BOOK REVIEW
THE STATE OF WORKING AMERICA The State of Working America By Lawrence Mishel and David M. Frankel Economic Policy Institute Armonk, NY: M.E. Sharpe, Inc.,1991 315 pp., $10.00 Reviewed by Holley Knaus When Ronald Reagan campaigned for the presidency in 1980, he promised a supply-side revolution,in which wealth would trickle down from rich to poor, with benefits for all sectors of the population. To a large extent, Reagan was able to engineer his revolution. Now, a decade later, enough time has passed to evaluate his efforts. In analyzing a variety of economic and employment data, The State of Working America, a report prepared by the Economic Policy Institute (EPI), arrives at a clear assessment: the economic policies of the Reagan and Bush years--tax cuts for the wealthy, deregulation, unregulated import competition--failed all but the very rich. Economic inequality has risen in the United States, with a majority of working people facing a decline in the quality of their lives. In the preface to the report, EPI President Jeff Faux writes that the hardships resulting from Reagan's policies are beginning to be recognized. "The decline in real wages and the accompanying increase in inequality have finally worked their way into the nation's consciousness. We are becoming aware that the experiment called Reaganomics failed in its promise to bring long-term prosperity to the average American." By tracing what has happened to taxes, wages, wealth, poverty and unemployment over the last decade, authors Lawrence Mishel and David Frankel show in quantitative detail what the failure of this experiment has actually meant to the typical working U.S. family. Mishel and Frankel offer a brief introductory analysis of income and wage trends during the 1980s, and of the Reagan and Bush policies which gave rise to these trends. The real purpose of the book, however, is to use economic statistics to demonstrate the results of these policies. And what do the numbers show? A fall in real wages, a slower growth in median family income than in any prior post-war business cycle, worsened after-tax income distribution with large tax cuts going to the richest 1 percent of the nation, wealth concentrated among a very few while the poverty rate rose, rising underemployment, and increasingly limited access to homes, education and health care. Underlying the fall in real wages were a number of interrelated factors: slow productivity growth; an employment shift from high-paying to low paying industries; shrinking union membership; and the transport of manufacturing to countries where labor is cheap. Many of the statistical trends identified in the report are staggering. Slow income growth in the 1980s resulted in a drop in income for the lowest 40 percent of income earners in the United States. In 1987, a male high school graduate with one to five years work experience was earning 18 percent less than his counterpart in 1979. Young families--almost entirely dependent on labor income and less likely to find or keep jobs in the shrinking unionized industries--now have $2,436 less income in real dollars to spend than their 1967 counterparts had. Changes in federal tax laws since 1977 have shifted the cost of government to the bottom 95 percent of taxpayers, who are paying for tax breaks for the richest 1 percent. Movement toward higher payroll taxes, a less progressive personal income tax and lower corporate taxes between 1977 and 1990 combined to provide the top 1 percent of families with an average tax cut of $45,565 in 1990. Faux sharply criticizes this trend, writing, "For much of our modern history, a function of government has been to counterbalance the natural tendency of the private market to generate inequality. But beginning in the late 1970s, the federal government reinforced inequality by shifting the tax burden downward." Inequality has also risen as state and local taxes, which tend to be regressive, have risen relative to federal taxes. The book is valuable for its exploration not only of the slow growth and unequal distribution of resources that Presidents Reagan and Bush have presided over, but also of what these resources actually bought. High interest rates and soaring prices led to a drop in the home ownership rate of 1.7 percentage points in the 1980s. (From 1973 to 1980 the rate increased by 1.2 points.) Despite spending more of its gross domestic product on health care than any other industrialized country, today the United States ranks low compared to these countries in basic health indicators such as infant mortality rate, perinatal mortality rate and male and female life expectancy at birth. In fact, since 1970, the U.S. ranking has dropped in all of these categories except male life expectancy. Furthermore, the percentage of people lacking any health insurance at all rose from 14.6 in 1979 to 17.5 in 1986. Perhaps what is most distressing is the inequality of opportunity among U.S. students for access to quality education. U.S. educational standards are low on an international scale; spending on education is low and varies greatly from state to state. Rapid growth in private college fees has created a two- tiered system of higher education, with many middle- and low- income students locked out of greater employment opportunities provided by private schools. Many minorities still lack access to higher education. The consequences are dire, for the economy as well as for young people's personal development. Faux writes, "Given the ... connection between poverty and school and work performance, we are currently sowing the seeds for a future harvest of low productivity, low wages, and low incomes." This comprehensive report is a valuable reference with tables, graphs and figures on subjects ranging from "Expenditures on Tobacco, Alcoholic Beverages, and Motor Fuels as Percentages of After-Tax Family Income" to "Effect of Increased Female Earnings on Income of Married Couples with Children" to "Comparative Pay Levels of Workers and CEOs" to "Full Time Weekly Wages, Union and Nonunion." All help to fill out the picture of an economy that, in favoring the very few, has failed to provide adequately for its people and to prepare them to meet future challenges and pressures. Other than a few brief and general suggestions (raise minimum wages, eliminate government hostility to unionization, extend fringe benefits to part-time and temporary workers, secure quality, affordable childcare, eliminate the "deficit" in public investment in infrastructure and in training and education), Mishel and Frankel offer no plan for reversing the economic slowdown and unequal distribution of resources. But that is not the purpose of the report. The book successfully documents and quantifies the negative effects of economic policies designed to benefit the rich. The statistics in The State of Working America offer no indication that anything is trickling down.