TEXT C
Last year’s economy should have won the Oscar for best picture. Growth in gross domestic product was 4.1 percent; profits soared; exports flourished; and inflation stayed around 3 percent for the third year. So why did so many Americans give the picture a lousy B rating The answer is jobs. The macroeconomic situation was good, but the microeconomic numbers were not. Yes, 3 million new jobs were there, but not enough of them were permanent, good jobs paying enough to support a family. Job insecurity was rampant. Even as they announced higher sales and profits, corporations acted as if they were in a tailspin, cutting 516,069 jobs in 1994 alone, almost as many as in the recession year of 1991.
Yes, unemployment went down. But over 1 million workers were so discouraged they left the labor force. More than 6 million who wanted full-time work were only partially employed; and another large group was either overqualified or sheltered behind the euphemism of self-employment. We lost a million good manufacturing jobs between 1990 and 1995, continuing the trend that has reduced the blue-collar work force from about 30 percent in the 1950s to about half that today.
White-collar workers found out they were no longer immune. For the first time, they were let go in numbers virtually equal to those for blue-collar workers. Many resorted to temporary work—with lower pay, fewer benefits and less status. All this in a country where people meeting for the first time say, "What do you do"
Then there is the matter of remuneration. Whatever happened to wage gains four years into a recovery The Labor Department recently reported that real wages fell 2.3 percent in the 12-month period ending this March. Since 1973, wages adjusted for inflation have declined by about a quarter for high school dropouts, by a sixth for high school graduates and by about 7 .percent for those with some college education. Only the wages of college graduates are up, by 5 percent, and recently starting salaries, even for this group, have not kept up with inflation. While the top 5 percent of the population was setting new income records almost every year, poverty rates rose from 11 percent to 15 percent. No wonder this is beginning to be called the Silent Depression.
What is going on here In previous business cycles, companies with rising productivity raised wages to keep labor. Is the historical link between productivity improvements and income growth severed Of all the reasons given for the wage squeeze—international competition, technology, deregulation, the decline of unions and defense cuts--technology is probably the most critical. It has favored the educated and skilled. Just think that in 1976, 78 percent of auto workers and steelworkers in good mass production jobs were high school dropouts. But these jobs are disappearing fast. Education and job training are what count. These days college graduates can expect to earn 1.9 times the likely earnings of high school graduates, up from 1.45 times in the 1970s.
The earning squeeze on middle-class and working-class people and the scarcity of "good, high-paying" jobs will be the big political issue of the 1990s.
Americans have so far responded to their failing fortunes by working harder. American males now toil about a week and a half longer than they did in 1973, the first time this century working hours have increased over an extended period of time. Women, particularly in poorer families, are working harder, too. Two-worker families rose by more than 20 percent in the 1980s. Seven million workers hold at least two jobs, the highest proportion in half a century.
America is simply not growing fast enough to tighten the labor market and push up real wages. The danger of the information age is that while in the short run it may be cheaper to replace workers with technology, in the long run it is potentially self-destructive because there will not be enough purchasing power to grow the economy.
To avoid this dismal prospect, we must get on the virtuous cycle of higher growth and avoid the vicious cycle of retrenchment. Otherwise, an angry, disillusioned and frustrated population—whose rage today is focused on big government, excess taxes, immigration, welfare and affirmative action--may someday be brought together by its sense of diminished hopes. Then we will all be in for a very difficult time.
How many people were partially employed last year