Advertisement

COLUMN ONE : It Just <i> Seems</i> Like We’re Worse Off : Many Americans fear their standard of living has eroded. But for most, compared to two decades ago, buying power has grown, the environment is safer, and homes are more comfortable.

TIMES STAFF WRITER

With two cars and a tidy home, Bruno Trenkler is a fairly average guy with a typical lament about the American standard of living.

“Never before have I earned so much money, and never has it seemed to cover so little,” says the 37-year-old engineer, who lives with his wife and three children in this well-manicured Philadelphia suburb.

It’s a familiar litany: Workers toiling harder for less. Paychecks never quite large enough to cover health care, schooling, housing, clothing. Living standards slipping inexorably backward.

But for Trenkler and the majority of Americans, there’s one piece of good news about this disheartening assessment: It’s not really true.

Advertisement

In fact, the average household is significantly better off than it was, say, 20 years ago--and not just because more wives are working outside the home.

Many Americans could be forgiven for thinking otherwise. As they peer out at a world of corporate downsizing, unpredictable layoffs, mounting foreign competition and rising health costs, they naturally come to the belief that their generation is losing ground.

For Americans of most income levels, however, the gains of the past two decades are thin soup only in comparison to the huge leap of the 25 years after World War II. Thanks to gradual but significant earnings gains and a steady accretion of technological advances over the last 20 years, the typical American has not only held onto the earlier gains, but has acquired more buying power and is surrounded by a material environment that is more comfortable.

Trenkler’s case illustrates the point when he is compared to David Thomas, 49, who held roughly the same job at the same defense plant 20 years ago.

Advertisement

Even after adjusting for inflation, Trenkler’s $60,000 salary outdoes the $16,500 Smith was paid.

And although Trenkler feels like anything but a king, his 2,100-square-foot home is spacious next to the 1,400-square-foot, single-story ranch house Smith could afford 20 years ago. Trenkler’s cars are not new--but they are safer, cleaner and carry more convenience features than Smith’s.

And while Trenkler pays about $500 a year toward his health insurance (Smith’s were fully company-paid), the care his family gets is substantially better, thanks to the medical advances of the past two decades. One sign: Trenkler’s children’s life expectancy is four years longer than it would have been two decades ago.

All this flies in the face of today’s political creed.

Advertisement

President Clinton built his 1992 campaign around an assertion that average Americans have been falling behind since 1973--a view that he and his lieutenants have repeated countless times in their effort to build political backing for more active federal policies.

“Middle-class people are bringing home a smaller paycheck to pay more for health care and housing and education,” Clinton declared in 1991 as he formally launched his candidacy.

For people at the lower range of the middle class, Clinton is indisputably right. The fast-changing economy of the 1990s has opened a growing gap between the nation’s poorer and better-off citizens.

And for Americans of all incomes, their collective sense of security has been shaken by years of social and economic change. The erosion of the family, the crumbling of faith in schools, government and other institutions, the rising concern about crime: All these are part of it.

Advertisement

So, too, is the effect of a turbulent new economy in which the pace of capitalism’s destruction has quickened along with the rate of its creativity. Many higher-paying, lower-skilled jobs have disappeared, and formerly reliable middle-level positions have been thrown in jeopardy as some of the most familiar corporate names have vanished forever.

Compounding these tensions is the fact that the huge baby boom generation--which dominates demographic trends and popular perceptions--is well into its child-rearing years, when financial burdens are greatest.

“All these things feed into people’s sense that they’re slipping behind,” says W. Michael Cox, an economist with the Federal Reserve Bank of Dallas. “But that perception doesn’t match up with the reality.” For most people, he says, the machinery of the economy has actually worked well.

*

Advertisement

Many of the improvements have been hard to discern amid the thunderous economic events of recent years, the most disturbing of which was the slowdown in productivity growth that began in 1973 after a tremendous spurt during the glory days of America’s postwar economic dominance.

The cause is still debated: Experts have blamed the 1973 Arab oil boycott, inept corporate management, ham-handed government, the declining quality of education and a petering out of the benefits of World War II-era inventions.

Whatever the cause, productivity was suddenly growing by about 1% a year rather than the 2% to 2.5% that had prevailed for so long. And because it is growth in productivity that ultimately makes people richer--only if workers produce more are there more goods to go around--living standards began growing more slowly.

The size of the slowdown is a matter of hot dispute. One group of analysts has seized on median family income to paint a grim picture of the past 20 years.

Advertisement

Measured in inflation-adjusted 1993 dollars, median family income reached nearly $37,000 in 1973 and has bumped along slightly above or below that since, resting in 1993 at almost exactly its 1973 level.

But that statistic misses the reduction in family size since the mid-1960s. Discretionary income--what’s left after taxes and the necessities of life--is up by nearly 50% on a per-capita basis.

Median family income also misses non-cash income, which has grown substantially in the form of health insurance, pensions and other fringe benefits. Although some benefit packages have recently been pared back, most remain more generous than they were two decades ago--with such goodies as additional vacation days and paid maternity leave. Fringes are worth 42% of wages, says Federal Reserve economist Cox, compared to 29% in 1970.

Much of the increase in health care benefits merely compensates for inflation. But some reflects real advances in medicine.

Advertisement

Americans “are getting access to some very different care than they had 20 years ago,” says University of Maryland economist Martin N. Baily. “What would people do if they were given a choice of taking care at the current price, or paying less and getting 20-year-old technology? I’m pretty sure they would accept (today’s) terms.”

Many economists believe the widely quoted median family income figures also are overly glum because they do not account for such factors as the growth of female-headed families, people who live alone and households with no two members related by blood or marriage.

One way to purge those factors is by looking at after-tax income per person, widely considered the economist’s best measure of living standards. Frank Levy, an urban studies professor at the Massachusetts Institute of Technology, says that by that measure, the average American had 46% more after-tax income in 1990 than in 1970, even after adjusting for inflation.

Economic expansion is no longer the “great rising tide” of which President John F. Kennedy spoke, Levy says. Yet even with two oil shocks, a dizzy inflationary spurt and three recessions, he concludes that “the proportion of high-income families grew faster than the proportion of low-income families, suggesting that more people gained than lost over two decades.”

Advertisement

Beyond the gains that economists can measure, many experts point to a wealth of advances in the American standard of living that don’t show up in statistics.

Among the most obvious are the new electronic gadgets: videocassette recorders, cable TV, computers and car phones.

Economist Cox uses the example of automobile tires, which cost about $70 each on average, up from about $13 in the mid-1930s. The government would calculate that as an increase of 1.5% a year, overlooking the fact that today’s steel-belted radials last 10 times as long as the four-ply, cotton-belted tires and are far safer.

Then there are improvements so gradual that they are easily overlooked. Consider air travel.

Advertisement

Americans complain--not without reason--about overcrowded planes and delays. The cause is that a huge share of the public is traveling routinely on a system that carries more passengers on more flights at a declining cost.

In the decade since deregulation, the number of flights has risen by 50%. And over two decades, ticket prices have fallen by about a third. Nearly two-thirds of Americans earning less than $20,000 a year have flown on a plane.

From Neiman Marcus to Wal Mart, the retail industry’s shift to discount stores has delivered new benefits to all classes. “If you’re poor, you can get a whole range of very low-cost basics,” Baily says.

A common lament of younger Americans is that single-family homes moved out of their reach with the inflationary surge of the late 1970s and early 1980s. And indeed, the homeownership rate in one age category--between 30 and 34--has fallen by about 10 percentage points since 1974.

Advertisement

But altogether, 65% of Americans own their own homes, about the same share as in 1970. And while changing social patterns have brought down the number of people in an average household, the median size of a new home has grown: 1,945 square feet in 1993, up from 1,525 in 1973.

The typical new home has 2 1/2 bathrooms, up from about 1 1/2, and three bedrooms instead of two. Bigger kitchens, central air conditioning, even fireplaces and garages--all have become standard.

Trenkler says he feels the shock of rising prices at the auto showroom. “Even the basic, stripped-down car costs so much more,” he says, “if you can even get one.”

In fact, if you could get a stripped-down car--without pollution controls and safety features--that was comparable to one made 20 years ago, it would be about 15% cheaper when inflation is considered. The government-required environmental and safety features add about 15% to the price, bringing it about to where it was two decades ago.

Advertisement

Most Americans probably feel that those added features are worth the price. It is harder, as Trenkler says, to find a stripped-down car because, as the auto makers have discovered, many Americans will pay for extras like power windows and fancy sound systems.

It has become the common wisdom that typical Americans are struggling so hard to hang onto a threatened standard of living that they have no time to enjoy the fruits of their effort. Millions of women have gone to work outside the home; many other Americans are working longer and harder.

Women who have gone to work have lost leisure. There are about 11 million more of them than in 1970, and they work on average about 13 hours more a week than they did before, when office work and chores are included.

Yet the new working women account for only 11% of the work force. For most of the remainder, the opposite trend is true: People are joining the work force later in life, retiring earlier and working shorter workweeks.

Advertisement

The typical worker, says economist Cox, spends less than one-third of all waking hours--taking into account weekends and vacations--working, either at home or on the job. Since 1973, he says, workers on average have added five years of waking leisure to their lifetimes, and only three years of that is the result of earlier retirement and longer life expectancies.

Another reason is that Americans are hiring more people to handle chores and eating more meals in restaurants. Americans spent 43% of their food budget in restaurants in 1993, Cox says, up from 33% in 1972.

Does this mean Americans are spending their savings to free up leisure time? Their savings rate has indeed declined. But largely because of the increased value of real estate, household net worth actually doubled even after inflation between 1970 and 1990, to about $49,000.

Americans are reaping the benefits of huge investments in safety, from air travel to consumer products, that don’t show up in standard measurements of living standards. As a result, accidental deaths are declining steadily. In 1991, according to Cox, 88,000 Americans died in accidents, the lowest number since 1924, when the population was less than half of today’s.

Advertisement

Likewise, the country has put about $2 trillion into environmental efforts in the last 20 years, says Bob Kahn, an economist at the American Enterprise Institute in Washington. By most measures, air and water quality have improved.

*

All this is not to say that the U.S. economy has no losers. Over two decades, large numbers have lost ground--including people with high-school-level training and the growing group of families headed by single mothers.

The case of two female Milwaukee janitors--one working now and another one who held the same job 20 years earlier--offers a window on their plight.

Advertisement

With only intermittent help from her husband, Bernice Wrencher, 63, was able to raise nine children on the $11,440 a year she was paid in 1974 for scrubbing out a downtown bank building.

“It wasn’t easy,” she says. Yet she was able to rent a four-bedroom frame house for $350 a month and feed and clothe her children. Under her union contract, Wrencher got 2 1/2 times the minimum wage, provided that her employer paid 85% of her health care costs.

Peggy Thomas, 38, holds a comparable job today. But the pay, which would have had to grow to about $34,200 to keep up with inflation, has barely reached $12,000--only a hair above the poverty line for a single mother with two children.

The two decades have clearly dealt punishing setbacks to many of the American workers who formerly held relatively comfortable semi-skilled and unskilled jobs.

Advertisement

Some economists, noting that average hourly wages have fallen during the past decade, suggest that this is the most important economic trend today. Most Americans’ earnings “start out lower and gain ground more slowly as they progress,” says Lawrence Michel, economist with the labor-supported Economic Policy Institute.

But these statistics are misleading, other economists argue. Average hourly wages do not include the fringe benefits that have accounted for much of the past two decades’ increase in compensation.

That the growth of average incomes slowed sharply after 1973 is beyond dispute. Looking a decade or two into the future, some economists expect that slowdown to turn into an actual decline.

More cautious economists, and they are numerous, maintain that the nation is not far enough along into the economic cycle to make any judgment with confidence.

Advertisement

And those at the optimistic end of the spectrum argue that productivity is about to bust out of 20 years of stagnation, powering economic growth and personal earnings for years. Companies, having cast off surplus workers and put the computer to work, are poised for brisk advances.

Even Federal Reserve Chairman Alan Greenspan has set aside his fabled caution.

“This is looking to me as good as I’ve seen an economy evolving in a balanced form in a very long period,” Greenspan told Congress last May. The economy’s advance, he added, “could go on for quite a long period.”

Even if the optimists’ hopes for the economy do not materialize, that doesn’t change the economic plot line since 1973. The point, says Baily, is not to overlook the slower but real progress of two decades amid a justified concern about the difficulties of some Americans.

Advertisement

“Over a long period and overall,” Baily says, “the economy has been functioning pretty well.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Most are Wealthier, Healthier

After huge gains in all income brackets in the decade before 1973, incomes for families toward the bottom of the income spectrum have typically lost ground since then. Families at the middle and upper reaches of the spectrum have gained.

Advertisement

Poorest 25% Median Richest 25% 1963-73 38% 38% 38% 1973-92 -7% 2% 10%

Note: changes in total income--fringe benefits as well as cash--between 1963 and 1973 and between 1973 and 1992 after adjustment for inflation

Slowing but not Stopping

The growth of average after-tax income of Americans has slowed since 1973 but has still grown significantly. Much--but not all--of the benefits have gone to those in the upper income brackets.

Advertisement

Average disposable income 1963: $7,718 1993: $14,329 (Figures are for cash income only and are in constant 1987 dollars.)

Life in America, Then and Now

A barometer on many of the factors that determine quality of life:

1970 1990 Average new home size (square feet) 1,500 2,080 Households with two or more vehicles 29% 54% Median household net worth (inflation-adjusted) $24,200 $48,900 Heart transplants 10 2,125 Average annual hours worked 1,722 1,562 Average daily time doing household chores (hours) 3.9 3.5 Average work time to pay for gasoline 49 31 for 100-mile trip (minutes) Days of paid vacations and holidays 15.5 22.5 People retired from work (millions) 13.3 25.3 Percentage of women who are in the work force 31.5% 56.6% Recreational golfers (millions) 11.2 27.8 Attendance at symphonies and orchestras (millions) 12.7 43.6 Americans finishing high school 51.9% 77.7% Americans finishing four years of college 13.5% 24.4% Life expectancy at birth (years) 70.8 75.4 Death rate by natural causes (per 100,000) 714 520

Advertisement

Sources: W. Michael Cox, Federal Reserve Bank of Dallas; Census Bureau, Lynn A. Karoly, Rand Corp.


Advertisement
Advertisement