The gap between the haves and have-nots widened more quickly in the Bay Area than elsewhere in the state during the past quarter century, and especially during the dot-com boom of the late 1990s, according to a report released today by the California Budget Project.

Between 1979 and 2004, the report's authors say, the average Bay Area worker's wages increased three times as quickly as those in the rest of the state.

But the scenario was different for workers in the bottom fifth of the pay scale, many of whom work in the hospitality and retail sectors and in some parts of the health care industry.

Their earnings, adjusted for inflation, declined by nearly 5 percent over that 25-year-period. At the same time, the top fifth of earners saw their earnings increase by more than 30 percent.

"We often hear economic growth is a solution to poverty," said Jean Ross, executive director of the California Budget Project, a nonprofit policy research group that conducts economic and policy analysis to benefit the poor. "Clearly what we found is that wasn't the case during the boom in the Bay Area."

The report's authors say the widening wage gap was driven by "phenomenal wage growth" among the Bay Area's high-wage earners in the late 1990s.

In some respects, Bay Area low-wage workers appeared to fare better than their counterparts across the state. They had lower unemployment rates and lower poverty levels. Wages in the Bay Area are approximately 20 percent higher than in the rest of the state, the report says.

But the higher cost of living in the Bay Area effectively cancels out the higher wages, Ross said.

"It ends up being pretty much a wash," she said. "You earn more, but you're also paying more."

Ken Jacobs, deputy chairman of the University of California, Berkeley, Center for Labor Research and Education, said the report does not come as a surprise. Statewide, the gap between high-and low-wage earners has widened as manufacturing jobs disappear. Those jobs once allowed workers with a high school education to climb into the middle class, he said.

"What we've had in California is the growth of an hour-glass economy," he said, "a hollowing out of the middle."

Alissa Friedman, executive director of OPTIC, an Antioch nonprofit that provides computer and literacy training to job seekers, said in the past five years she has seen wage levels decline for entry-level jobs.

She said some people go without phone service in order to pay winter heating bills, others can't afford basic maintenance on their vehicles.

"In all cases, it is a stretch getting by in the Bay Area," she said.

The report says that Latino workers, in particular, lost ground over the past 25 years in the Bay Area; the earnings of the typical Latino worker dropped more than 10 percent during that time period.

Renée Saucedo of La Raza Centro Legal in San Francisco said many of the day laborers she works with receive such low wages that they cannot afford to pay rent. They work by day to support their families, and live in residential hotels, city shelters or on the streets by night, she said.

Anthony Archie, a public policy fellow at Pacific Research Institute, a San Francisco-based free-market think tank, said he believes the dot-com boom helped California immensely. The wage gap, he said, simply reflects supply and demand - free market forces that should be left alone.

"Anytime you have a free, open system where people are allowed to flourish, people can go from rags to riches," he said.

Ross said she hoped the report's findings would be used to spark informed debates at the local level about policies that help working families make ends meet.

AT A GLANCE