Trends

Vanishing Middle Class: A Statistical Magic Act

"The standard of living of the average American worker is declining steadily, and Congress and corporate leaders must act soon to reverse the trend." So writes Los Angeles Times labor columnist Harry Bernstein, echoing the cry of labor leaders and politicians across the country. An increase in low-paying service jobs and a decrease in high-paying manufacturing jobs, they argue, spells the end of the middle class. Their solution? More trade barriers to protect U.S. manufacturing industries from competitive imports. A closer look at their analysis, however, reveals a lot of smoke and mirrors.

Much of the hullabaloo centers around some research by Professors Barry Bluestone of the University of Massachusetts and Bennett Harrison of MIT. After comparing period from 1979 to 1984 with the period from 1973 to 1979, they claim to find an "alarming trend toward low-pay jobs." Their report, published by the Joint Economic Committee of Congress and touted by unions nervous about declining membership, is often cited in arguments for protectionism. But according to Bruce Bartlett, a policy analyst at the Washington, D.C.–based Heritage Foundation, the study contains several "critical errors."

"By comparing job growth between 1979 and 1984," notes Bartlett, "Harrison and Bluestone chose the two most extreme years possible, thus obscuring the long-term trend, which indicates no change in the distribution of jobs." As syndicated columnist Warren T. Brookes explains in the Wall Street Journal, this period covers "three Carter fiscal years that also included two recessions, the worst inflation in modern history and a massive 7 percent, two-year decline (1979–81) in average real wages."

Brookes and Bartlett also quarrel with Bluestone and Harrison's choice of price index to adjust the income data for inflation. By relying on an index "widely recognized by economists…to overstate inflation during the 1970s," says Bartlett, they understated workers' real incomes. When a more-accurate index is used, "the low-pay trend mainly disappears."

Bartlett doesn't deny that employment in manufacturing has fallen in recent years, while employment in the service sector has grown. That trend, he argues, is natural in developing economies—and isn't really the devil it's made out to be. The popular picture is of well-paid assembly-line workers being laid off and forced to take minimum-wage jobs flipping burgers. But service jobs aren't limited to fast-food or retail outfits; they include, for example, jobs in law, medicine, and computers. Brookes points out that over 40 percent of the jobs created between February 1986 and February 1987 were managerial or professional—the Labor Department's highest-paid category. "This," he observes, "is the largest year-to-year growth-share for top-paid jobs."

Harrison and Bluestone also overstate their case by lumping part-time workers with full-time workers. A much higher proportion of service-sector jobs than manufacturing jobs are part-time. The large number of part-time workers pulls down the average wage level, conveying the misleading notion that as the service sector expands, full-time workers' incomes are falling. When Bluestone and Harrison do separate full- and part-time workers—at the very end of their study—it turns out that less than one fourth of all jobs created in 1979–84 were in the low-paid category, rather than the 58 percent claimed earlier in their study.

So, while employment opportunities shift around, the middle class remains essentially unchanged. A Census Bureau chart plotting the change in income distribution among Americans from 1960 to 1984 is as flat as the EKG of a dead person. Concludes Bartlett, "The middle three-fifths of the population, ranked by income, receive about 52 percent of total national income, a proportion that has been virtually unchanged since the Census Bureau began keeping such statistics in 1947."

There's No Such Thing As a Free Frequency

When recently departed (from office, not life) Federal Communications Commission chairman Mark Fowler suggested auctioning off chunks of the radio spectrum rather than allocating it through the current government licensing procedure, his proposal went nowhere. But the idea has traveled across the ocean and is abroad in Britain.

Margaret Thatcher's government is talking up a new report by consultant Charles Jonscher, written under the auspices of the Department of Trade and Industry. Jonscher concludes that the market, not the bureaucracy, ought to divvy up the radio spectrum.

Currently, the airwaves are woefully misallocated, noted the report. For instance, giant British Telecom dominates the microwave spectrum, despite the obviously superior value the mobile communications industry places on each megahertz. (Jonscher estimates the value of an extra megahertz of frequency at £75,000 in the standard telephone industry but at £4 million in broadcasting or mobile communications.) Under Jonscher's scheme, as any Econ 101 student learns, he who values a property most would buy the right to it.

Not only does Jonscher advocate auctioning off segments of the spectrum, he wishes to privatize the auctioneer. Under his plan, a group of private Frequency Planning Organizations would be charged with allocating and policing the airwaves.

As The Economist points out, private bodies with an incentive to maximize profits would be likely to utilize new technologies to "cram as many users into their wave-banks as possible." Indeed, Jonscher estimates that "all conceivable needs" could be met for at least the next 20 years by allowing a radio-spectrum market to develop. (The state would also pocket 160 to 400 million pounds a year, for what it's worth.)

If Margaret Thatcher's track record is a reliable predictor of success, the Tories may again take the worldwide lead in laissez-faire.

If Rejected by the Supremes, Don't Despair

It's a free country—but just how free may depend on what state you live in. The Constitution is supposed to protect basic individual rights, but federal courts are sometimes willing to make exceptions—obscenity, for example, is not considered protected by First Amendment guarantees of freedom of speech and of the press. But if the federal courts choose not to protect certain rights, relief from the depredations of big government can sometimes be found at the state level.

The Oregon Supreme Court, for example, recently overturned a state obscenity law on the basis of the state constitution. The case involved Earl A. Henry, owner of an adult bookstore, who was convicted in 1982 of possessing and disseminating obscene material. The law under which he was convicted was based on federal standards of obscenity.

Represented by a lawyer from the American Civil Liberties Union, Henry appealed the case, arguing that the state constitution provides greater protection to free expression than does the federal Constitution. Article 1, Section 8, of the Oregon constitution states, in part, "No law shall be passed restraining the free expression of opinion or restricting the right to speak, write or print freely on any subject whatsoever."

The state's high court unanimously upheld the appeal. Writing for the court, Justice Robert C. Jones concluded, "In this state any person can write, print, read, say, show or sell anything to a consenting adult even though that expression may be generally or universally considered 'obscene.'"

ACLU legal director John Powell told REASON that the organization has been pursuing a strategy for several years of relying on state constitutions and statutes to extend civil liberties. "It's picking up momentum as the federal courts delineate areas where they're going to continue to extend protection and areas where they're not."

State laws can be used to extend privacy protection beyond that recognized by the federal courts. In Minnesota, where a bill to repeal the state sodomy law failed, a lower court has declared the law unconstitutional under the state constitution. The case is on appeal, as is a similar case in Kentucky.

The ACLU also hopes to show that state search-and-seizure protections impose a limit on drug testing. And though the Supreme Court allows law enforcement authorities to examine personal or corporate bank records without a warrant, several states reject the practice.

"The Supreme Court has held that the right of privacy is largely focused on the home," explains the ACLU's Powell. "We've been arguing that [it] should be extended to where there's a reasonable expectation of privacy."

The shift in focus from the federal courts to the states can be viewed as a new twist on the old idea of states' rights. As California Supreme Court Justice Stanley Mosk says, "Today, states' rights are associated with increased, not lessened, individual guarantees."

Brushing Big Brother Away

For dental hygienists, dealing with government regulations can be as difficult as pulling teeth. But restrictions on their profession have recently been relaxed in at least two states.

Hygienists, who are licensed by the state, perform such services as cleaning teeth, taking X-rays, and giving fluoride treatments. In most states they are only allowed to function as assistants to dentists, but many are champing at the bit to practice independently, making more money while offering more-convenient and less-expensive service. Not surprisingly, many dentists, apparently fearing independent hygienists would take a bite out of their business, are resistant to the idea.

Last year, Colorado became the first state to pass a law allowing hygienists to open their own practices. The American Dental Association, claiming that the law endangers public health, is appealing a court decision upholding the law. Jeff Thompson of the Colorado Dental Association told REASON that one of the dentists' concerns is that patients won't know the difference between dentists and hygienists and will mistake a cleaning for "a complete oral examination."

Now, an experimental program in California may be the precursor of a deregulatory move similar to Colorado's. In the program, which was approved by the state in 1981 but took five years to get under way, 15 hygienists throughout the state are operating their own practices, which are monitored by a dentist and evaluated by several professors from three universities.

Nancy Chesler, a participating Los Angeles hygienist, notes that the services she offers can normally be provided by hygienists in a dentist's office without direct supervision. If a dentist is on vacation, for example, his hygienist employee can clean patients' teeth. Chesler offers more-flexible hours than most dentists, starting at 7:00 A.M. and staying open late one night a week. "The goal of the whole thing is to give the patient freedom of choice," she says.

But that's not the goal of the California Dental Association, which is challenging the program in court. Although the CDA is arguing on procedural grounds, those do not seem to be at the heart of the group's objections. In an editorial in the CDA's magazine, the association's executive director, Dale Redig, declared that "there is a war going on in our profession." He charged hygienists with having a "master plan" to achieve total independence from dentists, and asked dentists, "Which side of this war are you on?"

Not all dentists are ready to man the barricades. Hygienists refer patients needing dental work, and one Los Angeles dentist who has agreed to take such referrals under the experimental program told the Los Angeles Times that hygienists may be better than dentists at persuading people to seek dental care. "Sometimes when a dentist tells somebody he needs dental care, people don't believe him."

Perhaps regulators will take this comment to heart and not believe everything they hear from the Dental Association.

Milestones

? Friendly skies. More than two-thirds of those responding to a recent Washington Post–ABC News poll said airline deregulation has been successful, although 47 percent said it had increased flight delays. Eighty-one percent agreed deregulation had cut air-travel costs, and 54 percent said it had had a positive effect on service.

? Hawthorne, call home. Massachusetts has repealed a 203-year-old law that prohibited cohabitation by unmarried men and women. The law originally called for offenders to stand on the gallows with a noose around the neck, followed by "no less than 39 whip strokes."

? All in the family. Ten college students constitute a "family" and can't be evicted under Glassboro, New Jersey, zoning laws, a New Jersey Superior Court judge has ruled. The young men, dubbed the "Glassboro Ten," share chores, rent, and expenses and generally behave like kinfolks, said Judge Edward Miller.

? Bingo bonanza. The Supreme Court has ruled that states cannot regulate gambling on Indian reservations. Justice Byron R. White wrote for the majority that "self-determination and economic development are not within reach if the tribes cannot raise revenues and provide employment for their members."

Global Trends

Trade Like an Egyptian

JERUSALEM—Egypt has had socialized and nationalized markets since ancient times. Today, however, there are glimmers of hope.

President Anwar Sadat began liberalization efforts in 1974 with his "Open Door Policy," under which foreign and domestic investment controls were relaxed. But the massive introduction of U.S. aid (almost $20 billion since '74) funded huge enterprises, many controlled by Sadat cronies and the well-connected. Most of the aid was spent on military and large public-works projects.

Though the Egyptian government still profits from U.S. aid, the oil glut has sharply reduced remittances from the two million to three million Egyptians working in the oil states, who've earned as much as $60 billion. So the government of President Hosni Mubarak is at a crossroads: with the oil glut and a decrease in canal traffic and tourism, he must further Sadat's liberalizations if the economy is to revive.

At top levels of the Mubarak government, private enterprise has influential friends. His two recent premiers, Kamal Hasan Ali and Ali Lutfi, have suggested privatizing all state-owned corporations except those in strategic areas, such as steel production. The Cairo-based Business Association, led by former ambassador to the United States Ashraf Ghorbal, calls for a restructured economy with a limited state role, something Mubarak and his aides are not yet ready for.

At the grass-roots level, the 52 million Egyptians who benefited from the oil boom and Sadat's reforms have seen their standard of living rise 113 percent since 1974. The black market is also flourishing, a response to the many controls that still exist. In the consumer-oriented society Egypt has become, a return to socialism would bring great discontent.

For both economic and nationalist reasons, an increasing number of Egyptian voices are being raised against U.S. aid. A reduction in aid would probably quicken Mubarak's move toward free enterprise, for a healthy economy may also decrease the appeal of radical Islam: In the April 1986 elections, Islamic parties took 61 of the 448 seats.

—Oded Yinon

Privatization Rocks Around the Block

While hipsters talk up Max Headroom, condoms, and Vanna White posters, privatization continues to sprout up in the four corners of the globe:

• International jetsetters are flying the private skies more often. The British government has already sold its shares in British Airways, and Japan unloads its 35 percent stake in Japan Airlines in July. Less breathtaking moves—partial sale of government-held shares—have been taken or are planned by the Dutch, Belgian, Canadian, Jordanian, Sudanese, Indian, Pakistani, Argentinian, and Australian governments.

• Togo, the west African nation sandwiched between Ghana and Benin, is selling two textile mills to private interests for $30 million. Largely financed by venture capital raised in the United States, the sale is expected to result in 5,000 jobs.

• The Philippine government is seeking to sell numerous state-owned enterprises, including hotels, sugar mills, textile factories, an electronics company, and a boat-building firm.

• In a different kind of privatization, the Soviet Union has officially legalized small-scale entrepreneurship in a variety of fields: restaurants, repair shops, taxis, plumbing, even yoga instruction.

And the beat goes on…

French Give Thumbs Down to Censorship

When French Minister of Interior Charles Pasqua started a war on smut in his country, the Paris newspaper Libération let everyone know what it thought about the matter. It printed nine cartoons of Pasqua in what the Los Angeles Times tactfully described as "awkward sexual and scatological poses."

The incident was just one colorful illustration of how well censorship is going over in France. Pasqua's campaign received a chilly reception from publishers convening in Paris for an annual book fair, as well as from disapproving members of Jacques Chirac's conservative coalition.

The controversy emerged in March, when Pasqua issued regulations that in effect banned the public sale of five magazines and threatened others with the same restrictions. Premier Jacques Chirac tried to keep his distance without disavowing Pasqua, but other members of Chirac's government balked.

Minister of Culture and Communications François Léotard told the publishers that the law allowing Pasqua's actions is faulty, and conservative legislator Charles Million also disavowed the crackdown.

It seems that the attempted censorship has embarrassed the French government more than a few dirty pictures ever could.