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2003-12-30 -- Our So-Called Boom

If we look at the last thirty years, and particularly the 1990s "boom"
years:

  *  For every dollar of hourly pay earned in 1973 in private,
non-farm jobs, the average worker made 91 cents in 1998.

  *  The 1998 poverty rate was 1.6 percentage point higher than the
1973 rate.

  *  By 1996 the average family of husband, wife, with full-time jobs
worked six hours for every five they worked in 1979, yet millions of
other cannot find steady full-time jobs, so one in six non-farm worker
works less than 30 hours.

  *  From 1981 through 1995, workers losing a job and finding another
took an average of a 14% wage cut.

  *  In 1995, 20% of the population had trouble making a basic need,
defined by the government as not enough to eat, inability to pay
utilities, rent, or medical/dental needs.

Source: From Capitalism to Equality, Charles Andrews, 2000, Needle
Press, Oakland.


Our So-Called Boom


New York Times, December 30, 2003

By PAUL KRUGMAN

It was a merry Christmas for Sharper Image and Neiman Marcus, which
reported big sales increases over last year's holiday season. It was
considerably less cheery at Wal-Mart and other low-priced chains. We
don't know the final sales figures yet, but it's clear that high-end
stores did very well, while stores catering to middle- and low-income
families achieved only modest gains.

Based on these reports, you may be tempted to speculate that the
economic recovery is an exclusive party, and most people weren't
invited. You'd be right.

Commerce Department figures reveal a startling disconnect between
overall economic growth, which has been impressive since last spring,
and the incomes of a great majority of Americans. In the third quarter
of 2003, as everyone knows, real G.D.P. rose at an annual rate of 8.2
percent. But wage and salary income, adjusted for inflation, rose at
an annual rate of only 0.8 percent. More recent data don't change the
picture: in the six months that ended in November, income from wages
rose only 0.65 percent after inflation.

Why aren't workers sharing in the so-called boom? Start with jobs.

Payroll employment began rising in August, but the pace of job growth
remains modest, averaging less than 90,000 per month. That's well
short of the 225,000 jobs added per month during the Clinton years;
it's even below the roughly 150,000 jobs needed to keep up with a
growing working-age population.

But if the number of jobs isn't rising much, aren't workers at least
earning more? You may have thought so. After all, companies have been
able to increase output without hiring more workers, thanks to the
rapidly rising output per worker. (Yes, that's a tautology.)
Historically, higher productivity has translated into rising wages.
But not this time: thanks to a weak labor market, employers have felt
no pressure to share productivity gains. Calculations by the Economic
Policy Institute show real wages for most workers flat or falling even
as the economy expands.

An aside: how weak is the labor market? The measured unemployment rate
of 5.9 percent isn't that high by historical standards, but there's
something funny about that number. An unusually large number of people
have given up looking for work, so they are no longer counted as
unemployed, and many of those who say they have jobs seem to be only
marginally employed. Such measures as the length of time it takes
laid-off workers to get new jobs continue to indicate the worst job
market in 20 years.

So if jobs are scarce and wages are flat, who's benefiting from the
economy's expansion? The direct gains are going largely to corporate
profits, which rose at an annual rate of more than 40 percent in the
third quarter. Indirectly, that means that gains are going to
stockholders, who are the ultimate owners of corporate profits. (That
is, if the gains don't go to self-dealing executives, but let's save
that topic for another day.)

Well, so what? Aren't we well on our way toward becoming what the
administration and its reliable defenders call an "ownership society,"
in which everyone shares in stock market gains? Um, no. It's true that
slightly more than half of American families participate in the stock
market, either directly or through investment accounts. But most
families own at most a few thousand dollars' worth of stocks.

A good indicator of the share of increased profits that goes to
different income groups is the Congressional Budget Office's estimate
of the share of the corporate profits tax that falls, indirectly, on
those groups. According to the most recent estimate, only 8 percent of
corporate taxes were paid by the poorest 60 percent of families, while
67 percent were paid by the richest 5 percent, and 49 percent by the
richest 1 percent. ("Class warfare!" the right shouts.) So a recovery
that boosts profits but not wages delivers the bulk of its benefits to
a small, affluent minority.

The bottom line, then, is that for most Americans, current economic
growth is a form of reality TV, something interesting that is,
however, happening to other people. This may change if serious job
creation ever kicks in, but it hasn't so far.

The big question is whether a recovery that does so little for most
Americans can really be sustained. Can an economy thrive on sales of
luxury goods alone? We may soon find out.