Martina Morris didn’t just write a book. She held up a mirror. Plenty of people see themselves in the charts, graphs and analyses that fill the pages of Divergent Paths and led Morris and her three co-authors to a sobering conclusion—the American Dream is becoming more and more elusive.
The reasons are complex and the fallout widespread, but the bottom line is simple. Millions of workers who got their start in the “new economy”—including many with college degrees—are climbing the economic ladder much more slowly than the previous generation. The distance between the top and bottom rungs is widening and the population at the bottom is growing.
Based upon a pair of government surveys, Divergent Paths: Economic Mobility in the New American Labor Market compares the wage growth of two groups of white males over the span of 16 years. The first study tracked a cohort from 1966 until 1981. The second tracked a cohort from 1979 through 1994.
Like miners combing a mother lode, Morris, a UW professor of sociology and statistics, and her co-authors pulled numerous nuggets from the studies, but one outweighs them all. Ninety percent of all workers surveyed—high school dropouts, high school graduates, those with some college and those with bachelor’s degrees or better—are doing worse economically now than if they had been born 20 years earlier.
The key word is all. This is not a story of “the rich getting richer and the poor getting poorer,” writes Morris and her colleagues, “rather, nearly everyone is losing some ground, with those at the bottom losing the most.”
“This growth in inequality appears to be the signature of the new economy.”
Martina Morris
Look at the final year’s wages for each cohort and then translate them into 1999 dollars. Adjusted for inflation (using the most conservative deflator available, Morris quickly notes), the median hourly wage for a high school graduate plunged 21 percent (from $16.36 to $12.93). For someone with a bachelor’s degree or better, wages dipped 8 percent (from $20.01 to $18.42).
This, together with more and more people congregating at the bottom of the employment pyramid, means that “the heart of the middle class has been hollowed out” with 40 percent fewer workers achieving the earnings that defined America’s middle class in the 1970s, according to Morris and her colleagues.
Morris has fielded e-mail after e-mail from folks saying they’re trapped in the trend Divergent Paths documents. It’s a surprisingly robust response considering the book’s modest publicity, says Morris.
Then again, it’s natural for people to seize on signs that they’re not alone. “They know things aren’t quite right,” says Morris, “but they’re not sure why.”
Given the economy’s stellar performance in the 1990s, some may wonder whether the sour notes sounded in Divergent Paths are already out of tune. Additional data collected from the second cohort in 1996 and 1998 indicate wages were on the rise during the final years of the Clinton Administration. The median hourly wage grew for all four subgroups—high school dropouts, high school graduates, men with some college and college graduates—with college grads making the greatest gains.
Even if wages eventually reach the same level as those in the first cohort, it will be too late to match the first group’s lifetime income. The period in a worker’s life analyzed in Divergent Paths represents 70 percent of a person’s lifetime wage gains, say the authors. During that time, members of the second cohort lost between $40,000 (college grads) and $116,000 (high school grads) in cumulative earnings compared to their counterparts in the first group.
To Morris and her co-authors, declining wage growth is more than a leading economic indicator. It’s a threat to the promise that made America the land of opportunity—work hard and you’ll get ahead.
Divergent Paths capped five years of work by Morris and her co-authors, including her husband, Mark Handcock, a professor of statistics and sociology at the UW. The other authors are Annette Bernhardt, senior policy analyst at the Brennan Center for Justice at New York University, and Marc Scott, assistant professor of educational statistics at New York University.
To Morris and her co-authors, declining wage growth is more than a leading economic indicator. It’s a threat to the promise that made America the land of opportunity—work hard and you’ll get ahead.
“The purpose of this book is to push researchers and policy makers toward a sustained focus on how the life chances of American workers have changed,” they write. “Upward mobility—the hallmark of this country—hangs in the balance.”
In coming to her conclusion, Morris found some solid gold data—two National Longitudinal Surveys from the federal Bureau of Labor Statistics. What makes them unique is that they’re longitudinal. Instead of examining a different cross-section every year, each survey follows the same group of 2,500 young men from their teens into their mid- to late 30s.
It’s that distinction which allows the authors to track and compare long-term wage gains—the heart of upward mobility. “Nobody’s used them the way we did, which was comparing the two cohorts in their economic mobility over the full 16-year period,” says Morris.
Flawed data from the first survey is the reason Divergent Paths explores only the plight of white males, she adds. Because women worked outside the home less often in the late 1960s, they weren’t consistently asked the same set of questions as men. In addition, more than half of the non-white males included in the original survey dropped out over the 16 years, preventing meaningful statistical comparisons.
“We know from other studies that women and minorities made some gains during this period, but inequality also grew within these groups, much as it did with white men,” says Morris. “This growth in inequality appears to be the signature of the new economy.”
One of the grimmest trends the authors probed was the growing gap between high and low achievers.
Shelly Lundberg, an economics professor at the UW, says it’s no surprise that Divergent Paths documented a growing gap between the top and bottom rungs of the ladder. “Inequality in earnings has been the key statistic in labor economics for the last 15 years, “ she says. Nevertheless, the book offers “corroborating evidence supporting what we always knew,” says Lundberg. “And it’s pretty concrete in the way it compares the two cohorts. It’s a very eloquent book.”
One of the grimmest trends the authors probed was the growing gap between high and low achievers. The chasm widened 20 percent—not because those at the top did so much better, but because those at the bottom did so much worse. Not only that, but the number of people mired in low-wage jobs more than doubled—from 12 percent in the first cohort to 28 in the second.
“We went into the study with a sense of what we’d find, but we didn’t know so many people were getting stuck in the lower-end jobs and are cycling through them until their mid-30s, unable to rise to a position where they would have a family wage job,” says Morris.
At the same time, the payoff for most college degrees declined. Only college graduates in the small finance, insurance and real estate sector consistently posted higher wage gains than their predecessors. “The people who chase the money have the money,” says Morris. “I guess that’s not so surprising.
“It was a surprise to me that education wasn’t a big boost,” adds Morris, “especially among those that went to college but didn’t get a four-year degree, which is about 25 percent of the population. We found they lost ground just like the high school graduates.”
Jack Faris, the UW’s vice president for university relations and a former sociology professor, says the key point is not the diminished earning power from a college degree, but the heightened consequences of not having one. “A four-year college degree is even more critical than ever before,” says Faris. “The difference is that instead of being an automatic passport into the upper middle class, it’s more of an absolute necessity for penetrating the lower middle class.”
With that in mind, says Faris, it’s vital for the public school system to prepare every child for a college education and for universities to support that goal through efforts such as the K-12 Initiative at the UW.
Of course, many of the jobs created in the new economy don’t require a degree—and don’t pay a family wage. While universities can’t fix that problem, they can support research such as Divergent Paths to help understand it, says Faris.
Co-authors Morris and Handcock came to the University in 2000 after the UW tapped its University Initiatives Fund to create the Center for Statistics and Social Sciences. Although Divergent Paths was well under way by then, the center fosters interdisciplinary collaboration between sociologists and statisticians.
“These are very large social processes that have an impact on the individual. The only way to change things is to understand them better.”
Martina Morris
For Morris, Divergent Paths reflects a lifelong interest in issues of inequality. “It was what led me to become a sociologist and learn how to study these things scientifically,” she says.
Morris, 46, grew up in Cleveland, and watched as the city went from industrial giant to economic invalid. “A lot of steel mills closed and the town kind of emptied out,” she recalls. “I saw lots of people’s parents put out of work. Fifty percent of the population of Cuyahoga County left.”
Morris recalls her father, an architect, struggling to get loans when local banks were swallowed by out-of-state institutions that “didn’t know Cleveland at all.” Instead, they preferred lending money to booming regions such as the Southwest. “It was almost red lining,” she says.
Today, Morris finds herself in a position to dissect such trends and reveal possible cures. “These are very large social processes that have an impact on the individual,” says Morris. “The only way to change things is to understand them better.”
Although it was “blind luck,” the timing of the surveys couldn’t have been better, says Morris. By targeting one group that entered the U.S. labor market in the late 1960s and another that began working in the early 1980s, the surveys enable Divergent Paths to compare the experiences of men who joined the work force before economic restructuring to those entering after.
The economy responded to restructuring—downsizing, deregulation, globalization, declining unionization—as if it were on Viagra. “Productivity growth has improved, unemployment and inflation are low, and corporate profits as a percentage of gross domestic product are climbing,” write Morris and her colleagues. “Workplaces have become more efficient, the adoption of new technologies is brisk, and American global competitiveness is on the upswing.”
For many workers, however, restructuring is a bitter pill. Classic economic theory predicts a rising tide will lift all boats, notes Morris, but the new economy has not distributed prosperity equally. Citing one of the book’s many charts—Change in Hourly Wage By Percentile—Morris points to 1980 and the start of a steep decline for all but the top 10 percent. “What happened that year?” she asks.
Of course, Morris already knew—1980 ushered in Reaganomics and the trickle down theory. “That’s what people were doing … trickling down,” she says. The chart shows the gap between top and bottom at its widest during stretches when the minimum wage was frozen, she notes.
But Ed Rice, a business, economics and finance professor at the UW, sees some potential cracks in the book’s foundation. For one thing, the accuracy of deflator formulas crumbles over the long haul, says Rice, making it “fruitless to compare levels of ‘well-offness’ over 20-year periods, in my opinion.”
Morris and her colleagues found that more and more workers are trapped in the service sector’s lowest paying jobs—cashier, data entry, telemarketing.
Rice also questions omitting fringe benefits from wage growth analyses, especially when you consider the increased value of medical coverage. “It really makes a large difference in how the statistics look when you put health insurance in,” he says.
Finally, he challenges Morris’ allusion to the arrival of Reaganomics as a driving force behind slumping wage growth. He says the decline of unions is a result of the changing nature of the economy—a change that began long before the Reagan Administration.
But there is one conservative group that might take comfort from the trends found in Divergent Paths—those who blame affirmative action laws for the decline in white male income. However, those folks are missing the point, says Morris. “It’s not affirmative action that caused the loss of the blue-collar aristocracy,” says Morris. “Women and minorities haven’t taken those jobs. Those jobs are gone.”
With manufacturing jobs falling 41 percent between 1972 and 1996, four out of five Americans now work in the service sector, which offers far more low-paying jobs than high-paying ones, according to studies cited in Divergent Paths.
By themselves, those statistics might not scare anyone, but they’re joined by darker trends. Before crunching any numbers, Morris and her colleagues had assumed that the service sector’s appetites were being satisfied by young people fresh to the work force. If past patterns held true, those jobs would become springboards to better employment.
But past patterns have unraveled. Morris and her colleagues found that more and more workers are trapped in the service sector’s lowest paying jobs—cashier, data entry, telemarketing—which ironically are also its strongest growing sectors.
Why are those jobs so sticky? Because restructuring has washed away many roads to upward mobility—not just in the service sector but across numerous industries, says Morris. For example, as companies outsource more jobs to specialized subcontractors and flatten their management, they provide fewer chances for employees to rise from within or gain new skills they can exploit elsewhere, she says.
Economics Professor Lundberg doesn’t necessarily disagree with that conclusion, but does label it speculation. “We can’t see the operations of career ladders in the data,” she says. “It’s conjecture. It may not be inaccurate, but the evidence isn’t there.”
Morris admits she and her colleagues may seem like party poopers to have painted such a bleak picture during a time of economic prosperity. But they say the message needed to be sent—even if it’s hard to hear over the clamor of the ticker tape.
“We hope to introduce a balancing perspective into current policy discussions,” they write, “which have tended to be swamped by the economic boom and the needs of the stock market—for example, lack of wage growth is now applauded as an economic indicator. It is time to put long-term trends in workers’ welfare back on the table.”
The big question, says Lundberg, is whether anyone has the political will to do so. Right now, the answer appears to be no as most people remain mesmerized by the chance—no matter how slim—that they can hit the jackpot in the new economy. “To Americans, the potential of winning big outweighs the risk of losing when we think of public policy,” says Lundberg.
Morris cites two ways in which the country has so far “managed itself around” declining wage gains. “People have futures and they continue to mortgage them,” she says. Plus the migration of women into the workforce has helped keep median household incomes steady. But neither Band-Aid can last forever if wage gains remain stagnant. And both come with a price as people saddle themselves with consumer debt—the average household with credit cards carries a monthly debt of $4,000—and devote less time to family life, notes Morris.
Unlike the first National Longitudinal Survey, the second is continuing to track participants into their 40s and 50s and has valid data on women and minorities. Plus a third survey of a fresh cohort was launched in 1992. Together, those additional statistics will help prove whether the stagnant wages and growing inequality Morris and her co-authors documented were blips on the radar or permanent features of the new economy.
“There’s a group of people who don’t think there’s anything wrong … it’s just the market giving everyone what they deserve,” says Morris. “But it is not clear why people in this generation deserve so much less than their parents.”
“Joe,” a 1994 UW graduate, isn’t complaining. He has a steady job in his chosen field—finance. His wife is entering the health care industry. Their future looks bright.
Yet when Joe considers the trends spotlighted in Divergent Paths—especially growing job instability—he nods his head.
“One thing they taught us in business school was that the work world is different and to get ahead, instead of being promoted from within, you have to jump between jobs,” he says.
Divergent Paths examines the disparate wage growth of two cohorts of men—one that entered the workforce before economic restructuring and prospered; another that entered afterward and lost ground. Among other things, the authors discovered that the second group changed jobs more frequently. At the same time, they found that the rewards for changing jobs early in a person’s career—a traditional path to wage gains—were shrinking.
Although Joe is too young to be represented by either cohort, his career so far mirrors the second group’s experience with job instability. A lifelong Seattle resident, Joe had anticipated staying in one place long enough to climb a couple of rungs before moving on. Instead, he has held three jobs since graduating from the UW eight years ago. He left his first job after his employer changed his duties. He was laid off from his second job. He’s now on his third job—in real estate. To protect his career path, Joe asked that we not use his real name.
Joe echoes another point made by Sociology Professor Martina Morris and the other authors of Divergent Paths—that wage growth has been stymied by the splintering of internal career ladders. In the past, people assumed that when they joined a company, they would find opportunities to rise from within. Now, companies seem to more often look outside, says Joe. “Basically, there’s less corporate loyalty to the employees,” he says. “As a result, employees are less loyal to the company they work for.”
Compared to the men in the second cohort, Joe has several factors working in his favor. First, his field—financial services/real estate/insurance—was the lone employment category to post wage gains during the periods studied. Second, by the time he entered the workforce, wage growth was on the uptick again. Third, his wife is about to launch a career in health care.
In large measure, the growth of women in the workforce—creating more double-income families—is what kept household incomes steady despite the declining wage growth among men, say the authors of Divergent Paths.
That’s what his friends are experiencing, says Joe. “They’re doing fine, but it’s not like the old days when you could have one working spouse and buy a house,” he says. All in all, says Joe, what people are losing is time. “It seems like people are working more and more and have less to show for it at the end of the day.”