Sunday, October 26, 1997

A better economy for numbers than people

By PAUL AKERS / Scripps Howard News Service

Washington pundits and politicos who could argue over the color of Old Yeller nonetheless tend to sing a collective paean to the state of the U.S. economy. Who can blame them? Almost all of the numbers are great. Yet because these gentlefolk live largely inside the Beltway -- one of the nation's most affluent areas -- they may be viewing the rosy data through the lens of their own circumstance, making all appear a shade too rosy.

In some important ways this is a better economy for numbers than for people.

And what numbers. As Fortune magazine notes, unemployment is at a virtual quarter-century low, inflation is as tame as a tabby, investors are riding a rocket on Wall Street and corporate after-tax profits, in 1992 dollars, hit an unprecedented $378 billion last year. So why not proclaim an economic nirvana?

There are several reasons. One is that, in all these rising tides, workers' wages are almost waterlogged. Quite true, income for the typical American household rose in 1996 for the second consecutive year. Yet household income remains $1,083 below its 1989 inflation-adjusted peak of $36,575. Better measurement tools might reveal greater gains. But the sense of buoyancy typical of good times in the 1950s and 1960s is absent.

The reason, according to Kennedy administration economist Paul Samuelson, is that a "ruthless economy," forged by intense competition, has created "cowed labor" -- workers fearful of demanding more money. This fear comes from the knowledge that companies entice investors by increasing productivity, the easiest path to which is via layoffs. And although jobs are legion, there's debate over how good those jobs are and whether workers shown the door can maintain their living standard.

A 1996 study of job quality by Randy Ilg, a Bureau of Labor Statistics economist, paints a complex picture. As critics of the recovery have asserted, between 1989-95 job growth mostly took place in relatively low-wage industries (e.g., services, retail). The stock gag here is "Bill Clinton promised to create 8 million new jobs and I have three of them." However, within those industries, much of the growth occurred in high-paying occupations (executive, managerial). Substantial growth also took place in low-paying occupations (sales, wholesale farming). So everybody's right. The recovery has created a lot of good jobs and a lot of meager ones. Let's call it a wash.

But getting one of the better jobs isn't always easy. A recent Temple University study found that when laid-off professionals are re-employed, they earn on average just 84 percent of what they would have made in their old jobs. About a quarter of these workers make more money, a quarter lose one-third of their income and --shivers -- about a quarter earn two-thirds less than before. This means, unless it's paid for, they are probably out of their house. No wonder most Americans don't push their luck for a bigger paycheck.

Virtual wage stagnation is what keeps inflation low. There's something to be said for prices that hardly rise. But in prior boom times, workers' wages outpaced inflation -- sine qua non to the American Dream. Yet, aren't workers realizing increases in alternative compensation (health insurance, longer vacations, etc.)? Many are, but there's a counter-trend: Nationwide, notes the Employee Benefit Research Institute, employers providing employees with subsidized insurance fell from 69 percent in 1987 to 64 percent last year.

Che Guevara is dead and I look goofy in a beret. So don't nominate me as the next class warrior. Yet lately there is a disturbing disparity between the fortunes of investors and those of workers -- and a natural conflict whenever one group profits at the expense of the other. (When, a few Christmases ago, Mattel fired slews of factory workers who had helped the firm reap record profits and market share, executives said they had unleashed Headhunter Barbie to make an impression on Wall Street.)

It's true, of course, that many workers are themselves investors, as through company pension plans. But such income -- deferred and retention-dependent -- should not be overstated: Only 50 percent of all households possess more than $1,000 in financial assets, according to one source.

Sometimes, moreover, the Pollyannas of the new economy just grate. For instance, Fortune was blase about torpid hourly wages, while chirping that salaried employees have done better. But hourly workers make up almost 60 percent of the workforce.

Fortune praised Omaha, telemarketing capital of the cosmos, for its under 3-percent unemployment rate -- though telemarketers, typically contingent laborers without benefits, have median weekly earnings of less than $300.

Speaking of conservatives, we scorned the Marxist notion that harshness towards individuals was justified in the interest of "the state." But many conservatives revere the "creative destruction" of the free market, oblivious to the human pain requisite to this overall good. Can't that harshness be tempered? That pain at least regretfully noted?

Idolatry should be avoided in all forms. One writer called Communism the god that failed. Capitalism is the other god that gets about a B-minus.

(Paul Akers writes editorials for Scripps Howard News Service.)