The following opinion piece is from Ernie Niemi, president of Natural Resource Economics Inc. based in Eugene, Oregon.
From leaders as diverse as Barack Obama and Newt Gingrich, we’re hearing a desire to rein in the nation’s extreme inequality — inequality in incomes, wealth and political power. It’s about time. The forces underlying inequality have harmed Oregon’s workers, families and communities for several decades, and they undermine our children’s economic future.
Today’s economic inequality is staggering. The top 1 percent — 1.6 million families with incomes more than $394,000 in 2012 — currently captures about 20 percent of the nation’s total income. In contrast, from the end of World War II until 1980, that group collected only about 10 percent of total income.
In recent decades, as the nation’s total income has grown, the top 1 percent has captured an increasing share of the aggregate growth: more than two-thirds since 1993, and 95 percent of all increased income since 2009.
Inequality in Oregon shows similar characteristics. Between 1990 and 2012, the median income (half have more, half have less) of year-round workers remained essentially unchanged, at about $35,000 in 2012 dollars. Not so the richest Oregonians. Over the same period, the top 1 percent saw their incomes increase by about 40 percent, to almost $240,000.
The growth in inequality likely stems from several factors, but two stand out: the decline in labor unions and reductions in taxes. The changes in Oregon’s timber industry illustrates the importance of those trends.
Before the mid-1980s, most timber workers belonged to strong unions and the industry employed about 70,000 to 80,000 workers. Then the industry busted the unions and began cutting labor costs. It did so largely by eliminating jobs, so that it now employs only about 25,000 workers statewide.
Contrary to common belief, most of the job losses have not resulted from environmental restrictions that reduced logging on federal lands. In the 1990s, when most logging reductions occurred, for example, the Forest Service estimates that those restrictions caused only about one-third of the industry’s job losses.
Most job losses stem, instead, from management’s efforts to get rid of workers, replace workers with technology, and avoid hiring workers by shipping logs overseas.
Management also has reduced wages for the industry’s remaining workers. Before the unions were busted, the industry’s average wage was about 40 percent higher than the statewide average for all workers. Now, it has fallen to near or slightly below the statewide average.
If unions had remained in place and kept timber-industry wages 40 percent above the current statewide average, wages in the industry would be about $17,000 more per worker. Do the math.
Statewide, 25,000 loggers and mill workers lose about $425 million in wages per year. For the 3,300 wood-products timber-industry workers in Lane County, the loss is about $56 million per year.
Where does all that money go? Nobody knows for sure. It seems safe to say, though, that much of the money that otherwise would be going to middle class workers now goes, instead, to upper-income owners and managers of timber companies.
The shift has real, negative economic impacts on Oregon’s workers, families and communities. It also negatively affects our children’s future: The greater the degree of income inequality in our society, the greater the consequences if they become stuck on rungs of the economic ladder where incomes remain stagnant or decline.
The timber industry has accentuated these negative effects by obtaining tax reductions. In the early 1990s, the industry paid a severance tax of about $50 million per year on the volume of timber harvested in Western Oregon, with the proceeds going to support various types of public services. In 1993, though, it used the spotted owl’s impacts on federal logging and other arguments to persuade the state Legislature to begin phasing out this tax.
That arrangement contrasts with timber harvest taxes that timber companies — often the same companies that are doing business in Oregon — pay in Washington and California.
In Washington, for example, the industry pays a timber harvest tax dedicated to county governments. If Oregon had a similar tax, it would have provided Lane and other counties in Western Oregon with about $40 million in 2011. That amount would have filled much of the funding gap that has caused counties to lay off workers in their transportation, public safety, health and other departments.
The timber industry’s experience is not unique. The crippling of labor unions in other industries and changes in taxes at all levels of government have shifted income away from workers and middle-class families and to the very rich.
The extreme inequality we see today is not an unavoidable result of natural forces, however. It results, instead, from political decisions our parents and we made in the past.
We can reverse the effects of these decisions. We must do so if we are to arrest the growth in inequality that increasingly is producing an economy, a political system and a society of the people and by the people, but for the rich.
Ernie Niemi is president of Natural Resource Economics Inc. in Eugene.