, they have been stymied by a lack of detailed data.

Until now. Brooks Pierce, an economist at the U.S. Department of Labor, used confidential data regularly collected by the Bureau of Labor Statistics from businesses to measure trends in total compensation.

The results are striking: While specialists had long assumed that benefits acted as a leveling influence, particularly because of government-required benefits such as Social Security and unemployment insurance, the opposite is true.

In 1982, people in the top one-tenth of the work force made $24.80 an hour, 3.95 times the $6.28 an hour for workers in the bottom one-tenth. By 1996, the wage gap had widened, with the high-end workers averaging $25.74 an hour, or more than four times the $5.46 an hour of those at the bottom. Wages for the purposes of Pierce's study are all expressed in 1997 dollars to account for inflation.

The decline among unskilled workers is hardly surprising, given the increasing demands of an information-driven economy. But to understand it requires a look at total compensation, which places a value on benefits such as health insurance, vacation time and pension plans.

By Pierce's calculation, the total compensation in 1982 of workers in the top 10 percent -- $35.16 an hour -- was more than four times that of workers in the bottom 10 percent -- $7.72 an hour. Fourteen years later, the ratio had increased to 5.43 to 1, with highly paid workers having gained $1.73 an hour and low-end workers having lost 93 cents an hour.

Benefits led to a greater discrepancy in earnings between high- and low-wage workers in both 1982 and 1996. Moreover, they were responsible for one-tenth of the increasing disparity between the working elite and the working poor over the 14 years.

The reason, according to Pierce, is that a growing number of workers at the bottom of the pay scale have lost access expanded benefits: to paid leave, retirement benefits and even health insurance coverage.

Pub Date: 6/14/98

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