The Big Disconnect - New York Times
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September 1, 2006
Op-Ed Columnist
The Big Disconnect
By
PAUL KRUGMAN

There are still some pundits out there lecturing people about how great the
economy is. But most analysts seem to finally realize that Americans have
good
reasons to be unhappy with the state of the economy: although G.D.P. growth
has been pretty good for the last few years, most workers have seen their
wages
lag behind inflation and their benefits deteriorate.

The disconnect between overall economic growth and the growing squeeze on
many working Americans will probably play a big role this November, partly
because
President Bush seems so out of touch: the more he insists that it's a great
economy, the angrier voters seem to get. But the disconnect didn't begin
with
Mr. Bush, and it won't end with him, unless we have a major change in
policies.

The stagnation of real wages - wages adjusted for inflation - actually goes
back more than 30 years. The real wage of nonsupervisory workers reached a
peak
in the early 1970's, at the end of the postwar boom. Since then workers have
sometimes gained ground, sometimes lost it, but they have never earned as
much per hour as they did in 1973.

Meanwhile, the decline of employer benefits began in the Reagan years,
although there was a temporary improvement during the Clinton-era boom. The
most
crucial benefit, employment-based health insurance, has been in rapid
decline since 2000.

Ordinary American workers seem to understand the long-term disconnect
between economic growth and their own fortunes better than most political
analysts.
Consider, for example, the results of a new poll of American workers by the
Pew Research Center.

The center finds that workers perceive a long-term downward trend in their
economic status. A majority say that it's harder to earn a decent living
than
it was 20 or 30 years ago, and a plurality say that job benefits are worse
too.

Are workers simply viewing the past through rose-colored glasses? The report
seems to imply that they are: a section pointing out that workers surveyed
in 1997 also said that it had gotten harder to make a decent living is
titled, "As usual, people say things were better in the good old days."

But as we've seen, real wages have been declining since the 1970's, so it
makes sense that workers have consistently said that it's harder to make a
living
today than it was a generation ago.

On the other side, workers' concern about worsening benefits is new. In
1997, a plurality of workers said that employment benefits were better than
they
used to be. That made sense: in 1997, the health care crisis, which had been
a big political issue a few years earlier, seemed to have gone into
remission.
Medical costs were relatively stable, and in a tight labor market, employers
were competing to offer improved benefits. Workers felt, rightly, that
benefits
were pretty good by historical standards.

But now the health care crisis is back, both because medical costs are
rising rapidly and because we're living in an increasingly Wal-Martized
economy,
in which even big, highly profitable employers offer minimal benefits.
Employment-based insurance began a steep decline with the 2001 recession,
and the
decline has continued in spite of economic recovery.

The latest Census report on incomes, poverty and health insurance, released
this week, shows that in 2005, four years into the economic expansion, the
percentage
of Americans with private insurance of any kind reached its lowest level
since 1987. And Americans feel, again correctly, that benefits are worse
than
they used to be.

Why have workers done so badly in a rich nation that keeps getting richer?
That's a matter of dispute, although I believe there's a large political
component:
what we see today is the result of a quarter-century of policies that have
systematically reduced workers' bargaining power.

The important question now, however, is whether we're finally going to try
to do something about the big disconnect. Wages may be difficult to raise,
but
we won't know until we try. And as for declining benefits - well, every
other advanced country manages to provide everyone with health insurance,
while
spending less on health care than we do.

The big disconnect, in other words, provides as good an argument as you
could possibly want for a smart, bold populism. All we need now are some
smart,
bold populist politicians.

Copyright 2006
The New York Times Company

Posted by Miriam V.