Economy Keeps Improving, Why Aren’t Clinton’s Polls?

Prosperity isn’t what it used to be. Presidents used to get a boost in the polls when the economy did well. But it isn’t working anymore. Even as the economy barrels into the third year of an expansion, President Bill Clinton’s popularity lags. What’s wrong?

It probably isn’t the President. It’s something different--and more alarming.

The U.S. economy has undergone dramatic changes since conventional political wisdom started linking gross domestic-product growth and poll results. The effect of these changes has been to unhook the connection between the national economy, as a whole, and the welfare of individual families. The trouble is that rising GDP no longer means a higher standard of living for the majority of American households.

By many measures, American families are worse off--even though the economy, as a whole, continues to grow. Take one of the broadest measures of well-being--the real, inflation-adjusted pay of non-supervisory employees in private industry. From 1947 to 1973 these hourly wages almost doubled--from $6.75 to $12.06 in 25 years.

But real wages started to fall in 1973, and, by 1993, they had fallen to $10.83. During recessionary periods, real wages fell quickly--at more than 1% per year during the two recessions of 1979-82 and 1989-91. But they also fell during expansions--more slowly, but they still fell by about one-half of 1% per year, and, as a recent U.S. Department of Commerce report notes, from 1973 to 1993, real wages fell at an annual compound rate of .7% per year.

This trend continues. In the three months up to June, 1994, the purchasing power of U.S. workers fell .7%.

Expansion or no expansion, most people’s paychecks aren’t rising as fast as their bills--and they know it. As they cope with a generation of falling wages, most American families have adopted a simple strategy to cope with rising expenses and stagnant or falling incomes: They work more.

Specifically, women work more. Only one type of family saw its average incomes rise in the expansionary ‘80s: married couples with working wives. It didn’t come from the men--80% of husbands saw their incomes fall during this period. But with Ralph’s and Norton’s incomes dropping, Alice and Trixie went to work. American wives in two-wage-earner families increased their hours of work by an average of 32.3% between 1979 and 1989.

This isn’t about wealthy women finding new job satisfaction in rewarding careers; it is about women taking up difficult and poorly paid jobs to help feed their families. The poorest fifth of wives--the Alices and the Trixies--worked the hardest, adding, on average, 44.7% to their work weeks.

Adding insult to injury, benefits are falling along with real wages. In 1979, the average American manufacturing worker had 23.1 paid days off every year; 10 years later, after the longest economic expansion in U.S. history, workers only got, on average, 20.8 days of paid time off. Pension and health-benefit coverage also deteriorated during the much-praised expansion. Seven percent fewer private-sector workers were getting either pensions or health coverage at the end of the decade than at the beginning.

Economic expansions create new jobs--but higher employment at lower wages isn’t most people’s idea of progress. Unfortunately, job creation in the last two American expansions has been skewed toward low-wage, low- or no-benefit jobs, while high-wage jobs, especially in manufacturing, continue to disappear. Even the much ballyhooed rise of small businesses as large corporations downsize brings wages and benefits down--small businesses tend to pay lower wages and fewer benefits than large ones.

A recent report--”The State of Working America” by Lawrence R. Mishel and Jared Bernstein of the Economic Policy Institute--makes the statistical case for something most American families know from their daily experience: Expansion or no expansion, life isn’t getting better for most households.

This is both good news and bad news for the Clinton Administration. It’s good news because it means Clinton’s poor popularity during a business expansion isn’t a unique sign of his personal political weakness. Americans are still voting their wallets--it’s just that rising GDP no longer means fatter paychecks for the average family.

But that is also the bad news. It’s no longer enough to deliver a business expansion to win the gratitude of American voters. Real wages and benefits have to rise--or at least they have to stop falling. That, unfortunately, is harder to pull off than a simple cyclical expansion of economic activity. With technology continuing to eliminate some jobs, and low-wage competition from foreign countries eliminating others, it isn’t easy to see how this Administration, or any other, can improve economic conditions for the average American family any time soon.

The collapse of the relationship between economic growth and increasing prosperity for the average family may be the most important political event of the last generation in American life. Many of the political trends that worry and perplex the punditocracy grow out of this collapse. Declining voter participation, rising cynicism about virtually every national institution and the weakness of the two-party system are all related to the failure of the U.S. economy--and, therefore, the American political process--to improve the living standards of the American people.

At the moment, neither party seems to know what to do. Since the fall in wages began in 1973, Republicans have had 16 years in the White House and the Democrats have had five; Richard M. Nixon, Gerald R. Ford, Jimmy Carter, Ronald Reagan, George Bush and now Clinton have all failed to deal with this problem.

Pundits and economists, who generally belong to the most affluent American families with the highest income growth in the last 20 years, tend to think the solution is for the American people to lower their expectations, and accept a future of harder work, longer hours, shorter vacations, less job security and fewer benefits as the economy “adjusts.”

Maybe. But few politicians want to take up this idea. And the conflict between the expectations of the American people and the performance of the U.S. economy is about to get worse. The ability of families to maintain their incomes by increasing their hours of work is reaching a limit--when wives are already working full time, what more can families do?

As more families reach the limits of their ability to maintain their incomes, voter frustration will rise. The dissatisfaction with politicians of both parties will become more intense; movements like Ross Perot’s--however wrongheaded--will grow in strength and the fragile U.S. political consensus will continue to disintegrate. Incumbents will be less and less popular, institutions less and less trusted. Where this ends, nobody knows--and nobody sensible wants to find out.

Here’s something for politicians and business leaders of both parties to think about on this Labor Day weekend: If the U.S. economy stops working for the majority of the American people, the majority of the American people are going to lose faith in the U.S. system. That won’t be good for business, it won’t be good for politics and it won’t be good for the American people. Unfortunately, we seem to be headed down this road. Does anyone have any suggestions?