Expansion's length vs. impact

February 06, 2000|By Holly Sklar

YOU WOULD THINK we'd have more to show for an economic boom that just broke the record for the longest expansion in our nation's history.

February marks 107 months -- nearly nine years -- of uninterrupted economic growth beginning in March 1991 (when George Bush was president). The previous record was 106 months from February 1961 to December 1969.

The '90s boom has beaten the '60s boom in longevity, but not when it comes to raising incomes or reducing poverty.

During the '90s, the poverty rate fell slightly, from 13.5 percent in 1990 to 12.7 percent in 1998 (the latest figure available). During the '60s, the poverty rate fell sharply from 22.2 percent in 1960 to 12.8 percent in 1968.

Today's poverty rate is just about the same as it was near the end of the '60s economic boom.

The typical man saw his income rise 4.7 percent from 1990 to 1998, according to the Census Bureau. Male median income grew from $25,308 to $26,492, adjusting for inflation (in 1998 dollars). During the '60s, male median income grew five times as much, gaining 25.2 percent from $20,337 in 1960 to $25,459 in 1968 (in 1997 dollars).

Today's male median income is just about the same as it was near the end of the '60s economic boom.

The male-female earnings gap narrowed in the '90s as the typical woman's income rose 14.9 percent from $12,559 in 1990 to $14,430 in 1998, adjusting for inflation. During the '60s, women's median income grew more than twice as fast, rising 36.8 percent from $6,285 in 1960 to $8,595 in 1968.

Measured in millionaires, the boom has been a bonanza. The United States has 5 million millionaires, up from 1.3 million a decade ago.

Measured in real net worth, the boom has been a bust for families headed by people younger than 55 years old. The typical net worth (assets minus debt), including home equity, of families headed by people younger than 55 actually fell between 1989 and 1998.

According to the latest Federal Reserve Survey of Consumer Finances, the median net worth of families headed by people younger than 35 fell 9 percent from $9,900 in 1989 to $9,000 in 1998, adjusting for inflation. The median net worth of families headed by people 35 to 44 fell 12 percent from $71,800 to $63,400. For families headed by people 45 to 54, median net worth dropped 16 percent from $125,700 to $105,500. These families had less real wealth to draw on for children's college educations, dealing with unemployment or health crises, or building on for retirement than when the boom began.

During the '60s boom, inequality decreased. During the '90s boom, inequality increased.

In 1990, the lowest fifth of households had 3.9 percent of the income; the middle fifth 15.9 percent; and the top fifth 46.6 percent. In 1998, the lowest fifth had 3.6 percent; the middle fifth 15 percent; and the top fifth 49.2 percent. The top 5 percent's share of household income rose from 18.6 percent to 21.4 percent.

Growing inequality has consequences. The number of people without health insurance grew by 11 million between 1989 and 1998. During 1999, the demand for emergency food assistance grew at the highest level since 1992, according to the U.S. Conference of Mayors. Homelessness has reached levels unthinkable in the 1960s.

The Federal Reserve has been raising interest rates to slow down economic growth and restrain wage and price inflation. Last year, employee compensation (including benefits) rose 3.4 percent -- the same as 1998 -- barely ahead of inflation, which rose 2.7 percent. Real compensation rose less than 1 percent despite robust productivity and low unemployment -- 4.2 percent in 1999 compared with 3.5 percent in 1969. The median wage still lags behind its 1973 peak, adjusting for inflation.

If the current boom is going to live up to its reputation, it must deliver more real wealth and income growth for those at the bottom and in the middle.

Holly Sklar is co-author of "Shifting Fortunes: The Perils of the Growing American Wealth Gap."

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