The Front

Working for Less

U.S. WORKERS SAW their real wages fall in the final years of the 1980s economic upswing, even before the onset of the current recession, according to "Declining Wages for High School and College Graduates," a recently released briefing paper prepared by the Economic Policy Institute (EPI). In fact, George Bush's years in office are the only post- war period in which hourly compensation for U.S. workers declined in almost all occupational sectors.

EPI Research Director Lawrence Mishel and EPI economist Jared Bernstein found that, starting in 1987, average real wages and benefits began falling for groups that had enjoyed recent gains, including college-educated and white-collar workers and most women.

These developments coincided with the continuing wage deterioration of those who lost the most during the 1980s: high school graduates, men without college degrees (three-fourths of all employed men), lower-wage women and blue-collar workers. In general, Mishel and Bernstein found, since 1979, the lower the wage group, the more their wages fell. Wages at the twentieth percentile dropped 11.8 percent from 1979 to 1991, while those at the eightieth percentile declined 3.6 percent over the same period.

 The single sector to escape the pattern of wage decline has been men with advanced and professional degrees, who account for only the top-salaried 8 percent of men. They are the only group whose wages have risen since 1987.

The report's authors say that their findings challenge arguments that wage declines are a result of the current economic recession. "Causality may well go in the other direction," says Bernstein.

 The trend in wage declines, Mishel and Bernstein argue, was a significant factor in the onset of the recession, because consumer incomes were curtailed. Furthermore, the drop in wages may have contributed to the extremely low level of consumer confidence expressed during the current recession. "Throughout this recession, demand has been extremely weak," Bernstein says. "Unemployment and lack of growth of GDP have been light relative to past recessions. But what's made this recession as intractable as it is may be that declining wages are depressing consumer demand."

 The report suggests that a frequently predicted expansion of skilled technical and white-collar jobs in the 1990s will fail to materialize. The authors say that the recent decline in the wages of college-educated workers, and especially the decline of entry-level wages for young, male and female college graduates, show that growth in employer demand for college graduates has been slowing since 1987.

"A college education is no longer insurance against declining wage trends," says Bernstein. "Wages of high school graduates have been declining noticeably since the 1970s, but it was thought that wage earners with college degrees would escape the trend. However, what we see is that the scope of declining wages is touching people who are college graduates, and their salaries are decreasing as well."

 The workforce is not moving up any "income ladder," conclude Mishel and Bernstein. Their findings show that young workers now have fewer and fewer options to earn a decent wage. Wages of entry level jobs for African-American, Latino and white high school graduates are 26 percent lower than they were in 1979. Entry-level wages of college graduates are also falling, and there has been an overall decline in white-collar wages.

Furthermore, women's wage gains have been subject to significant reversals: the 5.3 percent gain in wages for women over the 10-year period from 1979 to 1989 has been nearly reversed by 14 percent reductions over the past two years. The data in the "Declining Wages" report show that almost all of the recent closing of the wage gap between men and women is due to declines in men's wages, and not to progress in the wage increases of women.

The report's findings address several other wage-related issues. Mishel and Bernstein argue that rising health insurance costs are not to blame for declining workers' compensation. The report indicates that although insurance costs are skyrocketing, average fringe benefit costs for employers have not risen since 1987. As a result of the tremendous growth of jobs with little or no employer-provided health benefits and the shift of employer health care costs on to employees, it is workers who have borne the burden of escalating health care costs.

 EPI's findings also shed some light on the affirmative action debate. Entry-level wages of college graduates have fallen more among African-Americans than whites, and all high school graduates' wages have plummeted "equally severely" according to Bernstein. He says that claims that "preferential treatment" for people of color in the work place has been the cause of wage and opportunity declines among white workers are therefore difficult to substantiate.

 The "Declining Wages" report argues that the central challenge facing economic policymakers is providing most workers with decent middle-income earnings and a rising standard of living. "Any set of proposed economic policies should be evaluated based on their ability to restore wage growth for the vast majority of the workforce," state the authors. "It is increasingly clear that, by this standard, recent economic policies must be judged harshly."

 - Julie Gozan