The booming 1990s have been gone long enough to begin identifying the lasting improvements that those prosperous years made in our lives -- and the promises that faded.
Personal computers and the Internet spread everywhere, enhancing communication in endless, permanent ways. Corporate productivity rose significantly for the first time since the early 1970s, and some of that enriching gain seems likely to endure in the post-boom years. Wages are another matter; the promise evaporated.
The hope was that income inequality would finally lessen, or at least stop growing. And it did stop for a while. But the brief respite demonstrated how deeply embedded income inequality has become in the last 20 years, suspending its destructive inroads only in an overheated economy.
``What you would expect from the strongest economy in a generation was to see income inequality diminish,'' said Jared Bernstein, a labor economist at the Economic Policy Institute. ``Instead we just held our ground.''
Americans often think of income inequality as pertaining to the really rich -- executives and highfliers in the 99th percentile of the income scale -- pulling rapidly away from the rest of the population. But the income inequality embedded in our system is a more down-home phenomenon.
Rather than millionaires, the men and women at the upper end who figure in many studies of income inequality are those in the 90th percentile, earning US$1,440 a week, on average, today. Their wages, adjusted for inflation, have risen steadily since the early 1980s while the wages of those in the middle (US$646 a week) and at the low end (US$307) have stagnated or lost ground to inflation. The break in this pattern occurred in 1996 and lasted through most of 1999, when the wages of all three groups rose smartly and at the same rate. Then suddenly, in the final months of 1999, the weekly wages of those at the upper end pulled away again.
That is the surprising new finding of Bernstein and his organization. While the Economic Policy Institute is known for its liberal views, its detailed analyses of data from the Bureau of Labor Statistics are accepted as accurate by most economists and policy makers. In his latest study, Bernstein focused on the bedrock labor force: full-time workers at least 25 years old. He counted only their wages, overtime, commissions and tips, not bonuses, profit sharing or stock options: the earnings of ordinary folk, in other words.
While the wage spread between the high end and the middle was US$707 a week in the fall of 1999, it had widened to US$790 in this year's first quarter, adjusted for inflation. The US$83-a-week difference may be a car loan payment or the extra cost of healthier food. That gave the upper end another leg up in living standards, which is what makes income inequality so divisive.
When the wages of all three groups were rising in tandem in the boom years, Bernstein argued that a tight labor market and the strong demand for workers had halted the growth in income inequality. What the nation needed, he said, were policies that kept the unemployment rate at around 4 percent. But the unemployment rate was still falling toward 4 percent in late 1999 when the wages at the upper end separated from the pack and took off.
Hours may have played a role. About that time, overtime hours began to fall, an early warning that the boom was starting to fade. Manufacturing workers in particular collected smaller weekly paychecks. They are mostly men. Income inequality, in fact, is mainly brought on by men; women's wages at the high end, middle and low end have risen in tandem through the 1980s and 1990s.
RSS