By Raymond Lotta
Revolutionary Worker #999, March 21, 1999
The politicians and businessmen brag about it. The mainstream economists wheel out statistics. Clinton repeats it like a mantra. The message? "This is the best economy in 30 years." So good that some of its boosters have called it a "new economy."
A few days after Clinton's State of the Union address, when he reminded us of "how good things are," I spoke with a staff member of Second Harvest, the largest supplier to the country's emergency food centers. "You know," she said, "on paper, a lot of the economic numbers look good, but we're seeing a substantial rise in the demand for emergency food."
She ran down some numbers to me from the U.S. Conference of Mayors. In major cities across the country in 1997, requests for emergency food increased by an average of 16 percent over the previous year.
My inquiries took me to an economist at the Congressional Budget Office. He also shared some numbers with me. In 1994, a year after Clinton took office, those households that made over $200,000 a year (about 1 percent of households) received 14 percent of national income. In 1997 this elite group increased its share of total household income to 20 percent--an astonishingly rapid rise in concentration of wealth at the very top. Some people do have reason to celebrate.
The U.S. economy is indeed growing faster than it did in the early 1990s. America's growth is outstripping that of the other imperialist economies. Official unemployment has come down from 7.3 percent in 1993 to 4.5 percent in 1998. The federal budget balance has gone from a $300 billion deficit to a $70 billion surplus. Inflation is at its lowest level since the early 1960s.
The best of all times? Well, as always, the real question is...for whom, and according to what criteria? The top 20 percent are doing quite well; for the top 5 percent and especially for the top 1 percent, these truly are bountiful times.
But most Americans "don't have it so good." The 1990s have been years of "running to keep from falling behind" for most people.
The State of Working America, 1998-99 documents the trend. Between 1989 and 1997, wages and benefits fell 4.2 percent for all workers. At the end of 1996, and this was after five years of economic recovery, median family income was still below where it stood in 1989. (Median means that half of families had higher incomes and half of families had lower incomes.)
It was not until 1997 that median family income got back to and slightly exceeded its 1989 level. But this slow recovery in income didn't happen because of wage and salary improvements. The main reason that the average married-couple family with children was able to hold its ground has been the longer hours worked by family members--six more full-time weeks per year in 1996 than in 1989. People are working longer for less!
Young families, those headed by someone under the age of 25, have been especially hard-pressed. In 1997, these young families had $5000 less income to spend (in real purchasing power) than such families had in 1967 when they were starting out.
The economy is expanding and more workers are being hired. But jobs are less secure in the 1990s than they were in the 1980s and earlier. Corporate downsizing and layoffs are still the order of the day, even in a brisk economy. And almost 30 percent of workers in 1997 were employed in situations that were not regular full-time jobs (Manpower Inc. has replaced General Motors as the largest private employer in the United States). These conditions have put downward pressures on wages.
Through the 1980s and 1990s, capital has been "restructuring" jobs and labor markets to raise profitability. Job tasks are redefined and expanded; more workers are hired for limited periods of time; large manufacturing companies subcontract an increasing share of production to cheap labor firms. More middle class professionals are forced to continue their workday into the night at home.
New jobs are less likely to offer health and pension benefits--so fewer of us are seeing doctors today than in 1989. The percentage of the labor force in unions fell rapidly in the 1980s and continued to decline in the 1990s--so fewer of us have contract protections. Labor costs have been pushed down by employers and this is an important reason that more people have been hired. It's not some miracle of "job creation."
The bottom 20 percent of the population in income and the bottom 10 percent of the labor force have been hit hard. In 1997 and 1998, real wages rose for low-paid workers. But the hurtful effects of cuts in welfare, food stamps, and other social programs are beginning to be felt more widely. A 1998 survey by the Children's Defense Fund found that in the early stages of "welfare-to-work," only a small fraction of new jobs found by welfare recipients paid above-poverty wages.
In the U.S. economy, there is a large pool of low-wage workers, and this pool will grow larger as more people are thrown off welfare, competing for low-wage jobs. In 1996, nearly a third of all workers were stuck in lower-skilled jobs paying less than $15,000 a year. These jobs offer few prospects for on-the-job training and advancement.
The overall situation facing those on the bottom is creating enormous burdens and insecurities--in terms of people being able to meet basic housing, health, and food needs.
The government points to a drop in the official poverty rate in 1996 and 1997. But the U.S. Census Bureau report on poverty in 1997 shows that the ranks of the very poor (those with incomes below 50 percent of the federal poverty line) increased sharply in those two years. And more children are impoverished today than in 1989--here in the richest country in the world 20 percent of all children and 37 percent of Black and Latino children live in poverty.
We're constantly told that education is the ticket for the disadvantaged. It doesn't quite work that way. Black and Latino women college graduates actually saw their wages decline during the 1992-97 recovery. Meanwhile, young Black and Latino males are being locked up in prison at a terrifying rate.
The headline economic event of the decade has been the soaring stock market. But look again: 60 percent of U.S. households own no stock, and close to 90 percent of the spectacular market gains of the 1990s went to the top 10 percent of households.
This highlights an important trend of the 1990s. Through seven years of economic expansion and Clinton social policy, income inequality has continued to widen. By 1997, the gap between the income of the richest 5 percent of the population and the lower 20 percent was at its highest level since 1947.
Inequality, poverty, and hype. This is the story told in the statistics and commentary that follow. This is capitalism in its turbulence and cruelty.
*****
Despite the growing economy, the number of people without health insurance has been rising sharply. In 1997, 43.4 million had no health coverage. This is 16.1 percent of the population, the highest level of the decade. 22 percent of Black people and 34 percent of Latinos are without health coverage. The working poor make up the largest segment of the uninsured. (See Charts #1 and #2.)
Why is this happening? One, most of the new jobs in the economy are in small businesses that are less likely than big companies to provide health insurance. At the same time, many large-scale employers are cutting back health benefits, both for employees and their dependents. A survey by the Kaiser Foundation showed that in 1985 nearly two-thirds of all businesses with 100 or more employees paid the full cost of a worker's care; in 1995, only one-third did so.
Two, "welfare reform" is eroding health support from Medicaid (the government health insurance program for the poor). Six million people have left the welfare rolls in the last five years. The jobs they typically find do not provide health insurance. Some of these people can still get Medicaid coverage for a year, but then they are dropped. In many states, income limits for Medicaid are set so high that even many poor people do not qualify. For immigrants, new laws have created an intimidating atmosphere that keeps many who might otherwise be eligible for Medicaid from applying.
Three, more and more people simply cannot afford to pay for private health insurance.
The growing lack of health coverage and the rising cost of health care are taking their toll. Medical costs are rising faster than workers' wages. As compared with people who have health insurance, the uninsured are less likely to get check-ups and treatment, less likely get prescriptions filled. Many of the uninsured wait until they become very sick and resort to hospital emergency rooms.
There is evidence that late detection and treatment of diseases like cancer are leading to higher death rates for poor people and Black people. It is a problem linked to declining access to health care.
The number of people locked up in federal, state, and local prisons is close to 1.8 million--an increase of 500,000 since Clinton came to office. (See Chart #3.) The United States has the largest penal system in the world. Nearly 1 of every 150 people in the United States is in prison or jail--a rate of incarceration that ranks close to the top of the world. The lock-up frenzy continues even though crime rates are falling.
The prison population is mostly young and poorly educated. While Black people make up 12 percent of the U.S. population, starting in the 1990s Black people accounted for more than 50 percent of the people being sent to state and federal prisons.
The United States has 1.5 to 2 percent of its potential workforce in jail.
Over the last year the government has been trumpeting the "low rate" of unemployment: 4.5 percent in 1998, down from 7.3 percent in 1993. But this statistic gives only a partial picture of joblessness and misses the problem of underemployment.
To begin with, different groups of people are affected differently by the economy. For instance, the Black unemployment rate in 1997 was 10 percent--a distressingly high level of joblessness and double the overall unemployment rate.
More generally, the official unemployment rate doesn't reveal longer-term unemployment and "underemployment." Not included in the unemployment statistic are those people working part-time but who want to work full-time, people who want to work but who have been discouraged from looking because they fail to find jobs.
If you put these categories together, you get an "underemployment rate" of 8.9 percent in 1997--which is considerably higher than the official unemployment rate of 4.9 percent. For 16- to 25-year-old Black males with a high school degree, their unemployment rate was 23 percent and their underemployment rate was 37 percent. For those without a high school degree, their unemployment rate was 37 percent and their underemployment rate was 51 percent.
Having a job does not mean you keep a job. Layoffs and downsizing have persisted through the "boom economy." Between 1992 and 1995, 15 percent of all workers holding jobs for one year or longer lost those jobs. While many found new jobs, on average the new jobs paid 14 percent less than before. Older workers who lose jobs, including white collar and middle-manager professionals, have a very hard time finding comparable jobs.
With the economy growing, 18 million more people are working today than in 1993. But we have to look more closely at the job situation.
There's a lot of hype about the employment prospects opened up by new "information technology." But jobs in computer-related fields accounted for only 4 percent of the job growth between 1992 and 1996.
Look at Chart #4. It compares the numbers of people laid off from major industries between 1993-98 with the number of people employed in 1995 by the 20 "new titans" of the computer chip and software industry, like Microsoft and Intel. The total employment of these firms was close to 130,000. That compares with 721,000 working for General Motors in the same year. People losing jobs in other industries will not be able to simply upgrade to the high-tech sector. The well-paying high-tech firms are not big employers.
Manufacturing jobs that once paid middle-class wages are increasingly replaced by retail and service jobs which pay low wages. Together, these low-wage industries accounted for 79 percent of all new jobs in 1989-97. In 1997, the Bureau of Labor Statistics forecast the fastest-growing jobs through the year 2006. The profession with the most growth: cashier!
In 1997, 28 percent of the workforce earned poverty-level wages. It's been at that range throughout most of the 1990s, not exactly testimony to a robust economy supposedly "lifting all boats." 35 percent of employed women are earning poverty-level wages or less.
In 1997, the poverty rate (the percent of the population living in poverty) stood at 13.3 percent. To be "in poverty" means not having enough money to meet basic needs. It means living below the so-called "poverty line." Over 35 million people were poor in 1996 and 1997.
With the economy growing, the poverty rate fell from 1993 to 1997. But the poverty rate in 1997 was still higher than it was in 1989 (the peak growth year before the last recession). In other words, the poverty rate is higher than in previous years with a strong economy.
There is another important characteristic of poverty in the 1990s. More and more poor people are living in extreme poverty. (See Chart #5.) In 1997, 14.6 million people had incomes of less than half the poverty level. This was an increase of over 500,000 from 1995. 40 percent of all poor people in 1997 were in this "deeply poor" and often desperate situation.
In California, nearly 30 percent of children under 6 were living in poverty in 1996. More than 1 in 10 children in the U.S. were living in extreme poverty.
The robust economy of the 1990s has not been bringing about a significant reduction in poverty. Why? Low-wage workers have a hard time working their way out of poverty. Sharp cutbacks in government assistance to the poor are creating a more desperate situation for many of the poor. And while the economy has been growing, income and wealth continue to be concentrated at the top levels.
In the midst of economic growth, hunger and homelessness remain serious problems. Some of the people who suffer from hunger and homelessness have been poor for a long time. But homeless shelters and soup kitchens are also serving working poor whose jobs don't pay enough to put food on the table or a roof over people's heads.
Recently published national studies show 4 million or more children and many millions of adults regularly don't get enough to eat. Based on 1995 data, the United States Department of Agriculture estimated that 11 million Americans living in 4 million households are experiencing "moderate or severe hunger"--this means, for example, that adults are regularly forced to seriously cut back on what they eat so their children don't starve. An additional 24 million people live in 8 million households where people regularly skip meals or leave the table hungry because of lack of money. In all, about 35 million people in the United States experience varying degrees of hunger.
A study carried out in March 1998 by Physicians for Human Rights among Latino and Asian legal immigrants in California, Texas, and Illinois found that more than one in three of the immigrant households suffered from "moderate or severe hunger."
"Welfare reform" is creating new problems. A study released in Wisconsin, a state "pioneering" welfare reform, found that people who moved off the welfare rolls into jobs were 50 percent more likely to say they did not have enough money for food than people still on welfare.
Between 1994 and 1998, the number of people on food stamps dropped steeply, from 28 million to fewer than 19 million. Some people are no longer eligible. A significant number of people who are eligible for stamps aren't getting them because of the hostile climate that has been created around such assistance.
This is a major reason that emergency food providers in major cities report continued long lines and requests for food, particularly among working families and households with children. About 600,000 people in New York City now rely on emergency food. According to Second Harvest, one in 10 Americans, or an estimated 26 million people, get all or part of their food from charitable food agencies.
Homelessness is hard to measure--there is little interest by government agencies to develop detailed figures. The two trends most responsible for the rise in homelessness over the last 15 years are the shortage of affordable rental housing and the increase in poverty.
Earlier this year, the National Law Center on Homelessness and Poverty estimated that 700,000 people are homeless on any given night, and up to 2 million people are homeless at some time during any one year. A 1995 study estimated that 12 million adults in the U.S. have been homeless at some point in their lives.
In 1998, the U.S. Conference of Mayors found that applicants for public housing in 30 survey cities had to wait an average of 24 months from the time they applied until the time they received a space.
The lack of affordable health care contributes to homelessness. As the National Coalition For the Homeless put it: "For families and individuals struggling to pay rent, a serious illness or disability can start a downward spiral into homelessness, beginning with a lost job, depletion of savings to pay for care, and eventual eviction."
Inequality has increased sharply over the last 20 years. Chart #6 shows the widening gap between the upper income and lower income groups, greater now than at any time since 1947. It has consistently increased over the Reagan, Bush and, now, Clinton years.
From 1979 through 1997, the income of the bottom 20 percent of families fell 7.6 percent, while the income of the top 20 percent was growing substantially.
What this has meant in terms of the distribution of income is this:
In 1979, the lowest fifth of families received 5.4 percent of all family income, but in 1997, their share declined to 4.2 percent. In 1979, the top fifth of families received 41.4 percent of all income, but in 1997 received 47.2 percent of all family income. The wealthiest fifth now averages 11 times more income per family than the poorest fifth. The middle 60 percent saw their share of income fall from 53.2 percent in 1979 to 48.6 percent in 1997. In the 1990s, the income gains were greatest for the very rich: the top 1 percent of families saw their incomes grow by 10 percent.
So the rich have gotten richer, the poor have gotten poorer, the middle has been squeezed.
But this pattern of income inequality doesn't tell the whole story. It doesn't include bank accounts, holdings of stocks, bonds, and other forms of wealth. The distribution of wealth in America is much more unequal than the distribution of income. In 1995, the wealthiest 10 percent of households controlled 72 percent of total wealth. The top 1 percent alone controlled nearly 40 percent of total wealth! The bottom 40 percent of households had only two-tenths of a percent of wealth.
What we have been looking at here has been unequal distribution of income. This inequality stems from unequal ownership of the productive resources of society. A tiny minority of the population, the capitalist-imperialist class, controls the means of production and exploits an international class of laborers. The economy and society are structured to serve the interests of the capitalist class. Inequality and poverty are built into capitalism.
Tremendous wealth is being created over this period of economic expansion in the U.S. But true to the nature of capitalism, this wealth pools up in the upper reaches of society.
America never was and never will be an egalitarian society...until there is socialist revolution. In fact, it is a society which continues to grow only more unequal.
Selected References
Lawrence Mishel, Jared Bernstein, John Schmitt, The State of Working America, 1998-99.
Edward Wolff, Journal of Economic Perspectives, Summer 1998.
Business Week, "Sharing Prosperity," September 1, 1997.
Edward Luttwack, Turbo-Capitalism.
New York Times, "Uninsured in U.S. Span Many Groups," February 27, 1999.
Food Research and Action Center, Recent Studies on Hunger in the United States.
National Coalition for the Homeless, How Many People Experience Homelessness?
National Center for Children in Poverty, Young Children in Poverty.
New York Times, "Welfare Policies Alter the Face of Food Lines," February 26, 1999.
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