Despite Wall Street jitters, dot-com billionaires keep sprouting like spring crocuses. And their good fortunes are raising the pay of everyone around them. The average pay of chief executives of major companies rose 18 percent in 1999, to $12 million. (In 1990 it was a modest $1.8 million.) Afraid of losing their talent to the dot-coms, big San Francisco and New York law firms have just hiked the pay of first-year associates to $120,000 not including signing bonuses. And Wall Street investment banks have upped the pay of analysts fresh out of college to more than $75,000.
Fed chief Alan Greenspan fears that all the money trickling down through the rich topsoil of America is causing consumers to buy more than the economy can produce, which means that inflation is just around the corner. That's why Greenspan and the Fed have hiked interest rates five times since last June. The word is that they'll hike rates again at their next meeting on May 16 and will continue to raise them until consumers calm down.
But in raising interest rates, Greenspan and company are imposing most of the pain on people on the bottom rungs of the income ladder. These are the people who have to pay more for first mortgages, car loans, and other borrowings, all of which take a bigger chunk out of their paychecks than out of the paychecks of the more affluent. And when the Fed finally succeeds in slowing the economy, these people will be among the first to lose their jobs.
Greenspan ought to consider the janitors who are on strike in Los Angeles because they earn $6.80 to $7.90 per hour - less than $16,000 a year. Adjusted for inflation, that's less than they earned 15 years ago. The cleaning companies say they can't afford a dollar more, but the janitors have been watching the rents soar in the office buildings they take care of - the same offices in which executives are pulling in larger and larger multiples of the janitors' take.
Janitors aren't the only ones working harder these days for less. More than 2 million Americans work in nursing homes - bathing and feeding frail elderly people, cleaning their bed sores, lifting them out of bed and into wheelchairs and changing their diapers. They earn, on average, between $7 and $8 an hour, about the same as janitors. Some 700,000 people who work as home health care aides, attending to the elderly, sick, or disabled at home. Their pay averages between $8 and $10 an hour - less than $20,000 a year. Another 1.3 million Americans work in hospitals as orderlies and attendants at about the same rate. Adjusted for inflation, most of them also are earning less than they did 15 years ago.
An estimated 2.3 million Americans are paid to care for young children in child care centers, organized play groups, or as nannies. They feed the children, change their diapers, sing songs to them, read to them, and tend to their bruises (physical as well as occasional bruised feelings). The median wage of child care workers is $6.60 an hour, usually without benefits - less than funeral attendants ($7.30 an hour) and pest controllers ($10.60 an hour). More than 700,000 Americans are social workers. They attend to individuals and families with severe problems - alcohol and drug abuse, domestic violence, and mental illness. Average pay: between $8 and $15 an hour.
The gap between the pay of top lawyers, executives, financiers, and dot-com impresarios and that of the nation's caretakers and caregivers is widening because of supply and demand. People who think for a living are in short supply, and demand for them is rising; people who take care of buildings and people are in abundant supply, and demand for them is weak.
When Greenspan worries about consumers spending too much because their wallets are bulging, he's looking in the wrong direction. America's caretakers and caregivers haven't participated in the economic boom. They haven't gotten a raise in years. Most don't own any shares of stock. Many rent their homes, so they haven't benefited from the big rise in home prices.
The big spenders are at the other end of the income ladder, where most of the money has gone. This year the richest 2.7 million Americans, comprising the top 1 percent, will have as many after-tax dollars to spend as the bottom 100 million put together, and they'll glean 40 percent of the nation's added wealth. The top fifth of earners will gain over half the nation's income and almost all its added wealth.
If Greenspan really wants to put a damper on excessive spending brought on by too much wealth, he should urge Congress to make the income tax code more progressive, increase capital gains taxes, and pass a wealth tax on households whose net worth exceeds a million dollars.
Robert B. Reich is university professor of social and economic policy at Brandeis University, and national editor of The American Prospect, from which this article was adapted.
© Copyright 2000 Globe Newspaper Company.