their chicanery
Reagan sold nostalgia, and with his regressive policies sure enough, we've got a return to the Gilded Age. From Business Week
Commentary: Waking Up From The American Dream
Dead-end jobs and the high cost of college could be choking off upward
mobility
Aaron Bernstein
November, 2003
There has been much talk recently of the "Wal-Martization" of America, a
reference to the giant retailer's fervent attempts to keep its costs -- and
therefore its prices -- at rock-bottom levels. But for years, even during
the 1990s boom, much of Corporate
America had already embraced Wal-Mart-like stratagems to control labor
costs, such as hiring temps and part-timers, fighting unions, dismantling
internal career ladders, and outsourcing to lower-paying contractors at home
and abroad.
While these tactics have the admirable outcome of holding down consumer
prices, they're costly in other ways. More than a quarter of the labor
force, about 34 million workers, is trapped in low-wage, often dead-end
jobs, according to a new book entitled Low-Wage America: How Employers Are
Reshaping Opportunity in the Workplace. Many middle-income and high-skilled
employees face fewer opportunities, too, as companies shift work to
subcontractors and temp agencies and move white-collar jobs to China and
India.
The result has been an erosion of one of America's most cherished values:
giving its people the ability to move up the economic ladder over their
lifetimes. Historically, most Americans, even low-skilled ones, were able to
find poorly paid janitorial or factory jobs, then gradually climb into the
middle class as they gained experience and moved up the wage curve. But the
number of workers progressing upward began to slip in the 1970s, when the
post-World War II productivity boom ran out of steam. Upward mobility
diminished even more in the 1980s as globalization and technology slammed
blue-collar wages.
MANY EXPERTS expected the trend to reverse as productivity rebounded during
the heated economy of the 1990s. Certainly, there were plenty of gains. The
long decline in pay rates turned around as supertight labor markets raised
the wages of almost everyone. College enrollment boomed, too, and home
ownership shot up, extending the American dream to more families. Low
interest rates and higher wages allowed even those on the bottom to benefit.
There was even a slight decline in the ranks of the very poorest families,
as measured by asset wealth -- those with a net worth of less than $5,000 --
according to a study by New York University economics professor Edward N.
Wolff.
But new research suggests that, surprisingly, the best economy in 30 years
did little to get America's vaunted upward mobility back on track. The new
studies, which follow individuals and families over many years, paint a
paradoxical picture: Even as the U.S. economy was bursting with wealth in
the 1990s, minting dot-com millionaires by the thousands, conventional
companies were cutting the middle out of career ladders, leaving fewer
people able to better their economic position over the decade.
During the 1990s, relative mobility -- that is, the share of Americans
changing income quintiles in any direction, up or down -- slipped by two
percentage points, to 62%, according to an analysis of decade-long income
trends through 2001 by Jonathan D. Fisher and David S. Johnson, two
economists at the Bureau of Labor Statistics. While two points may not sound
like much, it's bad news given how much progress might have been made amid
explosive growth. Essentially, says University of Chicago economics
professor and Nobel laureate James J. Heckman, "the big finding in recent
years is that the notion of America being a highly mobile society isn't as
true as it used to be."
In fact, according to a study by two Federal Reserve Bank of Boston
economists that analyzed families' incomes over three decades, the number of
people who stayed stuck in the same income bracket -- be it at the bottom or
at the top -- over the course of a decade actually increased in the 1990s.
So, though the boom lifted pay rates for janitors and clerks by as much as
5% to 10% in the late 1990s, more of them remained janitors or clerks; fewer
worked their way into better-paying positions. Imelda Roman, for one, makes
about $30,000 a year as a counselor at a Milwaukee nonprofit -- barely more
than the $27,000 or so, after inflation adjustments, that the 33-year-old
single mom earned as a school-bus driver more than 10 years ago. Says Roman,
who hopes to return to college to improve her prospects: "It's hard to find
a job with a career ladder these days, and a B.A. would be an edge."
What Roman faces is an economy that is slowly stratifying along class lines.
Today, upward mobility is determined increasingly by a college degree that's
attainable mostly by those whose parents already have money or education.
"It's clear that unless you go to college, you can't achieve a high
trajectory in life. Education is the key to success in America today," says
Aramark Corp. CEO Joseph Neubauer. He gives scholarship money to hundreds of
disadvantaged kids every year through the Horatio Alger Assn., a group of
successful Americans who try to help others make it, too.
THE GAP in advancement shows up clearly in longitudinal studies such as
Wolff's and the Boston Fed's, which track the same people over many years.
These give a better picture of long-term economic mobility than the annual
government surveys of wages and incomes, since even highly educated
employees usually start at the bottom and work their way up the economic
ladder.
For mobility to increase in relative terms, which is the standard way
economists measure it, someone has to move down the pecking order to make
room for another to move up. But the Boston Fed study found less movement in
both directions. Some 40% of families didn't change income brackets over the
decade, vs. 37% in the 1980s and 36% in the 1970s, according to the authors'
analysis of annual longitudinal surveys by the University of Michigan.
The changing dynamic of the U.S. economy clearly has the most impact on
those at the bottom. Some 49% of families who started the 1970s in poverty
were still stuck there at the end of that decade, the Boston Fed study
found. During the 1990s, the figure had jumped to 53%, even after accounting
for two-earner families. A key reason lies with the creation of millions of
jobs that pay less than a poverty-line wage of $8.70 an hour, according to
Low-Wage America, a massive research project involving case studies by 38
academics. Most of the workers, such as nursing assistants or food
preparers, "have no educational credentials beyond a high school diploma,"
the authors found.
Problem is, that all-important sheepskin is out of reach for most students
from low-income families. Although college enrollment has soared for
higher-income students, more children from poor families can only afford to
go to community colleges, which typically don't offer bachelor's degrees.
The number of poor students who get a degree -- fewer than 5% in 2001 -- has
barely budged in 30 years, according to an analysis of Census Bureau data by
Thomas G. Mortenson, who publishes an education newsletter from Oskaloosa,
Iowa.
In turn, the lack of mobility for those who don't or can't get a degree is
putting a lid on the intergenerational progress that has long been a
mainstay of the American experience. Last year, Wichita State University
sociology professor David W. Wright and two colleagues updated a classic
1978 study that looked at how sons fared according to the social and
economic class of their fathers. Defining class by a mix of education,
income, and occupation, they found that sons from the bottom three-quarters
of the socioeconomic scale were less likely to move up in the 1990s than in
the 1960s. Just 10% of sons whose fathers were in the bottom quarter had
made it to the top quarter by 1998, the authors found. By contrast, 23% of
lower-class sons had done so by 1973, according to the earlier study.
Similarly, only 51% of sons whose fathers belonged to the second-highest
quarter equaled or surpassed the economic standing of their parents in the
1990s. In the 1960s, 63% did.
That's the pattern Michael A. McLimans and his family follows. Now 33, with
two young children, the New Holland (Pa.) resident has spent the past decade
working at pizza chains such as Domino's and Pizza Hut (YUM ). He made it to
assistant manager but found that he could earn more, $9 to $12 an hour with
tips, as a delivery driver. He and his wife, a hotel receptionist, pull down
about $40,000 a year -- far from the $60,000 Michael's father, David I.
McLimans, earns as a veteran steelworker. "I save every dime I can so my
kids can go to college, which neither of us can afford to do," says Michael.
INCREASINGLY, the story's the same for immigrants, who have been the most
celebrated symbols of U.S. mobility. But compared with immigrants in the
1960s and '70s, a larger share of newcomers today are high school dropouts,
including hundreds of thousands of poor villagers from Mexico. They
encounter a plentiful job market that pays better than the one they left
behind -- but find fewer paths to a middle-class lifestyle, according to
several recent studies. Over the long term, the spread between immigrant and
native-born incomes is about three times greater today than it was a century
ago, according to Harvard University sociology professor Christopher Jencks.
Says Harvard economics professor George J. Borjas: "If you come here as an
adult, it's very hard to get more education, which is the only way to get
ahead today."
Restoring American mobility is less a question of knowing what to do than of
making it happen. Experts have decried schools' inadequacy for years, but
fixing them is a long, arduous struggle. Similarly, there have been plenty
of warnings about declining college access, but finding funds was difficult
even in eras of large surpluses. One radical approach: that college be
treated the way high school is, as a public good paid for by taxpayers.
Presidential candidate Senator John Edwards (D-N.C.) has proposed making the
first year's tuition free at all community and public colleges for any
student willing to work 10 hours a week. That may never happen, but clearly,
if the U.S. couldn't shake off a creeping rigidity in the best of times, it
will take a conscious change to reverse course now.
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I don't have a URL for this article (I did a "save target as" from a blog). If you come by one, please let me know.
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