It’s a Hot Economy, but Not for Janitors, Others

The American economy is so hot that Alan Greenspan, chairman of the Federal Reserve Board, is worried it’s overheating. Dot-com billionaires are blooming like spring crocuses. The average pay of chief executives of major companies rose 18% in 1999 to $12 million. Across the managerial, professional and executive ranks of the United States, pay (including bonuses, stock options and perks) is skyrocketing. Afraid of losing their talent to the dot-coms, big law firms just hiked the pay for first-year associates to $120,000.

Greenspan worries that all this prosperity is causing consumers to buy too much--more than the economy can produce--which means inflation is just around the corner. That’s why he and his pals at the Fed have hiked interest rates five times since last June in an attempt to cool things down and head off inflation.

But wait. What about Los Angeles’ striking janitors? What about all workers at the lower end of the economy? Raising interest rates hurts people at the bottom, causing them to pay more for first mortgages and car loans, and maybe even costing them their jobs when the economy sags.

Unionized janitors in Los Angeles earn $6.80 to $7.90 per hour--less than $16,000 a year. Cleaning companies say they can’t afford to pay the janitors a dollar more per hour. Yet the janitors have been watching the rents soar in the office buildings they take care of, where they mop the floors, wash the tiles, clean the sinks and toilets and empty waste baskets--offices in which executives and professionals are pulling in larger and larger multiples of their take. Adjusted for inflation, janitors are earning less now than they did 15 years ago.

Janitors are not the only ones working harder for less. More than 2 million Americans work in nursing homes, bathing and feeding frail elderly people, cleaning their bedsores, lifting them out of bed and into wheelchairs and changing their diapers. They earn, on average, about the same as janitors. About 700,000 people work as home health care aides, attending to the elderly, sick or disabled at home. Their pay averages between $8 to $10 an hour, less than $20,000 a year. Another 1.3 million Americans work in hospitals as orderlies and attendants, at about the same rate.

The list goes on. An estimated 2.3 million Americans are paid to care for young children in child-care centers or as nannies at a median wage of $6.60 an hour, usually without benefits. This is less than what funeral attendants earn ($7.30 an hour) or pest controllers ($10.60 an hour). And 700,000 Americans are social workers or human service workers who attend to individuals and families with severe problems--alcohol and drug abuse, domestic violence and mental illness--at an average pay of between $8 and $15 an hour.

Why are top lawyers, executives, financiers and dot-com impresarios earning so much more than ever before, while the nation’s caretakers are earning less? Economists will tell you that people earn what they’re “worth” in the market. It’s just supply and demand. Here’s the irony: The demand for lawyers, executives, financiers and dot-com impresarios can almost never be filled. The more you have of them, the more you need of them. Because of intense competition, they virtually create their own demand.

Meanwhile, the people who take care of buildings or people are in abundant supply, and the demand for them is not self-generating. The president of the Los Angeles Building Owners and Managers Assn. explained last week that janitors aren’t actual employees; they’re more like commodities. They’re a “purchased service, like so many others,” he said. If unionized janitors charge too much for their services, he said, then building owners will give the work to non-unionized janitors who charge less.

The problem is, the economy doesn’t always reward people according to what they’re worth to society. Janitors, nurses aides, child-care workers and others like them are doing the sort of work that keeps the rest of us going--taking care of the things that the rest of us don’t have time for or just don’t want to do. They haven’t participated in the economic boom. They didn’t get raises in the roaring ‘90s. Most of them don’t own any shares of stock, so they don’t ride the booming market. Many of them rent their homes, so they don’t get the benefit of the big rise in home prices over the last decade.

When Greenspan worries that Americans are doing too well and spending too much, he’s worrying about the wrong people. The big spenders are at or near the top, where most of the money has gone. This year, the richest 2.7 million Americans, making up the top 1%, will have as many after-tax dollars to spend as the bottom 100 million put together.

If Greenspan wants to put a damper on excessive spending brought on by too much wealth, he ought to set his sights on where the wealth is accumulating. He should urge Congress to make the income tax code more progressive, to increase capital-gains taxes and to pass a wealth tax on households whose net worth exceeds a million dollars.