Families Scrape to Pay Bills, Yet Consumers Are Upbeat

Family incomes are growing, but have not caught up to 1989 level

Consumer confidence soared this month to its highest level since 1990.

Yet the "typical" male worker has experienced a 6.3 percent drop in hourly wages between 1989 and 1995, according to the Economic Policy Institute (EPI) in Washington. The typical, or median, female worker saw a 1.7 percent fall in hourly wages in the same period, reversing some of a 5.7 percent increase in the 1980s.

Moreover, economic insecurity has worsened this decade with jobs less likely to offer health and pension benefits. Income inequality has continued to grow. Higher-wage, white-collar men and middle-wage women have been hit this decade by the same combination of falling wages and increased job losses that hurt the blue-collar, non-college-educated work force in the 1980s. And the average net worth of middle-income families (the value of tangible assets such as houses and cars, plus financial assets minus debts) has decreased, note economists at the EPI, a liberal think tank, in a book-length Labor Day look at "The State of Working America."

"The changes in the economy have been 'all pain, no gain' for most workers," write the EPI's Lawrence Mishel, Jared Bernstein, and John Schmitt.

When so many factors are gloomy, how can consumers be so cheery, as shown by the survey of 5,000 households by the Conference Board, a business research group in New York?

Factors behind elevated consumer confidence probably include lower unemployment, more than five years of economic expansion, low inflation, and rising family incomes.

These are the trends that the Democrats have been talking about this week at their convention. The Republicans, in their convention earlier this month, emphasized economic negatives.

In the latest issue of the bi-monthly magazine The American Prospect, Democratic pollster Stanley Greenberg explains the "heroic" outlook of non-college-educated working- and middle-class voters. "On the one hand," he notes, "they believe that people no longer get wage increases that matter at work and that the overall economy is failing to lift all boats. On the other hand, they believe they are achieving a higher living standard and better life for their families, because of their own personal efforts and the choices and sacrifices that they are making."

Despite lower hourly wages after inflation, American families have been able to raise their incomes by working longer, doing overtime, getting spouses to work, or taking on a second or third job. The median family income, the level at which half of families earn more and half less, grew by $902 after inflation between 1993 and 1994, notes the EPI study. But as a group, the bottom 95 percent of families in 1994 (the most current data) still had incomes below their 1989 level. The median family's income was down 5.2 percent or $2,168 in that period.

Mr. Bernstein, one author of the study, expects that 1995 data, when released not long before the election, will show more family-income gains. Poverty will also likely have fallen with the decline in unemployment in 1995.

Given the continued expansion of the economy so far this year, family incomes probably rose further, adding to consumer confidence. And next year, millions will benefit from the just-legislated hike in the minimum wage - a 50 cents an hour hike Oct. 1 and another 40 cents on Sept. 1, 1997. "That will definitely help the lowest-wage workers, disproportionately women," says Bernstein. "It cancels out about half of the decline in real terms in the minimum wage since 1979."

Bernstein would like the labor market to tighten sufficiently for workers to demand higher wages. "The bakers are not getting their fair slice of the corporate pie," he says. Business after-tax profits were at a 30-year high in 1995, "fueled by stagnant or falling wages" and not the result of greater investment or more rapid productivity gains, he adds.

Chief executives of large corporations saw their earnings reach a level 173 times the pay of the average worker, up from 60 times in 1978, Bernstein notes.

If profit levels returned to the average that prevailed between 1952 and 1979, and the revenue went instead to workers, the wages of these employees would be 4 percent higher, he says.

By circulating a draft of its annual book on working America at Labor Day, the EPI has won considerable publicity for the past several years. The final book, which includes the latest data on incomes, is published in the new year. Several thousand copies are sold, primarily to libraries as a reference book.

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