Newspaper article The Christian Science Monitor

An Economic Dream Begins to Fade?

Newspaper article The Christian Science Monitor

An Economic Dream Begins to Fade?

Article excerpt

WILL today's young people in the United States be less affluent than their parents? That's a prediction of some economists.

Lawrence Mishel, research director of the Economic Policy Institute in Washington, D.C., has documented a deterioration of the economic position of the typical young family during the 1980s. In a recent book written with David Frankel, "The State of Working America," Mr. Mishel noted that the younger generation was hit significantly by a fall in real wages (adjusted for inflation), the shift in employment toward low-wage industries, the effects of the large trade deficits, and the erosion of union membership.

Unlike the older generation, these newer workers generally did not benefit much from the boom in stock market prices or the rise in after-inflation interest rates during the 1980s. Young people usually have little in the way of savings to invest.

The median income of a young family, with parents aged 25 to 34, declined in constant 1989 dollars from $31,544 in 1973 to $30,873 in 1989, he reported. Minorities were hit even harder. And young families headed by a worker with no more than a high school diploma did much worse than those with a college education.

Business Week magazine took up the issue with a cover story in its latest issue, asking "What happened to the American Dream? the historic pattern of each generation being more prosperous than its predecessor generation. The article concludes: "It seems increasingly likely that America's young people are going to mature in a less affluent world. And that spells trouble for all Americans, young and old alike."

Richard McKenzie, a professor of economics and management at University of California, Irvine, Calif., maintains that the economic slippage of the 1980s is mostly a statistical illusion. It results, he says, from a changed method of calculating the consumer price index used to measure income dollars in real, constant terms, plus the failure to include a rise in fringe benefits during the 1980s. The economy, has performed "far less dismally' than many commentators have claimed, Mr. McKenzie holds. …

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