Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, November 3, 1994 TAG: 9411030099
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: STATE
SOURCE: R.C. LONGWORTH CHICAGO TRIBUNE
DATELINE: LENGTH: Long
It's still the economy, stupid. But it's an economy much more complicated than President Clinton ever imagined when he was campaigning for the White House.
A battle of statistics is raging over whether Americans as a whole are getting poorer or whether the long decline in average living standards is ending.
As the White House reminds us, the American economy is booming. The growth rate is up; unemployment and inflation are about as low as possible. Yet, while the American economy may be doing fine, American workers don't think they're doing so hot.
Two decades of downsizing, temporary work and stagnant wages have left the middle and working classes feeling scared and sour. So far, what's happened during the Clinton Boom has done nothing to change this mood.
Just over the horizon of this gloomy landscape is the Battle of Statistics. Many economists believe poverty is still increasing, good jobs are being eliminated and mostly bad jobs are being created, that the gap between rich and poor is still growing. They have a raft of official statistics to back their contention.
Another band of economists argues that after more than 20 awful years, the worst is behind us. Using different statistics, they claim wages are growing again and most new service jobs are as good as the old manufacturing jobs they replace.
``We are finally reaching the point where knowledge pays as well as strong backs,'' said David Birch, president of the research firm Cognetics Inc. in Cambridge, Mass. ``We are no longer losing ground by substituting brains for brawn.'' In short, Birch and others say, the decline in the comfort level of the American work force is ending.
There's plenty of ammunition for both sides. Consider these reports, all from the U.S. government in the past few months:
The poverty rate rose from 13.1 percent of the population in 1989 to 15.1 percent in 1992 and held steady last year. But the population grew, so the actual number of poor grew by 1.3 million people from 1992 to 1993. Source: the Census Bureau, three weeks ago.
The median household income, which was $33,585 in 1989, fell to $31,241 last year when inflation is considered. Even in 1973, the median household income was higher than it is now - $32,182. ``Median'' means half the households are above this figure and half below. Source: the same Census Bureau report.
Wages for all full-time employees rose, from $26,156 in 1990 to $29,395 at the end of last year. When inflation is figured in, this is an annual average increase of 1.6 percent per year. Not much, but it's faster than the 2.5 percent increase for the entire 1980s. Source: the Labor Department's Bureau of Labor Statistics, in August.
The Labor report went further. One reason wages are going up, it said, is that nearly three-fourths of all new jobs are not for minimum wages but managerial jobs that pay more than the average $15.43 an hour.
If accurate, that's good news. It means that, while the economy may be exporting good jobs, it may be creating as many good jobs as it's losing - enough to end the stagnation in average wages.
A little-noticed report, in February by two economists at the Federal Reserve Bank of Cleveland, supported this point. Max Dupuy and Mark E. Schweitzer said the popular belief that the average service-sector job pays worse than the average manufacturing job is wrong. Taken as a whole, they said, new jobs in stores, insurance and other services pay about as well as jobs in industry.
Everyone knows the American economy has been going through a historic upheaval, from manufacturing to services and from local control to globalization. Voters know that their old assumptions - a job for life, ever-rising wages, a better life for the kids - no longer hold true. This revolution has not yet played itself out, but the statistics give some clues. The trouble is, even the clues are contradictory.
Take the statistics about falling household incomes over the past 20 years. They might be accurate, but they don't tell much.
The reason is that a household today is not the same as a household in 1973, when more than half embraced a working father, a mother with a part-time job at most, and a child or two. Now the head of a household is more likely to be a working mother.
Granted, women are earning more than they did then. But they also are more likely to be the sole support of a family, and that drags those figures down.
So does longevity. People are living longer, and that's good, too. But it means more elderly households with lower earning power.
Poverty in America is indisputable. Whether the statistics accurately reflect that poverty is not.
Two sociologists, Christopher Jencks at Northwestern University and Susan Mayer at the University of Chicago, say many poor people actually spend twice as much as they officially earn, either through unreported income on the unofficial, gray economy or through non-cash benefits, such as food stamps.
If the bad news may be better than we think, the good news may be worse.
Take that Labor Department report on increases in average wages. This may mean only that the rich are getting richer faster than the poor are getting poorer. Northwestern economist Rebecca Blank says this would pull the average up but wouldn't help the mass of Americans at the bottom. Instead, it would only increase the gap between rich and poor.
This seems to be happening. The latest Labor figures show a typical male college graduate earns 80 percent more than a man with a high school diploma. Fifteen years ago, the gap was only 49 percent.
If most of the new jobs are for managers and professionals, this gap should be closing, not widening. But ``managers'' include the manager of the night shift at a McDonald's. ``Professionals'' include self-employed consultants scraping for a living.
That McDonald's manager or consultant, in fact, may be a man or woman who was ``down-sized'' out of a well-paid executive job in a Fortune 500 company; still a ``manager,'' but at a much lower salary.
But Birch, Dupuy and Schweitzer say the promise of slow but reliable growth in wages may be here now. They admit wages in services and manufacturing are about equal now not only because service wages have risen but also because manufacturing wages have fallen. Demand for factory labor has fallen - and the price of anything goes down when demand does.
But this is also the reason wages in many service industries are rising, Birch says. Many businesses rely on information technology and need more highly trained workers to run that technology. As the demand for these workers goes up, so do their paychecks.
``The labor shortage is here now,'' he said. ``Companies are increasing their productivity by spending on new equipment, but they are going to have to pay people more to run this equipment.''
The number of jobs ``is going to grow by only 1 or 2 percent per year,'' he said. ``But wages will grow twice as fast as that.''
Many American feel caught in a tunnel of insecurity, growing class differences and low pay. The growth in service-industry wages may be the light at the end of that tunnel. Clinton's re-election in 1996 may depend on how many voters see the light by then.
Keywords:
POLITICS
by CNB