UNCOMMON SENSE 11 © July 1996

by Charles J. Whalen, Resident Scholar, Jerome Levy Economics Institute of Bard College and Advisory Board of the National Jobs for All Coalition

The American Dream is in crisis.  The 25-year “Golden Age” that followed World-War II has been replaced by an equally long period of economic insecurity for most US workers. In the 1950’s and 1960’s, middle-class Americans saw themselves as part of an Affluent society, but that image has since given way to what is perhaps best described as the Anxious society of the 1990s. The expectation that young workers would be better off than their parents has been reversed. The assumption that all would rise together has been subverted by economic strategies which increase the standard of living of some to spectacular heights while that of the majority sinks.

By conventional measures, the US economy is strong. But Americans have good reason to feel ill at ease. In today’s economy, most working families can’t distinguish recession from recovery. Beneath the misleading surface prosperity lie numerous alarming trends:

• Downsizing In the 1990s, hundreds of thousands of workers have lost their jobs in corporate downsizing. Since 1979, more than 43 million jobs have disappeared, and though the total number of jobs has grown, the new jobs pay less, on average, than the old. Employment at the nation’s largest 100 companies has fallen 22 percent.¹ The Associated Press provided an all too vivid snapshot of our times when it reported last year on the experience of Bill Means, an engineer at a computer-software firm in Ohio. Means was terminated and escorted off  company property on “Take Our Daughters to Work Day,” while his 8-year-old daughter looked on in disbelief.

• More time between jobs; lower-paid jobs Job search in the 1990s takes longer than in the past. The median duration of a search has increased from 2.5 weeks in the mid-1960s to 1.5 months in the mid-1980s and to 2.5 months today.  In addition, workers losing jobs recently have suffered an average wage drop of more than 20 percent when they regain full-time work.³ About a quarter of the workers losing jobs during 1991 and 1992 had either stopped looking or not yet found jobs as late as 1994.⁴

• Declining wages The real purchasing power of wages for the average American worker has been falling since 1973. Average hourly earnings are now lower than they were in 1965; weekly earnings are lower than they were in 1959.  Median family income has fallen more than five percent in real terms since 1989, and is back to 1978 levels despite more two-earner families: the middle class has shriveled.⁵
• Longer hours For many still working, the hours are longer and the stress of work has increased, as employers try to achieve the same or higher output with fewer workers: both work time and income are poorly distributed.²

• More contingent work Part-time and temporary work is on the rise. Between 1970 and 1990, total US employment grew by about half; but the number of persons working part-time yet wanting a full-time job more than doubled; and the number of temporary workers more than tripled.⁶ A temporary-employment agency, Manpower Incorporated, is now the nation’s second-largest employer. These jobs frequently have few or no fringe benefits, such as health insurance, pensions or paid vacations, all necessary to stable family life.

• Multiple job-holding In 1985, 5.7 million Americans held two or more jobs; today the number is over 7.7 million. No other industrial nation approaches the US in multiple job holders.⁷ As one worker responded to a boast by President Clinton, “Don’t tell me about the millions of new jobs created–I’ve got three of them and I’m not all that impressed.”

In contrast to the present, the early post-World War II period was an era in which there was much truth to the expression “a rising tide lifts all boats.” Since most jobs provided steady  employment and rising wages, policymakers interested in the well-being of the middle class needed only to focus on three overall measures of economic performance: national output, employment and inflation.  The American Dream seemed secure for most people as long as the Gross National Product was growing and unemployment and inflation were low.

But much more is required in a global economy of fierce international competition, footloose corporations, and swift technological change. Today no single statistic of overall national performance can adequately reflect economic reality. No one policy initiative can restore faith in the American Dream.

The United States is capable of establishing an institutional framework that provides those who work hard with economic opportunity, a rising standard of living, and the prospect of an even better life for their children.  Moving society toward this objective, however, requires a new look at a broad policy landscape. Among the issues that must receive fresh attention are corporate strategies and economic policy.

CORPORATE STRATEGIES

Public policies are needed to encourage firms to compete on the basis of innovation, product quality, and the development of new markets rather than by downsizing, outsourcing, moving operations overseas, and reducing worker wages and benefits.  We must devise incentives for employee participation in business decisions and for compensation systems that share a firm’s prosperity with workers.  In addition, pensions should be portable and extended to a greater proportion of the workforce; basic health services should be available to all; and government, business and educational institutions must collaborate to ensure worker access to effective training programs and other labor-market adjustment mechanisms. We must find ways of making corporate management more accountable to the communities and workers that depend on their firms. International regulation of corporate conduct should supplement national systems of corporate regulation.

ECONOMIC POLICY

Macropolicy. Since 1946, federal law has required that the US government use all practicable means to promote maximum employment, production and purchasing power. But today’s fiscal and monetary policies are guided only by a desire to reduce budget deficits and inflation. The Federal Reserve should declare victory in its inflation battle and help accelerate economic growth with lower real interest rates.  Congress and the White House, meanwhile, must not lock themselves into a fiscal straightjacket with a balanced budget amendment. This would prohibit policies necessary to fight recession, like more government spending or lower taxes.⁸ International negotiations toward a global “New Deal” would support these moves and recognize the necessity for the major economies to expand simultaneously.

Setting a floor.  In the absence of labor standards with strong enforcement, competition generates a socially destructive, a race to the bottom–one that can erode the standard of living of nearly all workers.  In recent years, America’s workplace standards have been weakened by an assault on labor unions, a decline in the real  value of the minimum wage, and competition with low-wage nations. Shared prosperity requires policies that shore up these standards, including an increased minimum wage at home and trade agreements that seek the upward harmonization of standards across nations.  There is also a need for expanded community-service employment and other arrangements that allow the public sector to serve as employer of last resort.  Long-term joblessness demoralizes the individual and wastes valuable human resources, undermines worker bargaining power, and adds incalculable social costs. At the same time, it deprives society of an opportunity to address its social needs more adequately.

Public investment.  No nation can prosper without making investments in its future.  Public investments in education, science and technology and in infrastructure, for example, are vital not merely for their own sake but also as complements to private investment.  But federal non-military investments, when measured as a share of budget outlays or as a fraction of national output, have been declining since the mid-1960s.  The signs of neglect are all around us–decaying cities, inadequate public transportation, and an underfunded national park system. Unfortunately, the US government accounting system cannot distinguish investment from consumption. This system treats much needed infrastructure and biotechnology research no differently than a White House dinner party.  America needs both a federal capital budget and a new commitment to public investment. Such expenditures can be funded by real tax reform, which would correct the current burden on the middle class and poor and ensure that corporations and the rich pay their fair share.

Revitalizing the American Dream will not be easy.  The policy changes we need are many, and require a Congress and White House dedicated to addressing the problems faced by the nation’s working families.  But elements of a policy agenda are now coming together.⁹  And many who seek public office are now beginning to recognize that the current economic situation is unstable.  Anxiety cannot be the defining characteristic of any society for very long.

Middle-class insecurity is real and pervasive.  The American Dream is indeed in crisis.  Only sensible public action can put the United States on a new course.

NOTES

1. Challenger, Gray and Christmas, Layoff Report, March 1996; Louis Uchitelle and R. N. Kleinfield, The Downsizing of America, The New York Times (March 3, 1996), p. A27; Michael J. Mandel, Economic Anxiety, Business Week (March 11, 1996), p. 50.
2. Juliet B. Schor, The Overworked American: The Unexpected Decline of Leisure (New York:  Basic Books, 1991).
3. Economic Report of the President, Washington, DC:  US Government Printing Office, 1996, p. 326; G. Pascal Zachary, Census Bureau Confirms Eroding Wages, The Wall Street Journal, January 25, 1995, p. A2.
4. Bureau of Labor Statistics, Daily Labor Report, May 28, 1996, A12.
5. Economic Report of the President, pp. 314 and 330.
6. Polly Callaghan and Heidi Hartmann, Contingent Work. Washington, DC: Economic Policy Institute, 1991, p. 9.
7. Bureau of Labor Statistics, US Department of Labor, The Employment Situation, February 1996. Washington, DC:  US Department of Labor, 1996; Louis Uchitelle, Moonlighting Plus:  3-Job Families on the Rise, The New York Times (August 16, 1994), p.A1.
8. For more information on budget deficits, see Robert Eisner, Why the Deficit Isn’t All Bad: Balancing Our Deficit Thinking, Uncommon Sense #9 (Feb., 1996).
9. See, for example, Sheila D. Collins, Helen Lachs Ginsburg and Gertrude Schaffner Goldberg, Jobs for All: A Plan for the Revitalization of America (New York:  Apex Press, 1994).

Editor: June Zaccone, Economics (Emer.), Hofstra University