September 5, 1999, Sunday, Home Edition
SECTION: Business; Part C; Page 1; Financial Desk
LENGTH: 1537 words
HEADLINE: JAMES FLANIGAN;
LABOR DAY '99: THE CHANGING WORLD OF WORK;
Look at the Growth Opportunities, Not the Wage Disparities
BYLINE: JAMES FLANIGAN
BODY:
Contrary to a lot of the rhetoric you'll hear this Labor Day Weekend, wage
inequality in America
is narrowing, not widening. The gap is shrinking between the highest-paid
and lowest-paid workers.
But stoked by the rising stock market, the gap in wealth is growing between
the richest 1% of
Americans and the rest of the people.
That's neither a sign of cruel unfairness or of social breakdown but the
consequence of years of high
capital investment by business. Returns on those investments have been
reflected in profits and stock
prices. It would be surprising if the richest, who own the most stock,
didn't get richer in such times.
It's also not surprising that wage disparities are narrowing at a time
of low unemployment. Restaurant
workers are in short supply this year and are getting 6% more in wages
than they did last year,
according to Labor Department statistics. Retail store workers, too, are
beginning to see their pay
rise faster than the average for all industries.
Indeed, wage inequality has been declining for most of the 1990s, reports
the University of Texas
Inequality Project, which measures wages in manufacturing across 18 industries
dating back to 1947.
"Similar patterns occur in service industries," says UT economist James
Galbraith. "It makes sense.
Economic growth creates more jobs, and the lowest-paid workers do better
too." That's why
joblessness among minorities is lower than it has been in decades.
The UT figures show less wage disparity now than in the 1970s or 1980s
or the latter half of the
1950s.
Those facts don't mean that all is well. But they do suggest a different
perspective for this Labor Day.
America is not a society divided into income groups or classes, but a striving,
rich society, capable of
great initiatives.
Increased wealth represents an opportunity and a challenge to spend our
riches wisely for economic
and social good and to raise the level of the lowest wage earners so they
can get into the game of
wealth building too.
The wealth picture, as portrayed in statistics on household assets compiled
by economist Edward
Wolff of New York University, shows a skewing to the top. The richest 1%
of U.S. households now
account for 38.5% of the nation's personal wealth, whether in stocks, bonds,
houses, mutual funds or
other financial assets. That's up from 34% in 1983.
Meanwhile, the poorest households appear to have lost ground over the last
15 years, according to
Wolff's survey.
And undeniably, wage differentials are large. The Labor Department reported
last week that the top
10% of full-time workers earn $ 1,200 a week, on average, and the bottom
10% earn $ 275 a
week. High-tech jobs pay 78% more than jobs outside high tech.
The problem there is not the $ 1,200 weekly paycheck. More power to it!
But the $ 275 wage is not
enough to allow the wage earner to qualify for a mortgage and buy a house--the
asset that accounts
for 30% of all American wealth.
But, you say, moderation in wage increases is one of the factors driving
better profits and high stock
prices. Will raising low wages clobber the stock market? Not necessarily,
and in any case, larger
issues are involved. Chronically low wages can create an underclass.
The challenge is to bring up the bottom ranks, says economist Glenn Yago
of the Milken Institute in
Santa Monica. "If the poor can't participate, you run the risk of a diminishing
economy."
What to do? The commonplace answer these days is "improve education." But
education, although
the key to economic betterment, is a complex and long-term solution.
More immediately, the priority should be to help the poor earn more money.
"Find ways to make
mortgages available to poor workers; raise the minimum wage so they can
qualify for mortgages,"
says UT's Galbraith.
Raising minimum wages may not earn those workers the down payment on a
cottage, but special
mortgage programs do exist, and these could be expanded. Making homeownership
possible is a
great tradition--and the reason that 67% of U.S. families own housing.
Low-wage workers could form labor unions to bargain for better pay levels.
The organized-labor
movement, which has won and lost battles for low-paid workers recently,
now represents only
15.5% of the U.S. work force, roughly 21 million out of 137 million workers.
Still, the appeal is
there: Workers in unions make wages 32% higher, on average, than do nonunion
workers.
Employers, on the other hand, could find ways to generate stock ownership
and profit-sharing among
all employees. Stock ownership and options are the real driving forces
behind this decade's buildup
of U.S. wealth.
And there is education. The best way for Americans to increase their earning
power and chances for
wealth is to get a college education. The returns are clear: College graduates
earn 60% more, on
average, than those who finish only high school.
The returns on education are so well-known that colleges and universities
are inundated with rising
numbers of applicants. Soon schools will encounter difficulty in financing
student aid, says economist
Thomas Kane of Harvard University's Kennedy School of Government.
But the solution should not be to cut the poor off from college. Rather,
says Kane, author of a
forthcoming book, "The Price of Admission," student loans should be made
longer-term and payable
over a student's employment lifetime.
The suggestion is that government or private foundations make long-term
loans to, in effect, extend
the resources of higher education to more of the population.
That's a bold idea. It recalls the Homestead Act of 19th century America,
which gave land to farmers
and laid the foundation for a great rise in national wealth. And that's
fitting because these times are far
more like the late 19th century than any other age.
"The post-Civil War period saw the buildup of great fortunes and disparities
in wealth, but it was also
a time of great economic growth," says Charles Clough, a Merrill Lynch
investment strategist who is
retiring to pursue charitable work.
And there was vision. Rich men of that time used their wealth to launch
public institutions. Andrew
Carnegie funded the Public Library system. John D. Rockefeller financed
hospitals and scientific
research. J.P. Morgan and others financed art museums.
Those things were not rich men's toys but beacons to the whole society,
especially the poor, says
Leon Botstein, president of New York's Bard College and author of "Jefferson's
Children: Education
and the Promise of American Culture." It would be good if today's mega-millionaires
would put up
new beacons, Botstein says.
In fact, we may be making a start. The new and excellent Museum of Technology
in San Jose was
financed by Silicon Valley companies and individuals. The innovative aquariums
in Monterey and
Long Beach are examples of new philanthropy. Los Angeles' Getty Museum
can become a great
beacon if it will reach out to this area's diverse population.
Once again, an accurate picture for this Labor Day is that America is not
stuck in upper and lower
classes but is a rich and striving society in which great initiatives are
possible. It's a time of
opportunity.
*
James Flanigan can be reached at jim.flanigan@latimes.com.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Working on Equality
THE LOWEST PAID ARE GETTING MORE...
Wage inequality has been narrowing for most of the 1990s, as a strong economy
has created jobs
and given a better break to the lowest paid workers. The chart shows wage
patterns in manufacturing
across 18 industries, as measured by the University of Texas Inequality
Project. Similar patterns
occur in service industries, a project leader says.
Source: University of Texas Inequality Project
*
BUT THE REALLY RICH KEEP GETTING RICHER.
Rising values for stocks swelled the asset holdings of the richest 1% of
Americans by 17% between
1983 and 1995,, but assets of the other 99% are mostly down, reflecting
higher mortgages on
houses. Statistics show mean asset holdings in thousands of dollars to
1995, but trends continue to
the present along with stock market gains have continued.
Net worth, in 1995 dollars.
Top 1%: 1983: 6.7 million; 1995 $ 7.8 million
Next 4%: 1983: $ 1.1 million; 1995: $ 1.2 million
Top 20%: 1983: $ 808,300; 1995: $ 858,100
2nd 20%: 1983: $ 124,900; 1995: $ 118,100
3rd 20%: 1983: $ 51,900;; 1995:$ 45,900
Bottom 40%: 1983: $ 4,400; 1995: $ 900.
Checking Pay
1998 median weekly earnings for selected occupations:
Lawyer: $ 1,209
Physician: $ 1,156
Computer programmer: $ 843
Police/detective: $ 723
Mail carrier: $ 681
Accountant: $ 674
Teacher (not college level): $ 671
Electrician: $ 643
Machinist: $ 594
Office clerk: $ 400
Construction laborer: $ 390
Janitor/cleaner: $ 327
Retail salesperson: $ 312
Farm worker: $ 281
Kitchen worker: $ 274
Child-care worker: $ 204
*
April 1999: 241.18
A carpenter wipes the perspiration from his face at a construction site near downtown Los Angeles.
Source: Edward N. Wolff, New York University
Sources: University of Texas Inequality Project; Edward N. Wolff, New York
University; Bureau of
Labor Statistics
GRAPHIC: PHOTO: (no caption) GRAPHIC: WORKING ON EQUALITY / Los Angeles
Times
LANGUAGE: English
LOAD-DATE: September 5, 1999