Time and again both Republicans and Democrats will answer that, yes, wages have been stagnant or even down--not for just five years or so, but for thirty, not counting the late 1990s. At our center at the New School, in fact, we find median male wages--the male worker right in the middle of the pack--down from levels reached after inflation in the 1970s and 1980s, even if they went to college.
But, no matter, Americans own so many things, we are told. Cars, air conditioners, DVD players, sneakers. Their houses are bigger, their cars are faster, their airline tickets are cheaper, their mortgage rates are lower.
This all came up again at a conference we held at The New School last Friday. Someone reminded us, even as he documented how poorly wages have done for most workers, of all the stuff we Americans now own. And also, he restated, the old saw that when we measure inequality according to what people consume, inequality is not as bad as when we measure what they earn. There may be an important discrepancy. Which numbers are right?
Several quick and angry points here:
1. People can indeed afford many items that have fallen in price or not risen very quickly at all. That's no surprise, nor anything to write home about. These include some clothes and food products, and most notably electronics products and airline tickets. They also have more variety to choose from in, say, entertainment products, not to mention beer, cookies and T-shirts.
Here's what they cannot afford (that is to say, what is seriously straining budgets): healthcare, drugs, pre-K education and good childcare so the spouse can work, public transit (up in price very fast over thirty years), expensive houses in neighborhoods with really good school districts.
2. The result is 46 million without health insurance, an unequal distribution of health benefits that are provided, and disappointing health outcomes regarding longevity, infant mortality and results from a variety of procedures, given the nation spends far more per person than any other rich nation in the world. A highly unequal start for children of those who don't make a pretty good salary; a median salary doesn't cut it, anymore. It means, among other things, highly unequal K-12 education, people commuting farther so they can afford a decent house, and pinched family budgets to buy into a good public school district for the kids.
3. By the way, not everyone has a PC. The spread of TV in the 1950s was much faster and more universal than the PC in the 1990s and 2000s, even though the price of TVs was much higher, discounted for inflation. Moreover, many and probably most of these new products people rave about are unequally distributed--like SUVs, European vacations, central air conditioning, big houses. Oh, yes, and on that frequent claim about how big houses are today. The only house size that's really up is for new construction, which comprises 2 percent of existing housing. By contrast, the typical house is up in size 120 to 150 square feet or so since the early 1980s-- say, a room 12 by 12. Try to throw a party in that.
4. People had to borrow like crazy to buy those things they do own. They borrowed against their houses and their credit cards. But what happens next if wages continue to stagnate or rise at a tortoise pace? House prices, even if they don't collapse, are not going to go up the way they once did, so people won't be able to keep raising their debt levels at the old pace. We have been living on borrowed money--but more important, borrowed time.
Republicans I understand, but what's most bothersome is when Democrats won't face these facts. People are so indebted they may have a lot of trouble dealing with the next recession. Sup-prime borrowers are already in trouble. And such financial devastation hits Americans unequally. Those down the scale are first to be sent overboard.
Cheap new goods do not make up for it. Equalizing consumption by enabling people to borrow their way into the middle class has serious limits. Let's stick with men. If they had earned one percentage point more a year, the way they used to, they and their families would today have ten thousand dollar or more a year to spend on education and healthcare and a mortgage in the expensive school district. That's the best medicine for Americans.
So, what do we do? First, promote a full employment, high wage economy. The obsession with keeping inflation at 2 percent or lower has resulted in dampening federal policies. We can allow inflation to climb a bit if it means higher wages.
We have to abandon the fear of big deficits when government spending is addressing our deepest needs, in particular public investment in childcare, pre-K, college, transportation infrastructure, energy self-sufficiency and the basics of a fair society. These will revitalize GDP themselves, and may well pay off more than they cost.
We've got to refresh our commitment to civil rights and the removal of prejudice in credit and labor markets.
We have to remove healthcare and pensions security from the job, and, arguably most important, profoundly reform and universalize the delivery of healthcare as well.
These orders are not as tall as they seem. They are doable. Americans probably long for such a policy.