House Banking and Financial Institutions Committee Hearing on the Semiannual Report of the Board of Governors of the Federal Reserve System
Witness: Alan Greenspan, Chairman of the Federal Reserve
February 24, 1999
Sanders opening statement at the hearing:
REP. SANDERS: Thank you very much, Mr. Chairman. John, thank you very much. I would just like to say this . . . . there is no argument that in recent years the economy in fact has been very good. But we should not overdo it in terms of what's going on for the average working person in this country. The good news is that for the last couple of years, for the first time in decades, we have seen wages go up for lower-income workers and middle- income workers -- for the first time.
But the fact is that the median family in 1996 was $1,000 less than in 1989. The inflation-adjusted earnings of the median worker in 1997 were 3.1 percent lower than in 1989. And over the period from '89 to '97, real hourly wages either stagnated or fell for most of the bottom 60 percent of the working population.
So while we can say that in the last few years, for the average worker, things have been getting better, the reality is that most workers in America today are working longer hours and lower wages than was the case 10 or 20 years ago. And if we say this is as good as it's going to be, that's a pretty pessimistic outlook.
More importantly, and this is a point that I want to stress, because it is not talked about too much, according to the Economic Policy Institute, the typical married couple family worked 247 more hours per year in 1996 than in 1989. That's more than six weeks worth of additional work. That means all over this country, and I'm sure it's in your district as well as in mine, you're seeing people working two jobs, working three jobs. In the beginning of the century, workers fought. They said, "We want a 40-hour work week. That's what we want." A hundred years later, workers are working 45, 50, 60 hours a week. Wives are working alongside of husbands because we need two bread-winners in a family to pay the bills.
[Y]eah, I have seen improvement in the last couple of years. We should be proud of that. We should continue that effort. But if you look at what's going on for the average American worker today, in many respects, he or she is not where they were 20 years ago. We still have 43 million people without any health insurance. People can't afford the cost of college education. We have the highest rate of childhood poverty in the industrialized world; the greatest gap between the rich and the poor.
So if we sit here and we say, "Gee, we are living in Utopia. It's not going to get any better than this," boy, I think that would be a very sad and unfortunate statement. And that would be my point, Mr. Chairman.
The Sanders - Greenspan Exchange
REP. SANDERS: Thank you very much, Mr. Chairman. Ironically, I was going to ask a similar question to what Mr. Castle asked over on the minimum wage.
Some of us see the positive signs in the current economy in that real wages for low income workers have finally gone up after many years of stagnation and decline. And I'm surprised, therefore, about your response to Mr. Castle, because one of the positive things -- Some people would argue that one of the reasons that wages for low income workers have gone up is an increase in the minimum wage. And you and others argued two years ago when we fought to raise the minimum wage from four and a quarter to five-fifteen there'd be massive, large-scale unemployment among workers. Unemployment is now at a record low. So my question is, do I gather -- do you still oppose raising -- the president would like to raise the minimum wage by a buck over a two-year period. Many of us would like to go even higher. Are you still opposed to raising the minimum wage?
MR. GREENSPAN: Well, I still think it's a bad idea, because as I said to Mr. Castle, you don't see the effects when you have a huge demand for labor. The real crucial way to test whether it is a desirable thing to have is when the economy is slack. And as far as I can judge, and the data that we tend to find quite compelling, is that teenage unemployment does go up with the minimum wage. And if that is, in fact, the case, I think it's a disservice to the younger people.
REP. SANDERS: But unemployment now is almost at a record low and we've raised the minimum wage. But let me ask you this question.
MR. GREENSPAN: Well I'm not -- you won't see it today. I agree with that.
REP. SANDERS: Okay. But let me ask you this question. If you're concerned about wage increases developing an inflationary spiral, how do you feel about CEOs of large corporations now making 200 times what their workers are making and getting huge golden handshakes and all this kind of stuff? Does that concern you?
MR. GREENSPAN: If their shareholders are willing to do it, they're wasting their money, in many respects, and I find a lot of that stuff, frankly -- I find a lot of what is being paid to individual CEOs not directed to the value that they are producing for their shareholders who are paying the bill.
REP. SANDERS: But be that as it may, when we talk about inflation -- and you may be right, you may not -- but what we're seeing is CEOs now make 200 times what workers make. You're expressing your concern about raising the minimum wage over $5.15 an hour, but I would hope we would see that same concern about CEOs making -- you know, getting golden handshakes worth tens and tens of millions of dollars.
MR. GREENSPAN: Well, in both cases, I'm arguing that the government should not be involved. I'm just essentially -- I'm being consistent in that respect.
REP. SANDERS: Let me ask you another question, global economy. Some people would argue, including Business Week, New York Times, World Bank, many others, that IMF policy in Mexico, Asia, Russia and Brazil has largely failed over the last several years. Are you prepared to join such institutions as Business Week in urging a rethinking of the fundamental tenets of the IMF in terms of austerity programs, capital flow and so forth? Business Week in a recent editorial said, and I quote: "The austerity policies of the IMF and the U.S. Treasury aren't part of the solution, they are part of the problem," end of quote. I believe the World Bank said something similar. There is increased discussion that basic IMF philosophy has failed. Are you calling for changes in basic IMF policy?
MR. GREENSPAN: Let me just say that we are having conversations, as we always do, on issues of structure of international financial institutions with Treasury. We are the relevant agencies in this regard, or the ones who are most directly involved. The secretary is the senior member of our representation at the IMF; I am the alternate delegate. We are the two who effectively are interfacing with that. I don't think it's appropriate for me to be discussing what it is we discuss or the like. I think it is appropriate for us to be thinking about these issues, and obviously we are.
REP. SANDERS: Well, I am not hearing you vigorously defending current IMF policy.
MR. GREENSPAN: Well, you are not going to see me defend a number of things, which are part of joint discussions with the Treasury. And there are certain things, I think; when we are ready to announce something, I think you'll hear an announcement, if there's such views.
REP. SANDERS: Okay.
MR. GREENSPAN: But I don't want to discuss what goes on in these joint meetings. I think it probably will not be productive --
REP. SANDERS: Okay. The last --
MR. GREENSPAN: -- and useful notion.
REP. SANDERS: -- a brief question. I mentioned earlier that a recent report indicated that the typical married couple in the United States is currently working 247 more hours in 1996 than in 1989. Now, tell me. When we talk about the economic boom and the economy being so great, I know that in my state it is not uncommon for people to be working 50, 60, sometimes 70 hours a week; women working, et cetera. At the beginning of this century, as you will remember -- I know you are an historian -- workers said: "We want a 40-hour week. We don't want to work 50 or 60 hours." A hundred years have come and gone, new technology, all of this so-called progress; people are working huge hours. What do you think -- how can we lower the work week so people have more time for their kids, can relax, not be so stressed out?
MR. GREENSPAN: Well, you know, one of the interesting things, Congressman, is the fact that there was a very dramatic and protracted decline in the average work week for a number of years, and it stopped. And there is an interesting issue, which I don't know the answer to, as to the extent to which people did that voluntarily. Now, you are saying in effect, and I am sure you are quite correct in this regard, that in certain instances people have been working more hours because they needed to. But I have also a suspicion that there is a desire to be working. In other words, there are enough areas of our economy where people could very easily be working fewer hours and having more leisure time and are choosing not to. Now, I don't know what the mix is, but I think it's a very interesting sociological, as well as economic, issue.
REP. SANDERS: I would tend to agree with you. But you certainly would not deny that in many instances, people are working longer hours and their wives are working, who might otherwise prefer to stay home with their children, not as something they want, but as something that they have to do?
MR. GREENSPAN: Oh, I'm sure that's true.
REP. SANDERS: Okay. I would just ask you, Mr. Chairman, that when we talk about the booming economy, let us not forget that a lot of folks are not booming, and they're working 50 and 60 hours a week.
MR. GREENSPAN: And there is a significant part of our work force who are not doing well and haven't been doing well for quite a long period of time. I don't deny that at all.
REP. SANDERS: Thank you, Mr. Chairman.
REP. LEACH: Thank you, Mr. Sanders.