An Economic Dream Begins to Fade?
WILL today's young people in the United States be less affluent than their parents? That's a prediction of some economists.Lawrence Mishel, research director of the Economic Policy Institute in Washington, D.C., has documented a deterioration of the economic position of the typical young family during the 1980s. In a recent book written with David Frankel, "The State of Working America," Mr. Mishel noted that the younger generation was hit significantly by a fall in real wages (adjusted for inflation), the shift in employment toward low-wage industries, the effects of the large trade deficits, and the erosion of union member ship. Unlike the older generation, these newer workers generally did not benefit much from the boom in stock market prices or the rise in after-inflation interest rates during the 1980s. Young people usually have little in the way of savings to invest. The median income of a young family, with parents aged 25 to 34, declined in constant 1989 dollars from $31,544 in 1973 to $30,873 in 1989, he reported. Minorities were hit even harder. And young families headed by a worker with no more than a high school diploma did much worse than those with a college education. Business Week magazine took up the issue with a cover story in its latest issue, asking "What happened to the American Dream? the historic pattern of each generation being more prosperous than its predecessor generation. The article concludes: "It seems increasingly likely that America's young people are going to mature in a less affluent world. And that spells trouble for all Americans, young and old alike." Richard McKenzie, a professor of economics and management at University of California, Irvine, Calif., maintains that the economic slippage of the 1980s is mostly a statistical illusion. It results, he says, from a changed method of calculating the consumer price index used to measure income dollars in real, constant terms, plus the failure to include a rise in fringe benefits during the 1980s. The economy, has performed "far less dismally' than many commentators have claimed, Mr. McKenzie holds. Nonetheless, even his numbers show a much slower rate of growth in average real incomes since about 1978 than in earlier decades. And, he admits that some groups within the total labor force may have been hit harder than the average. As to the prospects for today's younger generation, McKenzie says: "I am a strong skeptic that somehow the American dream has gone by the wayside." If the productivity of the US economy accelerates, it would make more goods and services available to Americans as a whole. Whether young people can earn the money to buy more of that new production depends on such factors as government policies and demography. A 1987 Hudson Institute report prepared for the Department of Labor, "Workforce 2000: Work and Workers for the 21st Century," reckons that a labor shortage lies ahead because of the so-called "baby bust" generation. That shortage would enable youngsters to demand better pay as they come into the labor force. Already the slow growth in the labor force has kept the unemployment rate to a relatively modest 7 percent in the 1990-91 recession. Fewer women are going to work. Fewer youths are graduating from school. The Bush administration also foresees a mismatch between the qualifications of those joining the labor force and the higher skills and education needed for available jobs. If the economy grows only slowly or productivity picks up, no shortage of workers will develop, says Mishel. Despite slow growth in the labor force in Western Europe in the 1980s, unemployment remained higher than in the US. Nor will there be such an explosion in the need for better education and skills. However, he says it is possible that 30 percent of future jobs will require a college degree, up from 25 percent in the mid-1980s. Even so, there could be a "glut" of college graduates, Mishel figures. He says the bigger challenge is to improve the jobs, pay, and skills of workers with less than a college education. He would like the government to encourage unionization and provide financial incentives for businesses to train their workers.