Wages on the line: US workers slip behind
European, Japanese wages rose in 1980s as US hit set of woes
BOSTON — THE roller-coaster economy of the 1980s may have created 18 million new jobs in the United States, but for most American employees, the decade brought smaller and smaller paychecks, even after being adjusted for inflation.
This is the finding of a study by the Economic Policy Institute, a liberal think tank in Washington, due out in December. The study, ``The State of Working America 1994-95,'' found that wages fell most sharply in the US for workers in entry-level jobs, low-wage women workers, and blue-collar workers. Meanwhile, workers in Europe and in Japan saw their paychecks rise during the 1980s, even though those countries experienced the same ups and downs of the market.
And the trend has continued from 1989 to '93 in the US:
* Real median-level wages fell 2.6 percent overall and 4.6 percent among men.
* Entry-level wages fell 7.8 percent for high-school-educated workers.
* For college-educated workers, entry-level pay fell 6.1 percent.
The fall in wages came just as US workers should have become more valuable to their employers, says Jared Bernstein, co-author of the study. American workers became more productive in the 1980s, producing more cars, computers, and hamburgers in fewer hours, but the market did not generally reward this productivity with higher wages.
For many families, the only way to improve or maintain their standard of living is to work more hours or send another family member into the workforce.
When compared with the life of workers in Europe and Japan, the picture for US workers is similarly bleak.
Unlike workers in the US, medium- and low-wage employees in Europe and Japan saw their paychecks increase during the 1980s. While US workers as a whole had the best purchasing power in the world, able to buy more goods with their wages, Europeans and Japanese were quickly closing the gap. And compared with European governments, Washington was less generous to its unemployed workers in providing job training and welfare benefits and in creating government-backed jobs.
Most economists agree with Mr. Bernstein and his co-author, Lawrence Mishel, that wages fell for 60 percent of the US workforce over the 1980s, and even some conservatives agree that such a fall in wages eventually hurts the market, since thinner wallets mean less consumption of US goods. But few economists agree with Bernstein's push for more government involvement.
``It's hard to tease what's happening out of the data,'' says C. Eugene Steuerle, an Urban Institute economist in Washington. ``When you are looking at such a broad aggregate, there is no single policy instrument that can be used to solve the problem.''
For Mr. Steuerle, education is one solution. ``When the economy goes through a rapid period of shift, those with greater levels of education are more adaptable. It may be that our education system is not serving people at the bottom well, not educating people for the current economy.''
Bernstein and Mr. Mishel say that a combination of factors - a severe drop in the value of the US minimum wage, deunionization, the expansion of low-wage service-sector jobs, and increasing trade competition - explain part of the problem. These factors also explain why European workers did better, since unions there remain strong and the minimum wage has kept pace with inflation.
But the authors reject the notion that wage inequality reflects a higher demand for educated or skilled workers. Half the overall increase in a wage gap in the 1980s occurred among workers with similar education levels.