UFE - Press: Economic Apartheid in America

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UFE Co-directors Publish
Economic Apartheid in America: A Primer on Economic Inequality and Insecurity

by Chuck Collins and Felice Yeskel
The New Press: 2000

Order this book.

(The following is adapted from the introduction to the book.)

So are these the best of times? What do you see when you look at the signs of the times? What are the signs of economic health? What’s working? What are the signs that all is not well?

Inflation is indeed flat. Unemployment as a national average is low. Yet the much touted prosperity brought on by the economic boom of the late 1990s has not been evenly shared.

Today’s economy is particularly rewarding if you own lot of assets such as real estate, stocks or bonds. However, if you are on a fixed income or depend on a job to bring home wages or a salary, things have been a bit rough. If you’re not part of the 30 percent of the population that has more than $5,000 in the stock market, then all the media hoopla about a booming economy doesn’t help. In fact, you’re invisible. The economy is not booming for everyone.

And the gap between the very wealthy and everyone else is growing dangerously wider.

Being poor in America has always been a rocky road, worsened in recent years by social scapegoating and even further eroding living standards. But many people in the American middle class also share a growing sense of precariousness. "We have the impression from television and the media that our prosperity is huge, but that is not the middle class experience," observes Marc Miringoff, A Fordham University expert on social indicators.

The signs of the economic times present two divergent pictures. Some of these signs include...

The stretch limousines are longer, yet more people are homeless. There are more "statement house" mansions being built, yet fewer affordable apartments to be found.

Unemployment figures are low, yet 1998 and 1999 were a record years for worker lay-offs.

Stores that serve the middle class have gone out of business --or have remade themselves into either bargain-basement outlets targeted at working families or luxury retailers to chase the largess of the nation’s richest shoppers.

Consumer spending and borrowing have gone up while personal savings have plummeted.

Top corporate chief executive officers (CEOs) pay themselves mega-millions while the wages of over half the U.S. workforce have remained flat or fallen.

A growing number of new jobs are temporary or part-time and do not offer health insurance, retirement or vacation benefits. Two out of three new private sector jobs are in the temporary employment category, with median wages at about 75 percent those of full-time salaried workers. Our largest employer is now Manpower, Inc. –a temporary agency.

Over the past two years, the Fed has allowed unemployment to fall and wages to rise a little. Certainly if push came to shove, Federal Reserve Chairman Alan Greenspan would side with Wall Street over wage earners, but since 1996 he hasn’t had to choose sides.

Thirty zip codes in America have become fabulously wealthy. Meanwhile, whole urban and rural communities are languishing in unemployment, crumbling infrastructure, growing insecurity and fear.

In the final month of each year, the juxtapositions become more ironic. Newspaper articles that chronicle the booming bonuses that go to a handful of Wall Street financiers are placed next to stories of destitution and insecurity and exhortations to "Remember the Neediest!"

Warning: Entering New Global Economy -- Proceed With Caution

Welcome to the new global economy, designed by and for America’s largest corporations and wealthiest individuals.

The beneficiaries of the new economy are working overtime to convince you that the economy is fantastic. Look at that climbing stock market, even when it's on a roller-coaster. Check out the growing number of millionaires and people invested in the stock market with do-it-yourself internet brokerages.

But the reality is that many people are working extremely hard and facing growing economic uncertainty. Personal debt and bankruptcies are rising. While "keeping up with the Jones'" in our high-tech, advertising-driven, consumer society accounts for some of this, a large percentage of workers, particularly those in their 20s and 30s, have two jobs with no benefits. A growing number of people are living without health insurance and postponing needed medical treatment. In the last twenty years, a higher percentage of people have little or no retirement security and are experiencing no future job security.

People are being told: "You are on your own." "Security is an illusion." "Don’t expect anything from your employer." "Don’t expect anything from government (especially as we dismantle it)." "Get out there and become an entrepreneur!"

Meanwhile, the media gives us a picture of the economy as entirely rosy. We do not see many news stories about economic insecurity and growing inequality in America. The mass media encourage us to look up the economic ladder and to fantasize about and identify with the superrich, while unscrupulous politicians encourage people to direct their blame and anger toward people one or two rungs down the economic ladder. The scapegoats for the polarized economy include women on welfare and new immigrants.

The Trends: Rising Tide, Sinking Boats

The larger economic trends of the past two decades help to explain many of the signs of the times we currently observe.

Falling Wages. There has been an overall growth in income, but virtually all income growth has gone to the highest-earning fifth of the population with the biggest gains flowing to the richest 1 percent. Real wages, the actual spending power of people’s paychecks, for the bottom 60 percent of the population have stagnated or fallen. There is some good news, as in 1998 and 1999 median real wages began to climb back to where they were in the 1970s, but this hardly qualifies as an economic success story.

Wealth Inequality. The overall wealth pie has grown, but almost all of the gains have gone to the wealthiest one percent of households. The top 1% of households currently have more wealth than the bottom 94 percent combined.

Widening Gap Between Highest and Lowest Paid Workers. While real wages have fallen for half of US wage workers, compensation to top managers and CEOs has skyrocketed. Inequality in wages is at an all time high.

Losing Ground at Work. During the last twenty years, three out of four U.S. wage earners have lost ground on the job. In real terms, this means that people’s wages have not kept up with inflation or that workers have lost some portion of benefits they previously had. Instead of having a pension or 100 percent health care coverage, many workers now have no retirement security or pay some or all of their health care costs. Many workers are now temporary or part-time workers with no benefits. Some have lost their jobs and have not been able to find a comparable paying job or any job at all.

This means a lot of people are feeling the sands shifting beneath their feet. A generation ago, people were more likely to know where they would be working in five years. Today, half of the population says they feel no employer loyalty nor job security.

The Rising Tide is Lifting Only the Yachts. Since 1989, there has been an expansion in the economy and an increase in productivity. Yet, unlike previous periods of economic growth, the rising tide has not lifted all the boats. Inequality has grown, with the rising tide lifting up only the yachts while the smaller boats rocked in the wake. Unlike the post World War II years, when economic growth was shared more equitably, there has been a dramatic pulling apart in the last twenty years between the small number of "haves" and everybody else.

Despite these conditions, recent polls show that many people are happy about the performance of the economy. Yet this may be a false sense of comfort as many people’s current fortunes are largely based on personal debt, money borrowed upon the assumption of future growth and prosperity. On the one hand, this borrowing spree has buoyed the economy with increased consumer demand; on the other hand, there are falling savings rates, rising costs of health care and college education, increasing bankruptcies and other signs of economic insecurity. For many in the middle class, there is a precariousness to this prosperity.

The "perpetual motion" economy at the turn of the century is chugging ahead based on a number of factors that can’t go on forever. Because some people’s wealth has grown faster than their wages, people are borrowing money against their homes and against anticipated stock earnings. Mortgage and home equity loans were the fastest-rising form of consumer debt in 1999. This is just one factor that points to instability. When the social fabric pulls so far apart it begins to rip. Our response is to put record numbers of people in prison and build more gated communities. Any bump in the road, any economic downturn, will reveal the hidden dangers of growing inequality.

We Can Build a Fairer Economy

Most of us experience our daily lives in terms of family, work, friends and our local community. We do not always see the connections between the struggles we may be facing and changes in the larger economy such as longer working hours, having multiple jobs, and the inability to save money. Even when we understand the link between the larger political and economic forces and our daily lives, we do not necessarily believe that we can do anything to improve our circumstances. Often we simply hear: "That’s just the way things are." "There is no alternative." However, this is not true.

There are alternatives -- and there were times in our country’s history when we were not so economically divided. The U.S. economy was significantly fairer in the years following World War II. Prosperity was better shared among almost everyone in society than it is today. There is no reason why this should no longer hold true in the present.

During the last few decades the economic rules of the game were changed, by wealthy individuals and corporations, and they can be changed back by people like us. In the 1930s, the New Deal ushered in an era of greater economic security and a rising standard of living for seniors and working families. In the 1960s, we launched a War on Poverty that improved health care for seniors and the poor and provided a "Head Start" to low income children.

Today, at the beginning of a new century, we need a new set of policies and priorities to ensure a more broadly shared prosperity.

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