Family income level stagnates. Will voters think `pocketbook' election day? GETTING A PIECE OF THE AMERICAN PIE
Here's a Labor Day quiz: Compared with 1973, how much more did the typical American family earn last year after adjusting for inflation?
(a)$10,010; (b)$4,500; (c)$980; (d)$33.
The correct answer may come as a surprise. In the past 15 years, real median family income, or income adjusted for inflation, has grown by a paltry $33, according to government figures released Wednesday. This income stagnation is unprecedented in the postwar history of the United States. And it is fast becoming a hotly debated topic this election year.
Some economists blame the Reagan administration's policies for failure to pull incomes out of the slump. ``They are not the cause, but they certainly have not been the cure,'' says Larry Mishel, an economist with the Economic Policy Institute and co-author of a forthcoming study on the issue.
Other economists take a more positive view. The new 1987 numbers, after all, represent the highest level ever for median family income - $30,853. And if that's only $33 better than 1973, it's $184 better than 1979.
In fact, some analysts believe that the effects of inflation have been overestimated, making the past seem more golden and the present more gloomy than is actually the case. One study put out by the Congressional Budget Office in February used new calculations and found that median family income has continued to grow since 1970, although at a lower rate than before. Also, many couples are delaying or forgoing raising a family, the study concluded, making them better off financially.
In April, the debate over income growth was sharply divided as the Congress's Joint Economic Committee issued its annual economic report. The Democrats' majority report found that ``policies designed to accelerate income growth during the 1980s have largely failed.'' The Republican minority, however, found a turnaround in family income during the Reagan years.
Because Reagan's policies represent such a shift from those of previous administrations, the debate will likely sharpen as election day nears, several income analysts say.
The one point virtually all scholars agree on is that for the period from 1973 to 1987, something happened to retard income growth in the US for the first time since the end of World War II. No one is sure why it happened, although there are many theories. Productivity began to lag worldwide. The oil embargo of the Organization of Petroleum Exporting Countries helped trigger a long inflationary spiral. Other nations, flat on their backs at the end of the war, had become effective competitors. The baby-boom generation and women of all ages began to enter the work force in unprecedented numbers.
Whatever caused the stagnation, it brought a quick end to the American boom times of the 1950s and '60s. What troubles researchers is that they cannot agree on whether the '50s and '60s or the stagnant '70s and '80s represent normal income growth.
In any case, the '50s and '60s saw dramatic, almost effortless income leaps.
For instance, the average 30-year-old man in 1949 could expect in 10 years to see his income rise 58 percent, once adjusted for inflation. Similarly, the 30-year-old man in 1959 could expect his income to jump an average 52 percent. But the 30-year-old man in 1973 would have seen his real income fall by 1 percent by the time 1984 rolled around. (The year 1983 was not used because the economy was still recovering from recession.)
``This stagnation has led to a kind of quiet depression that is responsible for many of our problems,'' writes Frank Levy, a University of Maryland professor who included the calculations in his recent book, ``Dollars and Dreams.'' ``When times are good, the [American] dream easily expands to include new items - long-distance phone calls, a certain amount of travel - but the dream is much slower to contract when times are bad.''
Some groups have fared better than others during this period of stagnation, Professor Levy says. Among workers 25 to 34 years old, women working full-time and year-around boosted their real income by 13 percent between 1973 and 1986. Men with four years of college held their own. Those males with only a high school diploma lost an average 16 percent in income during the 13-year period.