THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, December 18, 1995 TAG: 9512160008
SECTION: FRONT PAGE: A10 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 72 lines
There are three watershed years in the ongoing economic decline of working-class Americans, according to Lester Thurow, a professor of economics at the Massachusetts Institute of Technology. He described them in a Nov. 19 New York Times article.
1968 - Economic inequality started to rise. ``Among men working full time - the group most sharply affected - inequalities in earnings between the top 20 percent of wage earners and the bottom 20 percent would double in the next two and a half decades.''
1973 - The median wage for all men working full time began to fall. ``Over the next 20 years, men's earnings (adjusted for inflation) fell 11 percent, from $34,048 to $30,407, even though the earnings of the top 20 percent grew steadily and the real per-capita gross domestic product (GDP) rose 29 percent.''
1989 - ``Mostly by working many more hours per year, women kept median household incomes slowly rising until 1989.'' That year, their wages began to fall. Since then, median household incomes have dropped more than 7 percent, after correcting for inflation and family size, from $33,585 to $31,241.
Since 1968, money has been climbing a ladder. Folks on the top few economic rungs have pocketed more and more of it; most everyone else, less and less. For the first time since accurate data began being kept in 1929, the nation's GDP has risen while real wages for a majority of U.S. workers have declined.
``The share of total net worth of the top one-half of 1 percent of the population rose from 26 to 31 percent in just six years, between 1983 and 1989. By the early 1990s the share of wealth (more than 40 percent) held by the top 1 percent of the population was essentially double what it had been in the mid-1970s and back to where it was in the late 1920s, before the introduction of progressive taxation.''
How does Thurow explain what's happened to the working stiff?
Technological shifts that demand a more skilled work force.
International competition from lower-paid but well-educated workers.
Two decades of the Federal Reserve Board creating unemployment to fight inflation.
An end to the implicit contract between owners and workers guaranteeing lifelong employment if the companies could afford it. (Today highly profitable corporations lay off thousands.)
What's the remedy for the working stiff's woes? Thurow calls for ``a huge program of re-educating and retraining the bottom 60 percent of the work force, investments in research and high-tech infrastructure and a willingness to run the economy with tight labor markets so that labor shortages push wages upward.''
That amounts to doing the opposite of what we're doing.
``Public spending on infrastructure, as a percentage of GDP, has been cut in half in the last two decades and is scheduled to be reduced even further by Washington's budget cutters,'' Thurow said.
Congress is planning an income tax cut for the rich, along with a retroactive reduction in the capital-gains tax - two measures that, coupled with welfare and middle-class benefits cuts, assuredly will increase economic inequality.
A consumer-driven society depends on middle-class spending. When consumers lack money with which to consume, things fall apart.
Some societies have existed for millennia with huge inequalities of wealth and income, Thurow noted, but none were democracies, none believed in one person, one vote.
``In effect,'' Thurow said, ``we are conducting an enormous social and political experiment - something like putting a pressure cooker on the stove over a full flame and waiting to see how long it takes to explode.''
He seems pessimistic. So are many in the shrinking middle class. by CNB