SPENDING THE HOLIDAYS
NOVEMBER 24, 1995
As the Christmas shopping season begins, correspondents Paul Solman of WGBH-Boston, and Jeffery Kaye of KCET-Los Angeles file reports on consumer confidence.
JIM LEHRER: Today, the Friday after Thanksgiving, is the traditional first day of the Christmas shopping season. It has also become the traditional day for looking at consumer confidence and other public attitudes and concerns about the economy. We follow that tradition tonight from several perspectives, beginning with two reports, one by our economics correspondent, Paul Solman, of WGBH- Boston, the second by Jeffrey Kaye of KCET-Los Angeles.
PAUL SOLMAN: For quite a few years now, the American economy has been growing at a healthy 4.2 percent annual growth in the most recent quarter, yet conventional wisdom has it that Americans are very nervous about their economic present and even more so about their future. Jeffrey Kaye of KCET-Los Angeles has talked to conservative writer George Gilder who takes an unconventional upbeat view of the economy, but first, the more sobering perspective from economist Frank Levy at MIT. MIT's Frank Levy says we're uneasy with the economy because of the changing nature of economic growth in recent years. FRANK LEVY, Economist: What's happening now that we're getting what we wanted, we wanted--for a long time we wanted the economy to become more efficient, and that's happening. And in the last several years we've wanted all this to take place with less government spending, which means a smaller safety net, and when you put those two things together, the economy becoming more efficient and a smaller safety net, you get more inequality, and you get a very wild ride.
PAUL SOLMAN: Levy often speaks on this subject to folks of all ages. Less government spending only means that government's growing less quickly than the economy as a whole, but to Levy, it also means that the victims of economic efficiency are less protected by government programs more nearly on their own. Now, the efficiency Levy's talking about, and its mixed blessings, are probably familiar to the NewsHour audience. Regularly, over the years, you've seen factories like this one. A skeleton crew spends most of its time waiting for some problem to arise. Here, engine blocks are being turned out by computers instead of union scale workers. When a line goes down, a technician or two speeds to fix it, and running at all, good new jobs done by highly educated professionals, who form the backbone of modern manufacturing. This is frankly the story. Going, going, gone are the blue collar jobs created by the technology of the 40's, 50's, and 60's, which paid good money to the people with a modest education who used to man factories like this one, replaced, behind the scenes, by the white and gold collar jobs of the new technology. Levy's worry is that the new technological growth is creating a widening income gap between those with education and those without it. And it's been the beneficiaries of the new growth who tend to really understand what's been happening. Frank Levy's home is Newton, Massachusetts, and this is a ninth-grade classroom in Newton North High School, where even the freshmen know the score.
FEMALE STUDENT: Well, if you don't go to college, you won't get a really good job when you grow up, and then basically you won't have a life. You really need to go to college 'cause it's like a required essential of living in the 90's. PAUL SOLMAN: No life at all, you say?
FEMALE STUDENT: Well, I mean, you might get a job that's going to pay $5 an hour, if you're lucky, and that's not going to help you survive if you have kids and a family. PAUL SOLMAN: To kids here, college is a prerequisite, and to many not just any college.
MALE STUDENT: I haven't even decided what I want to do for a living yet, but whatever it is, I mean, it obviously helps to have--to go to a good college and get a good degree there, because it's--people would rather see someone with a degree from John Hopkins than a degree from like Massachusetts State Community College. PAUL SOLMAN: Frank Levy thinks the kids are right on the money.
FRANK LEVY: The biggest change in the labor market in the last 15 years has been what's happened to the earnings of high school graduates. If you go back to the late 70's, the average 30-year-old guy with a high school diploma was making about twenty-seven or twenty-eight thousand dollars in today's dollars. If you look today, the average 30-year-old guy with a high school diploma is making about $21,000. That's a tremendous decline, and those kids obviously have the message. The issue is those kids are in really one of the better school systems in the country, and who are in a position to do something about increasing educational skills.
PAUL SOLMAN: Meanwhile, kids in less lustrous school systems, says Levy, are in an increasingly worse position. TV viewers have seen footage like this so often it's become almost a stereotype. At most schools, kids focusing on football instead of physics, for the majority school is a social scene, not a training ground for the post-industrial job market. But it's not just kids who are feeling the pressure, nor even just blue collar adults. The center of Newton, Massachusetts, is high rent by almost any standard. Suits at Mr. Sid's can run $2,000 or more. But out on the street literally everyone we stopped voiced the same anxiety about their economic future.
MAN ON STREET: I think that the general climate is that everything is a lot less certain.
OLDER WOMAN ON STREET: I think the economy of our country is rather--can't predict a thing.
WOMAN ON STREET: I think a lot of people are feeling they're walking around with a target, a bull's- eye on their back.
PAUL SOLMAN: A professor we've talked to, from Harvard, says the following. He says, look, most people now are on this kind of track, going forward; they don't have upward earnings to look forward to. And then are a few people, a slim stratum of the society, that are going like that, but the problem is even those people are worried now because they say, gee, if I lose the job I'm on, look how much further it is that I'll have to fall. Is that a fair description do you think of what's happening?
SECOND MAN ON STREET: I think it is. I think the minority of people are basically on a slow upscale, where the majority is the status quo, and people who are earning higher incomes have to be somewhat concerned because basically those that were in upper-paying jobs when they lose their jobs, they're going down a notch or two, okay.
PAUL SOLMAN: And they're falling further than they would have in the past.
SECOND MAN ON STREET: Correct.
PAUL SOLMAN: This prompted our final question for Frank Levy. Does fear of falling explain the anxiety that besets even those with good jobs?
FRANK LEVY: There are a lot of things going on right now. In the labor market, employees are being judged more on performance day to day, and that creates a lot more uncertainty. For people with really exceptional talents like Michael Eisner or Michael Jordan there are huge salaries, there are a lot more two-income families because you need two incomes to hedge against this labor market, you have female- headed families at the bottom of the distribution that are out of the economy, and throughout all of this, you have this growing split between workers of different educational levels. All of this is coming out of the kind of economic growth that's making the economy more competitive, but because we're doing this, we're going through this period with a small safety net, it's just a very, very uncertain time.
PAUL SOLMAN: Thus, the sobering view of the U.S. economy in which growth favors the few and the rest are left to fend for themselves.
JEFFREY KAYE: Uncertainty and pessimism about the U.S. economy are far from universal. The Haglund family of Denver, Colorado, grew by one about six weeks ago when Tyler was born. Meagan and Bill Haglund couldn't be more optimistic about the financial prospects for them and for their only child.
BILL HAGLUND: Boy, I'm high on life right now. I'll tell you, everything is going the way I would like it to. I mean, I got a beautiful family and a healthy little baby boy, and a decent job with a good career ahead of me.
JEFFREY KAYE: The future looks good?
BILL HAGLUND: The future's looking bright. The future's looking real bright.
JEFFREY KAYE: Do you agree, Meagan?
MEAGAN HAGLUND: Oh, yeah. This is his first white collar job. He doesn't come home dirty anymore.
JEFFREY KAYE: Haglund's cleanliness is virtually guaranteed since he just started work in the clean room of a high-tech company. He had been delivering desks to that firm and to others when he was offered a job as a lab technician. As a result, Haglund, who is a high school graduate studying electronics in night school, saw his salary increase from $14,000 to $21,000 a year.
BILL HAGLUND: In three months, I'll get the degree, and hopefully, we'll re-negotiate my salary, so it'll be even more. So it's a very positive thing.
JEFFREY KAYE: Haglund's new job is with a company with the unwieldy name of Superconducting Core Technologies, or SCT. SCT President Robert Yandrofski says the company is undergoing a growth spurt.
ROBERT YANDROFSKI, President, SCT: We've grown from 10 people less than a year ago to 60 people now, and our growth curve is pretty staggering. And that's driven largely by the demand for any type of technology that lowers the infrastructure cost for these wireless networks.
JEFFREY KAYE: SCT is about to start production of a device that will improve the efficiency of wireless communication equipment such as cell phones. The company recently had a visit from author George Gilder. Gilder writes about technology and entrepreneurship and has become a leading advocate for the notion that telecommunications companies like SCT represent a startling turnaround in the U.S. economy. GEORGE GILDER, Author: This kind of company epitomizes the entrepreneurial efflorescence that really drives economic growth in America. It's part of this fabric of incredibly fertile new technology and research that's going on in small American companies all around the country and which is also extending huge possibilities around the world.
JEFFREY KAYE: And those possibilities, according to Gilder, are reflected in the good fortune of workers such as Bill Haglund, employees who, says Gilder, make the case that despite talk of an economy on the doldrums, the U.S. economy is actually vibrant and dynamic.
GEORGE GILDER: What Bill Haglund represented a few months ago probably was somebody in poverty or near poverty. And what he represents now is probably a member of the middle class on his way, because he's a part of a fast-rising new company in the wireless industry toward wealth. The idea that you have to have a college education or whatever to participate in this era is just nonsense. It's not true, and it's a figment of statisticians who miss the kind of phenomenon that Haglund represents.
JEFFREY KAYE: The phenomenon, according to Gilder, is an explosion in job creation caused by computers. Evidence of the economic boom, as Gilder sees it, was on display last week in Las Vegas, where some 200,000 people attended the world's largest computer show, COMDEX. Gilder suggests computers are creating a tidal change in the economy.
GEORGE GILDER: Today in 1995, for the first time, there will be more personal computers sold in units than television sets. There will be more e-mail messages sent in the United States in 1995 than postal messages. These are just a tip of a vast transformation underway in our economy, where the Internet and the computers connected to it become the central nervous system of a whole new economic environment.
JEFFREY KAYE: According to Gilder, prosperity created by U.S. domination of the growing telecommunications industry has actually narrowed the gap between rich and poor.
JEFFREY KAYE: Are you suggesting that people's widespread despair about the economy is not related to their own personal experience?
GEORGE GILDER: Yeah. I think--I don't think there's widespread despair about the economy. I just--I don't know what these polls are particularly. I don't--I doubt their validity. What there is widespread despair about is the moral decay in the country. That's a different phenomenon that expresses itself in economic problems, and there's 70 percent more single parent families in the numbers these days, which means that if you measure by households, rather than by per capita people, you'll find that you can show that incomes aren't rising. And this is what people frequently do. They measure by households, when there's a huge increase in the number of households. Each household commands less income.
JEFFREY KAYE: In fact, according to Gilder, companies like SCT are causing a powerful economic ripple effect by creating employment and patronizing suppliers. Some of the furniture Bill Haglund delivered is stacked up at SCT ready for the company's planned expansion, yet another example, as Gilder sees it, of the explosive power of U.S. entrepreneurial growth.
PAUL SOLMAN: A few last words about these two seemingly irreconcilable points of view. Economists like Frank Levy may sound glum, but few of them are anti-growth or anti-entrepreneurship. Some even think George Gilder could eventually be proved right and that the post-industrial revolution might finally provide jobs at all levels of the economy. Others doubt it, but what all these economists tend to worry about is a wrenching transition to a rosy or not so rosy future, a transition they think we're going through now. Conservatives like Gilder, for their part, don't deny that the economy has problems, nor that America needs an educated work force; their emphasis, however, is on the need for initiative, responsibility and entrepreneurship, all qualities they believe Americans have in abundance.