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< In the New Economy, the Same Old Story >
by Robert Kuttner*
April 23, 2000 (American Prospect)
The other day, in Silicon Valley, President Clinton spoke eloquently of the
"digital divide." He extracted a pledge from the computer industry to donate
hundreds of millions of dollars worth of high-tech hardware to America's
schools.
By coincidence, I recently moderated a debate about wages and the New
Economy. How is it, debaters asked, that we can have full employment, high
rates of economic growth, and still have wages for most ordinary working
people barely move? A good question. In the last great boom, 1948-1973, real
wages rose smartly, doubling in a generation; and they actually rose faster
for ordinary workers than for executives and professionals.
Of course, there is a widely held answer to the question, one reflected in
the president's initiative: It's skills, stupid. In the new internet economy,
those who can master computer skills will make out just fine. The others, not
surprisingly, will be left behind.
This sounds so obvious that it's hardly worth debating. In fact, the high
tech industry reports some 800,000 jobs going begging.
So if you want to upgrade wages, upgrade skills. But hold on a moment.
For one thing, there are tens of millions of service sector jobs that don't
require advanced computer skills?taking care of elderly people in nursing
homes, cleaning buildings, waiting on table, minding the toddlers of the
affluent, cashiering at McDonalds. These jobs will not be replaced with
machines.
There are many million more workers who use computers, but in a routine way.
Amazon.com made a few executives very rich, but most of its employees work in
warehouses finding, wrapping, and shipping books. The inventory, of course,
is very carefully controlled by computer. But these are the routine, low-wage
jobs of the new economy, computer or no.
Indeed, supermarket clerks who work with scanners, data entry clerks sitting
at terminals in the back offices of insurance companies, airline
reservationists, shipping clerks, bank tellers, and retail sales people all
have two things in common. They have been trained to work with computers--and
their wages are going nowhere fast.
I recently gave my college-age daughter a button that reads; "I majored in
liberal arts. Will that be for here or to go?" Despite full employment, labor
economists report a surplus of liberal arts grads, who face mediocre earnings
prospects.
To be sure, people with advanced computer skills are another story. Many of
us know people in their twenties and even teens who taught themselves web
design skills and who are making a very nice living, even if they majored in
comparative lit. For the moment, with every hotdog stand feeling the need for
its own website, there's a shortage of web designers.
But think a little harder. Some of the people with the most advanced training
in the economy today are facing falling real incomes. In medicine, thanks to
managed care, there are too many specialists relative to the willingness of
insurance companies to pay the bills. So psychiatrists, dentists, and many
subspecialists have declining earnings no matter how high their skills.
Airline pilots, whose skills get more advanced with each generation of
aircraft, make less than they used to.
And just as there are too many psychiatrists, it's entirely possible that in
a decade there will be too many web designers. And their wages will fall,
too.
So the problem is not just skills. The other part of the story is the
bargaining power of wage and salary workers relative to managers and owners.
The big difference between today's economic boom and the great boom of the
post World War II years, it turns out, is not technology or skills. It is the
diminished bargaining power of employees.
Today, unions are weaker. There is weaker regulation of wages, and changes in
employment norms. Companies today feel free to let loyal, long-tenured
workers go if they can find someone else to do the job more cheaply. There is
more competition from low wage workers overseas.
Freer immigration beings that competition home. Today in big cities with
large immigrant populations, one can find daily shape ups on street-corners,
where a new generation of day-labor agencies transports minimum-wage
immigrant workers to day jobs in warehouses, construction sites and
factories. This new casualization of immigrant work undercuts labor
bargaining power, too.
So, by all means, let's teach everyone to use computers, but let's also
recognize that this is only half the story. For the vast majority, decent
earnings are also a matter of ground rules and bargaining power.
* Robert Kuttner is one of five contributing columnists to Business Week's
"Economic Viewpoint," and was the economics editor of The New Republic.
Kuttner is the author of five books: Everything for Sale: The Virtues and
Limits of Markets (1997); The End of Laissez-Faire (1991); The Life of the
Party (1987); The Economic Illusion (1984); and Revolt of the Haves (1980).
--------------------------------------------------------------------------------
Copyright (C) 2000 by Robert Kuttner. Readers may redistribute this article
to other individuals for noncommercial use, provided that the text and this
notice remain intact. This article may not be resold, reprinted, or
redistributed for compensation of any kind without prior written permission
from the author.
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< It's a Hot Economy, but Not for Janitors, Others >
by Robert B. Reich*
April 12, 2000 (L.A. Times)
The American economy is so hot that Alan Greenspan, chairman of the Federal
Reserve Board, is worried it's overheating. Dot-com billionaires are blooming
like spring crocuses. The average pay of chief executives of major companies
rose 18% in 1999 to $12 million. Across the managerial, professional and
executive ranks of the United States, pay (including bonuses, stock options
and perks) is skyrocketing. Afraid of losing their talent to the dot-coms,
big law firms just hiked the pay for first-year associates to $120,000.
Greenspan worries that all this prosperity is causing consumers to buy too
much--more than the economy can produce--which means inflation is just around
the corner. That's why he and his pals at the Fed have hiked interest rates
five times since last June in an attempt to cool things down and head off
inflation.
But wait. What about Los Angeles' striking janitors? What about all workers
at the lower end of the economy? Raising interest rates hurts people at the
bottom, causing them to pay more for first mortgages and car loans, and maybe
even costing them their jobs when the economy sags.
Unionized janitors in Los Angeles earn $6.80 to $7.90 per hour--less than
$16,000 a year. Cleaning companies say they can't afford to pay the janitors
a dollar more per hour. Yet the janitors have been watching the rents soar in
the office buildings they take care of, where they mop the floors, wash the
tiles, clean the sinks and toilets and empty waste baskets--offices in which
executives and professionals are pulling in larger and larger multiples of
their take. Adjusted for inflation, janitors are earning less now than they
did 15 years ago.
Janitors are not the only ones working harder for less. More than 2 million
Americans work in nursing homes, bathing and feeding frail elderly people,
cleaning their bedsores, lifting them out of bed and into wheelchairs and
changing their diapers. They earn, on average, about the same as janitors.
About 700,000 people work as home health care aides, attending to the
elderly, sick or disabled at home. Their pay averages between $8 to $10 an
hour, less than $20,000 a year. Another 1.3 million Americans work in
hospitals as orderlies and attendants, at about the same rate.
The list goes on. An estimated 2.3 million Americans are paid to care for
young children in child-care centers or as nannies at a median wage of $6.60
an hour, usually without benefits. This is less than what funeral attendants
earn ($7.30 an hour) or pest controllers ($10.60 an hour). And 700,000
Americans are social workers or human service workers who attend to
individuals and families with severe problems--alcohol and drug abuse,
domestic violence and mental illness--at an average pay of between $8 and $15
an hour.
Why are top lawyers, executives, financiers and dot-com impresarios earning
so much more than ever before, while the nation's caretakers are earning
less? Economists will tell you that people earn what they're "worth" in the
market. It's just supply and demand. Here's the irony: The demand for
lawyers, executives, financiers and dot-com impresarios can almost never be
filled. The more you have of them, the more you need of them. Because of
intense competition, they virtually create their own demand.
Meanwhile, the people who take care of buildings or people are in abundant
supply, and the demand for them is not self-generating. The president of the
Los Angeles Building Owners and Managers Assn. explained last week that
janitors aren't actual employees; they're more like commodities. They're a
"purchased service, like so many others," he said. If unionized janitors
charge too much for their services, he said, then building owners will give
the work to non-unionized janitors who charge less.
The problem is, the economy doesn't always reward people according to what
they're worth to society. Janitors, nurses aides, child-care workers and
others like them are doing the sort of work that keeps the rest of us
going--taking care of the things that the rest of us don't have time for or
just don't want to do. They haven't participated in the economic boom. They
didn't get raises in the roaring '90s. Most of them don't own any shares of
stock, so they don't ride the booming market. Many of them rent their homes,
so they don't get the benefit of the big rise in home prices over the last
decade.
When Greenspan worries that Americans are doing too well and spending too
much, he's worrying about the wrong people. The big spenders are at or near
the top, where most of the money has gone. This year, the richest 2.7 million
Americans, making up the top 1%, will have as many after-tax dollars to spend
as the bottom 100 million put together.
If Greenspan wants to put a damper on excessive spending brought on by too
much wealth, he ought to set his sights on where the wealth is accumulating.
He should urge Congress to make the income tax code more progressive, to
increase capital-gains taxes and to pass a wealth tax on households whose net
worth exceeds a million dollars.
* Robert B. Reich is University Professor and Maurice B. Hexter Professor for
Social and Economic Policy at Brandeis University's Heller Graduate School.
Reich served as Secretary of Labor in the first Clinton administration. He
has written extensively for the Prospect on the international economy and
American progressivism.
--------------------------------------------------------------------------------
Copyright (C) 2000 by Robert B. Reich. Readers may redistribute this article
to other individuals for noncommercial use, provided that the text and this
notice remain intact. This article may not be resold, reprinted, or
redistributed for compensation of any kind without prior written permission
from the author.
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