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Wages up for the well-off, but not for others

'Rich-poor gap' relates to long-term forces, but could hurt Bush as it reaches record level prior to election.

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Most US workers saw their earnings fall or stagnate last year, with those at the bottom of the income scale hit hardest.

The trend, coming alongside a slack job market, explains why many Americans feel left out of the economic recovery - and why President Bush faces a tough sell with his campaign-trail message that there is "good strong growth." Democratic rivals point to "two Americas," one for the rich, one for the poor.

Whether concerns over widening wage inequality will damage Mr. Bush remains to be seen. But the gap between workers in the 90th earning percentile and the 10th has never been wider. That opens the door for a populist message by a Democratic challenger to resonate, if job creation doesn't pick up.

Beyond the election, the stalling progress for the bottom half of American workers represents a challenge to the health of an economy traditionally driven by a growing consumer class.

The problem of widening wage inequality is not new, and is rooted in long-term trends. The rise of technology in the workplace, for example, puts a premium on educated workers and eats into the bargaining power of the less-skilled. The entry of about a million immigrants a year, puts downward pressure on wages in many low-income jobs. Offshore outsourcing of jobs and falling union representation also play a role.

"All these factors are still present," says Ann Owen, an economist at Hamilton College in Clinton, N.Y. and former Federal Reserve economist in Washington. "We can probably project a future growth in inequality."

Particularly troubling: The challenge persists even as the economy is growing, at a 8.2 percent annual rate in the third quarter of 2003 and a 4 percent rate in the fourth quarter.


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