Stagnation Clouds American Dream
Washington — THE American Dream of steady wage increases and easier living, often realized in the past, has given way to a starker reality.
Upward mobility has been largely supplanted by economic stagnation. Americans now work longer hours, with lower pay and less leisure time. Since the 1973 oil shock, stretches of high inflation and three full recessions have caused gradual but steady economic attrition for United States households.
And this despite the fact that average Americans increased their work hours by one month a year and took 15 percent fewer days off, from 1969 to 1989, according to an Economic Policy Institute study. A continuing drop in real wages since 1973 and increased health care and housing costs have caused Americans to work longer, says the study.
Brookings Institution economist Barry Bosworth joins a chorus of economists who point to the country's crumbling infrastructure and its failing education system as signals of an ailing economy. But the telltale sign, he says, is offspring who will not enjoy the same quality of life that their parents have had. "Children who think they're going to be just like their parents by getting a high school education and then a job are going to be much worse off than their parents. That's where the decline is," M r. Bosworth says.
Some of the factors pointing to a general decline in the US standard of living are:
* US workers are entrenched in an economy in which double incomes are necessary to sustain household income growth.
* A staggering 25 percent of families are headed by single parents (compared with 11 percent in 1970). Women, who earn on average 75 percent of what their male counterparts earn, most often bear the single-parent burden.
* Debt relative to private income rose sharply during the 1980s, relegating Americans to among the industrial world's lowest savers. Household savings went from 8 percent of income in the 1960s and 1970s to today's 5 percent.
* US research and development investments are drastically lower than key Asian and European competitors. Public and private debt combined leaves marginal financing available for investments of any kind.
* A dramatic gap in wage scales between the people at the top, who received notable wage increases during the last 15 to 20 years, and people at the bottom, with significant losses.
* Even the very best US schools compare poorly with schools in other leading industrial countries.
In the past 30 years, there has been a precipitous drop in US educational standards. The most striking aspect of the decline, is that "it seems to be endemic to American society, regardless of students' ethnicity or race, whether they live in urban or suburban areas," says Bosworth.
Says Marvin Kosters, director of Economic Policy Studies at the American Enterprise Institute: "Employers will pay more for workers who invest more in their education and work experience."
Bosworth attributes the big income distribution gap to "the opening up of the global economy." Low-level workers, he says "are in huge surplus. Given increasing challenges from competitive industrial and agricultural producers abroad, these workers are in greater jeopardy of losing their jobs." Valuable educated labor is in short supply, he says. Educational differences partly account for the great disparity in wages, economists agree.
The current recession has forced Americans to take stock of their economic lot. "It should be self-evident to Americans," says Bosworth, "if you don't invest anything in the future, it's going to look dismal." The basics that determine high and rising standards of living, including business capital, job training, and technological advancements through research and development, are lacking, largely due to the poor US savings rate, he says.
Bosworth says "there's essentially zero investment" in old infrastructure across the nation - the roads, tunnels, bridges, waterworks, and electrical grids that have a daily impact on every American. But the country's abysmally low savings confine government to "on average, spending at the rate infrastructure is wearing out." Neglect has become the norm.
The US Conference of Mayors recently surveyed 305 cities across the nation, and then listed thousands of urban and suburban public works projects put on hold due to recession and the lack of federal funds.
Recession and budgetary pressures leave the poor's housing needs unaddressed, says Paul Leonard, senior policy analyst with the Center on Budget and Policy Priorities. The presidential election year focus on Middle America has distinctly cast the growing number of poor Americans to the sidelines.
According to federal standards, housing that consumes no more than 30 percent of household income is affordable. By 1989, more than 80 percent of 5 million poor households exceeded this standard with low rent housing availability falling to a 20-year low, according to the Center on Budget and Policy Priorities and the Low Income Housing Information Service. This aggravated a severe shortage of affordable housing for the poor and put more low-income Americans in jeopardy of homelessness.
During the 1980s, new employment was born of an entrepreneurial environment: Government offered incentives and Americans had ample access to capital in order to finance business. It was a decade that for the US began in recession. New and expanding businesses helped create 18 million new jobs, above and beyond millions of layoffs by large US corporations.
But, today, the prevailing element in the business environment is the credit squeeze. Underfunded and overexposed banks are risk-averse; even the most financially sound individuals and enterprises are hard pressed to secure loans.