10 things you wish weren't true about the American economy

September 11, 2000

BY JOHN GALLAGHER

FREE PRESS BUSINESS WRITER

Summer's waning, and most working people are back on the job. But many find themselves working longer hours for less health and pension coverage than they used to get. At home, meanwhile, their debts pile higher than ever.

That's the sad, if not well understood, underside of the American economy. Even today, during the longest economic expansion in U.S. history, not all is well with the American worker.

That's the conclusion of "The State of Working America, 2000-01," a survey of the U.S. economy produced every two years by the Washington, D.C.-based Economic Policy Institute.

Liberal in its orientation, the Institute and its report have won over critics by the accuracy of its data and the quality of its analysis.

The report was written by economists Lawrence Mishel, Jared Bernstein and John Schmitt. The trio mined thousands of reports and statistics on all facets of working America, from income levels to productivity rates.

Their conclusion: "Any serious analysis of the condition of today's workers must distinguish between 'things getting better' and 'things being good....' Recent improvements are heartening, but much remains to be done."

What could be so bad about an economic expansion that's the longest in U.S. history? Well, sit back, have another cup of coffee and read on.

We call this list the "10 Things You Wished Weren't Still True About the American Economy."

Child poverty

Through some combination of bad luck, bad planning or bad choices, child poverty in America remains the worst of the industrialized world. In 1998, 18.9 percent of American children, or roughly one in five, lived in poverty. That was a slight improvement over the 19.6-percent child poverty rate in 1989, but still well above the 16.4 rate for children in 1979.

How bad do we look compared with other nations? In the mid-'90s, when the child poverty rate in the United States neared 25 percent, the rate in Canada was 15.3 percent, the rate in Japan was 12.2 percent and the rate in Sweden was 3 percent.

Millions still lack basic coverage

Roughly one worker in three lacks employer-provided health insurance, and fewer than half (49.2 percent) have employer-provided pension plans.

Not surprisingly, the benefits are spread unequally across economic classes. More than 80 percent of workers in the top fifth of the wage distribution enjoyed health benefits, compared with just 29.6 percent in the lowest fifth.

We're working longer than ever

One of the great selling points of our economy is that families with children have enjoyed rising income. That's good, of course.

But the bad news is that a lot of the extra cash comes from working longer hours, rather than pay increases. This trend has been evident throughout the '70s, '80s and '90s.

The longer family working hours come because women continue to work longer hours on the job. The average family, with the combined help of all its members, now works 83 weeks a year, up from 68 weeks in 1969.

There are benefits, of course, to women breaking barriers in the workplace. The downside comes when families must choose between time at work and time at home. The authors of "Working America" conclude: "Families are clearly worse off if their primary means to obtain higher incomes is more hours of work rather than regular pay increases."

Race still matters

In 1999, unemployment for whites was 3.7 percent, less than half the rate for African Americans (8 percent) and slightly more than half the rate for Hispanics (6.4 percent).

Moreover, white families in the middle income tier worked an average of 3,789 hours a year; for comparable black families, the average was 4,278 hours, or nearly 500 hours a year more to earn the same income.

The tide of debt keeps rising

"For the typical household, rising debt, not a rising stock market, was the big story of the 1990s," the authors write in "Working America."

In 1999, families were carrying debt loads greater than their disposable income. In contrast, household debt was about 20 percent of income in 1950 and 60 percent of income in the early '60s.

Debt isn't all bad, of course. It lets us buy homes, cars and other big-ticket household items. Interest rates have remained relatively low, easing the burden of carrying that debt.

But the share of household income given to higher debt payments rose significantly in the 1990s. During 1999, about six of every 1,000 adults declared personal bankruptcy. That was almost twice as many as in 1989, the last time economic expansion peaked.

Erosion of the minimum wage

The value of the minimum wage, when adjusted for inflation, peaked in 1967, when it was worth $6.43 in 1999 dollars. Today, the wage is $5.15, or 20 percent lower than it was in 1979 when adjusted for inflation.

The "Working America" report refutes the common claim that only teens earn minimum wage at after-school jobs. The biggest group earning the minimum wage (43.2 percent of the total) is women in their 20s or older.

Unions are still declining

The percentage of the workforce represented by unions fell rapidly in the 1980s and continued to fall in the '90s. It may have bottomed out, if recent reports are true, but unions represent only about 14 percent of U.S. workers today compared with about 24 percent in 1973.

Some employers may cheer, but for workers, that trend means bad news. Belonging to a union remains one of the best ways to raise one's pay and benefits. The report estimates this "union premium" at 27.8 percent, or more than $6 an hour over the wages and benefits paid to non-union workers.

"Working America" concludes that the decline of unions has put downward pressure on wages, particularly for men in traditional blue-collar jobs.

The stock market benefits mostly the top

"The stock market boom of the 1990s left the impression that most Americans were experiencing an unprecedented growth in wealth," the authors write in "Working America."

"The truth, however, is that most Americans have no economically meaningful stake in the stock market," they add. The report cites government data that show fewer than half of all households hold stock in any form, including mutual funds and 401(k)-style pension plans.

One percent of all investors hold almost half (47.7 percent) of all stocks based on their market value. The bottom 80 percent of shareholders own just 4.1 percent of stock holdings.

Fat cats get even fatter faster

Workers at the bottom of the wage scale finally made real gains in take-home pay recently. That's good. But the rich got richer even faster. Unlike the wage inequality of earlier years, which saw the top pulling away from the middle and the middle pulling away from the bottom, the new wage inequality sees the bottom rising to meet a stagnating middle class while the top pulls away even faster.

"A poor role model for the world."

We Americans like to view ourselves as the richest and most productive nation in the world. By some measures, that's a valid picture. But not by all measures, according to the authors, who call the nation "a poor role model" for the world.

America may enjoy the world's highest per capita income, but other nations' income levels are rising faster than ours. During the '90s, Norway, Denmark, the Netherlands, Australia and several other advanced economies saw per capita income rise faster than the United States' 1.6-percent annual increase.

Even America's highly touted productivity gains, which led the world for most of the post-World War II era, were exceeded in the '90s by several nations, among them Belgium, western Germany, France, the Netherlands and Norway.

Meanwhile, the United States has the most unequal income distribution and one of the highest poverty rates among all the advanced economies in the world.

Conclusion

Well, it's not all doom and gloom. The United States has posted strong gains in family income, productivity and other measures in recent years.

But, the authors say, "Those who look exclusively to the United States for solutions will miss a great deal."

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-- Carl Jenkins (Somewherepress@aol.com), September 12, 2000