The New York Times (pg. C-1)  [Printer-friendly version]
August 2, 2006


[Rachel's introduction: "Since peaking in 2003, the real hourly pay
of the median worker has fallen about 2 percent. The decline has been
closer to 4 percent for people in the upper-middle part of the wage
distribution and for those toward the bottom. In essence, most
Americans have not been receiving cost-of-living raises, and the
national mood seems to be shifting as a result."]

By David Leonhardt.

Last week, as the Chicago City Council prepared to vote on a bill that
would impose a $10 minimum wage on the city's big-box retailers by
2010 and require them to pay health benefits as well, the big guns
came out to defeat it.

Mayor Richard M. Daley said the bill was tantamount to redlining,
because it would keep stores and jobs out of black neighborhoods.
Andrew Young, the 1960's civil rights leader, traveled to Chicago and
chided black leaders who supported the bill. Around the city,
Chicagoans could see a "Don't Box Us Out!" advertising campaign paid
for by Wal-Mart, and editorials in both Chicago newspapers denounced
the bill.

But it passed anyway: 35 votes in favor and just 14 against, meaning
that even if the mayor uses a veto -- something he's never done since
taking office in 1989 -- he may lose.

Meanwhile, in Colorado on Monday, Gov. Bill Owens signed a bill
requiring people to prove that they are legal residents of the United
States before they can receive government benefits or a professional
license. The debate over the law has dominated the news in Colorado
for weeks, a good indication that immigration will be a big issue in
this year's midterm elections and not just in border states.

The common ingredient in Chicago and Colorado isn't simply populist
anger. It's a particular anxiety that people have about their
paychecks. Whether the culprit seems to be Wal-Mart's drive for
profits or an illegal immigrant who takes someone's else job, many
families feel as if they're falling behind, and they're right. While
it can be dangerous to make too much of two isolated incidents, these
seem like a signal that the politics of the American economy may be
coming to a turning point.

Going back to the 1970's, the single best predictor of the nation's
mood has been its collective paycheck. For all the other things that
affect public opinion, like a war or a scandal, the power of wages
jumps out at you when you look at broad polling data over the last 30

When pay has been steadily increasing, as it was in the 1980's and
late 90's, optimism has surged. But when pay stagnates, pessimism
about the country's future inevitably takes over. As Andrew Kohut,
president of the Pew Research Center, says, "When their jobs aren't
going anywhere, many people lose their optimism about the country
making economic progress."

There have been only three periods since World War II when pay
increases have fallen behind inflation. The first came in the 1970's,
after decades of healthy raises. The public malaise became so severe
at the time that a sitting president was moved to say, "For the first
time in the history of our country, the majority of our people believe
that the next five years will be worse than the past five years." A
year later, that president -- Jimmy Carter -- was unseated by the
Reagan revolution.

The second period started at the very end of the 1980's, and it left
many Americans convinced that Europe and especially Japan had passed
this country by. The worries fueled the fleeting success of
presidential campaigns by H. Ross Perot, Pat Buchanan and Jerry Brown
and eventually forced the early retirement of the first President Bush
and the Democratic leadership in Congress.

The third period of wage stagnation is now. Since peaking in 2003, the
real hourly pay of the median worker has fallen about 2 percent. The
decline has been closer to 4 percent for people in the upper-middle
part of the wage distribution and for those toward the bottom,
according to Labor Department data analyzed by the Economic Policy
Institute. In essence, most Americans have not been receiving cost-of-
living raises, and the national mood seems to be shifting as a result.

In the most recent New York Times/CBS News poll, conducted in late
July, people were asked how their children's living standards would
one day compare with their own. Only 18 percent said "much better,"
and 30 percent said "somewhat better." This is the first time in the
12 years that question has been asked that fewer than half of
respondents predicted that their children's lives would be better.

This fear, I think, explains a good bit of the desire to legislate
higher wages in Chicago and to keep out immigrant labor in Colorado.
Right now, Americans' view of the economy is nowhere near as negative
as it was in the early 1980's or early 90's, but there is a real
anxiety about its direction. Mr. Kohut said his polls showed a big
drop in the number of people reporting that they had made progress
over the last five years. According to the University of Michigan's
consumer poll, a stunning 57 percent of Americans say they expect the
next five years to bring periods of widespread unemployment up from 38
percent two years ago.

The obvious analysis is that this will help the Democrats, the party
out of power, and to some extent it probably will. Independent voters
are now nearly as pessimistic about the economy as Democrats are. But
the only solid historical conclusion is that falling wages will bring
some kind of political turmoil. Wage stagnation helped elect both
Ronald Reagan and Bill Clinton, after all.

Moreover, the complex reality of a growing economy that isn't
benefiting most workers will tempt both parties in some dangerous
ways. Many Democrats have taken to exaggerating the economy's problems
in recent years -- overlooking, say, the resurgence of cities, the
decline in interest rates and the benefits of technology -- and have
ended up out of step with the voting public. "This idea that people
are worse off than 20 or 30 years ago is so ludicrous," said Jason
Furman, an economist who advised John Kerry's 2004 campaign. "And
I've come to appreciate how damaging it is."

President Bush and his advisers, meanwhile, continue to talk about the
rise in average income, which is happening almost entirely because of
gains at the very top. Among their many attempts to talk up the
economy, my favorite was a chart released by the Treasury Department
showing that median household income had fallen since 2000 -- but not
by as much as it had in the early 90's. That's probably not going to
make people feel a lot better. So don't be surprised if the local
outbursts of anxiety in Chicago and Colorado soon go national.