In many ways, he’s right. The White House cites low inflation (2.5 percent last year), a low ““misery index’’ (that combines inflation with unemployment), low mortgage interest rates (7.3 percent on fixed-rate loans) and soaring stocks.
But Americans vote their paychecks, not their mortgage rates, and by that measure Clinton is in trouble. When he pops the election-year question ““Are you better off now than you were four years ago?’’ the swing votes will be shouting ““no.''
Forget January, when unemployment leaped to 5.8 percent, from 5.6 percent the month before. Fierce winter storms kept workers home; payrolls probably bounced right back. Overall, unemployment hasn’t been this low since 1990.
Still, millions of people are working harder for less reward. Real earnings are flat to down. The chasm between rich and poor is the widest since 1947 (that’s as far back as the numbers go). Economic unrest helped topple George Bush in 1992 and could defeat Bill Clinton, too.
When Americans vote, here’s what their pay stubs will show:
Average real hourly earnings dropped 28 percent from 1979 to 1994 for men who didn’t finish high school, 16 percent for high-school graduates and 11 percent for those who put in some college time, says economist Lawrence Mishel of the Economic Policy Institute. Only people with college degrees showed real-earnings gains.
Women’s real earnings rose in the ’80s but stagnated after the decade turned. They’ve drawn closer to the male wage, but mostly because male wages fell. That’s a heck of a way to reach equal pay.
For many employees, wages are only part of the story. They also get valuable fringe benefits, such as pensions and health insurance. Counting these fringes, compensation is up a tad.
But this form of pay will be yanked away if you get laid off or have to work for a firm that doesn’t give benefits. Even those who retain their fringes may wind up with less money to spare, because they’re shouldering more of their medical and retirement costs.
Real family incomes rose during most of the 1980s, but mainly because more wives took jobs. By the end of the decade that trend had pretty much run its course. So when the 1990-91 recession hit, there were few untapped earners to bring extra paychecks into the house. Family incomes fell through 1993. Ire and insecurity grew.
The economy generated nearly 20 million jobs between 1983 and 1993. But they weren’t spread evenly over the national income range. Employers offered more high-wage jobs (technicians, professionals) and low-wage jobs (generally, hourly workers), with fewer jobs in the middle. An additional 21 million people replaced workers who moved out. But 60 percent of them earned in the bottom half of the pay range, says Labor Department economist Neal Rosenthal.
Job insecurity won’t die down. When the American Management Association surveyed companies last July, 29.5 percent were expecting to cut their work force over the following 12 months. That’s the highest in this annual survey’s nine-year history. The AMA thinks that the actual number will be closer to 60 percent. With job cuts now the norm, fewer companies try to ease the pain. You’re less likely to get extended severance pay, extended health benefits or help in finding a new job.
On the bright side (there is one), these companies hired almost as many people as they fired in 1994-95 – expanding in some sectors even as they shrank in others.
Without question, it’s a great time to be rich. Between 1977 and 1992, America’s most prosperous fifth gained 28 percent in real income after tax (they’re projected to earn an average of $89,000 this year). For the richest 1 percent, real gains shot up 91 percent. The middle, however, just held its own, while the poorest fifth grew 17 percent poorer still. Even within groups, inequality grows apace. Among college graduates, for example, the luckier or smarter are steadily pulling ahead of the rest.
Wealth follows earnings. The rich are saving – and investing – some 15 percent of their incomes, compared with just 2.1 percent for the middle class, says economist Edward Wolff of New York University. Inequality of wealth stands at a 63-year high. The top 1 percent controls 42 percent of the nation’s household assets and 50 percent of its financial assets, such as stocks and bonds.
Maybe I’ve read too much Jane Austen, but attitudes seem to be taking a 19th-century turn. In Austen’s time, the well-to-do were tended by a servant class. Today they’re tended by hired services that they also keep in check. It’s not just businesses that object to a higher minimum wage. The ““overclass’’ doesn’t want to pay more to its day-care workers and household help, says economist Barry Bosworth of the Brookings Institution.
Workers rebel in the voting booth. Among Democrats, college graduates generally stuck to their party in 1994, as did African- Americans. Those who deserted were white high-school dropouts, high-school graduates and voters with some college education – all of them typical of the groups whose real incomes fell, says Ruy Teixeira of the Economic Policy Institute. In last week’s Louisiana caucus, Pat Buchanan drew strength from lower-income voters and voters without college degrees. In New Hampshire, Steve (Flat Tax) Forbes runs best among those with moderate incomes. But if tax cuts could get wages up, Ronald Reagan would have done it.
The prime cause of wage inequality appears to be technological change, which rewards skills while leaving everyone else behind. How to stop wage erosion isn’t clear. Business investments that make even low-skilled workers productive? Manpower investments, like the GI bill that upgraded the work force after World War II? If workers can’t afford to spend, the economy can’t grow. Yet we’re all chasing scapegoats: immigrants, foreign trade, corporate greed, taxes, the rich, the poor, the FBI. We’re like howling dogs sitting on a burr. We could move, but we’d rather howl.
