Low Wages and Social Discontent
WAGES have stagnated in the United States for 15 years, if you take inflation into account. And there is a greater inequality in annual earnings for men (but not for women) and greater inequality in family incomes. In other words, the rich have been getting richer, the poor poorer.Skip to next paragraph
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These trends are ``a recipe for social discontent,'' says Frank Levy, a University of Maryland economics professor. He worries about the possibility of greater class consciousness arising in the US.
During the 1950s and '60s, real incomes of people were rising 20 to 30 percent a decade as productivity increased solidly. Even if stuck with a poor job, an individual's standard of living was rising fast enough to give him or her a sense of greater prosperity.
Since the Organization of Petroleum Exporting Countries first quadrupled the price of oil in 1973-74, that's not been happening for much of the population, particularly those with high school education or less. The well-educated, however, have enjoyed rising living standards.
``The economy has shifted in the direction of a meritocracy,'' says Robert Hall, a Stanford University economist. The ``smart and highly motivated'' have grasped opportunities to blossom financially.
Lawrence Summers, a Harvard University economics professor who advised Massachusetts Gov. Michael Dukakis during his run for the presidency, believes the wage stagnation thesis may be overstated. The statistics, he says, may not pick up all improvements in living standards - dozens of television channels instead of three or four, more variety at supermarkets, bank cash machines, microwave ovens, and so on.
Nonetheless, he wonders if stagnating incomes will make generosity ``a luxury item'' in the American political scene. Could Washington launch a ``War on Poverty,'' as President Johnson did in the late 1960s after a long period of prosperity? he asks.
In a paper for the National Bureau of Economic Research, Mr. Levy spelled out in more detail income trends that form the background to these concerns:
Between 1973 and 1986, the proportion of men earning less than $20,000 (in 1987 dollars) and earning more than $50,000 have both increased. The proportion of men earning $20,000 to $50,000 has declined. These changes are consistent with the thesis that a declining proportion of male workers earn enough to support a middle-class standard of living.
Unlike in earlier decades, a young man can more easily find himself paid less than his father or even an older brother, both when he starts work and as he ages.
Women's annual earnings still lie well below men's. But between 1973 and 1986, the proportion of women earning less than $10,000 has declined substantially, while the proportion earning between $20,000 and $50,000 has increased.
This indicates that there has been a breakdown in discrimination against women on the job and some increase in their occupational mobility, says Levy. In other words, women are getting both better-paying jobs and a greater variety of jobs.
For families (defined as two or more people related by blood, marriage, or adoption) there also was little real growth in earnings between 1973 and 1986. Over the period, median family income increased from $28,890 to $30,670, or 5 percent each decade. This earnings stagnation was accompanied by greater income inequality. The proportion of families with incomes below $10,000 and above $50,000 both increased moderately.
The median income of all men who worked year round and full time declined from $27,490 in 1973 to $26,926 (a 2 percent drop). The comparable figure for women rose from $15,553 to $17,147 (up 10 percent). Over the same period, income per capita (including men, women, and children) rose briskly, from $9,926 to $12,250 (up 23 percent). That's because the proportion of the population working for money has risen from 42 percent in 1973 to 50 percent in 1986.
The 1950s family probably had one paycheck and two or three children. The family of the 1980s likely has two paychecks and one or two children. Women have been joining the labor force in a gradually greater proportion since the 1950s.
Family income inequality is high compared with that in other industrial nations. And there has been some increase in inequality of family income in the US since the 1970s. The richest fifth of families received 40.6 percent of total income in 1969; 43.7 percent in 1986. The poorest fifth numbers are 5.6 percent and 4.6 percent.
One factor in this shift has been the increasing number of families headed by females. Many of these, and the children involved, are likely to be poor.
Levy suspects that these poor children will not be properly educated for jobs that in the future may require more skills.
A conservative may argue that income inequality reflects individual abilities and is of no concern to government. Levy maintains that the government should take measures that redistribute income to help the poor, especially poor children.
It is an old debate that could be reviving.