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2009-09-27 BACK
The American Dream: A Promise Half-Empty or Half-Full?
The American Dream: A Promise Half-Empty or Half-Full? This article originally appeared in the Texarkana Gazette on September 27, 2009 Dr. James Harbin, Professor of Management, Texas A&M University-Texarkana, College of Business The American Dream has always been that each generation could, if they worked hard and got an education, live better than their parents did. Is this dream still achievable? While no one knows what the future holds, let me share some trends that would support both the glass being half-empty or half-full. First, the case for the promise being half-empty. In the past, a college degree, combined with a little luck and determination, was an automatic ticket up the American ladder. I am a living example of that. Today, that degree is still very helpful, but it doesn't come with the same degree of assurances that it once did. Those that didn't want to pursue a college degree had another viable option. That of the blue-collar ranks whose jobs paid middle income salaries combined with great benefits and life-time employment. America has lost millions of those jobs. From December 2007 to August 2009, our economy lost nearly 7 million jobs. In the past, when the U. S. exported high-paying jobs to low-wage countries, we replaced them with even greater numbers of high-paying jobs in industries whose inception could be traced back to science done decades earlier. The PC, Internet, and the cellular industries, born in the 1980's and 90's, more than offset the losses of high-paying jobs in the consumer electronics, steel, auto, and other sectors. But in recent years, outsourced software and manufacturing jobs have largely been replaced by millions of low-wage service jobs in fast-food, retail and the like. That trend is likely to continue in the near future. Several talking heads on the financial networks have advocated that the salvation of America's economy will be small businesses. They will be an integral part, and it is true that 60% of all new jobs will be created by firms employing less than 100 workers, but small businesses mean small salaries. Small businesses provide few if any employee benefits. For approximately every 100 small businesses that start up another 90 go out of business. A third of small businesses don't last 4 years. If you're under 30 in American today, you're likely to have seven jobs by the time you are thirty. General Motors had 853,000 employees in 1980, they will be lucky to finish this year with 63,000. What America needs is big businesses that provide high-value jobs. Small wages, few benefits, and lack of job stability makes it very difficult for families to commit to long-term decisions, like buying a house, getting married, or having children. The gap between the haves and have-nots in America has widened. Average income continues to increase in the U. S. But a focus on averages masks significant differences in trends for lower versus higher-wage workers. One of the things that has transpired is the people at the top are getting more, the middle group is decreasing in numbers, and the lowest group is losing ground. Jobs at the lower end (bottom ½) of the wage distribution lost ground during 1973-2003, while jobs at the upper end (top ½) gained in both absolute and relative terms. Rather than being bunched together in the middle as in the past, today more and more Americans have been earning either a lot more or a lot less than the average. A second reason the "average" income has increased is the addition of a second wage earner in the household. For the vast majority of families, this second income is not treated as fun money, but became an integral part of their budget: mortgage or car payments, buying food, paying medical bills, etc. But this second income also put that family at double jeopardy. A loss of either spouse's job would be a devastating financial blow. Talking about averages - of the roughly 130 million jobs in the U. S., only 20%, or 26 million, pay more than $60,000 a year. The other 80% pay an average of $33,000. Those averages do not provide a good foundation for a strong middle class and a prosperous society. When 80% of Americans are making an average of $33,000 a year, and when the average home price is $181,000, that 80% doesn't come close to qualifying for buying even an average house. Slow job growth combined with suppressed wage growth could likely keep our economy in the dumps for years to come. Some were jumping for joy recently when the rate of job losses lessened. Unemployment has hit 9.7%, a 26 year low. It will be in double digits shortly. The rate is already above 10% in 15 states. If we factor in the number of people who have given up looking for a job (which is not included in the unemployment rate) the rate would be over 20%. It wouldn't take much more to break the rate experienced during the Great Depression. Now the case for optimism and seeing the promise as one half full. While the half-empty case is based on past trends and statistics, the half-full argument is based more on faith in the American system. The fact that America has weathered all past crises, and that this rough spot will also pass. It is a given that future generations will have it better in many respects. Who knows what inventions are just around the corner? The quality of health care will improve and technology will continue to astound us. People will live longer. They will have more things to enjoy and entertain. All of this will be made available at a cheaper price. The number of educated people around the world has greatly expanded. Annual worldwide yearly enrollment in post-secondary education has gone from 30 million in 1970 to a 150 million in 2007. America used to graduate 50% of the world's PhD's, now we only produce 15%. Ten years ago the U. S. had the highest percentage of adults worldwide with college degrees. Now we're tenth. A generation ago, patents didn't even exist in China. The country didn't adopt patent laws until 1985. Today, China's patent office has become the third-busiest in the world, ranking behind only Japan and the U. S. It is expected to pull ahead of both of those by 2012. While America might not always remain the dominant country in the world, other than loss of pride, that would not be the worst thing that could happen. Some of the developing countries around the world can now help shoulder the world's responsibilities and challenges. As education and training increases around the world, combined with stronger economic ties, world peace will be more valued. Americans are now saving more. The U. S. personal savings rate was 9.59% in the 1970's and fell all the way to 1.83 during 2005-07. In the last few months it has risen to 5%. This is good, but it has also aggravated the current recession. We need people to not only have money, but spend it. Interest rates are close to an all-time low. I can remember paying 12 percent on one of my home mortgages. Home sales are rising again; and manufacturing data last month started to grow. Some American firms are beginning to rethink the advantages of off-shoring and have begun to bring back jobs. The NCR Company is bringing back the manufacturing of ATM's from China and Brazil to Columbus, Georgia. Expectations concerning investments are more realistic. Loans are being scrutinized more closely. Politicians and CEO's have learned many lessons concerning ethics and responsibility. The stock market has had a tremendous run the last 6 months. My 410 plan has experienced a 50%+ rate of return in just the last six months. Thank goodness I remained a glass half-full guy concerning the market. Out of depression – in times of great crisis come opportunity. History is full of stories about companies and products that were invented or launched in bad times. Many of American's entrepreneurs made their billions during especially tough times. Maybe we should redefine what our expectations of the American Dream should be. Do we have to have a 5,500 square foot McMansion; a KOBE steak at $35 an ounce; and a Whole Foods Market free-range chicken in every pot? A recent lottery winner, after saying she felt she wasn't being extravagant, lived her American dream by running out and buying $20,000 worth of purses and $100,000 of Disney figurines. The dream could incorporate a little more frugality. One in which each of us does our part to insure that we pass America and the world on to the next generation just a little better than we had it. We should practice those Native American proverbs of "the frog does not drink up the pond in which he lives", and "we should treat the world well; it was not given to you by your parents, it was loaned to you by your children. We did not inherit the Earth from our ancestors, we borrow it from our children." Our dream should be that each of us, individually and collectively, strive to ensure that our children, and their children's children, live in a world where they at least have an opportunity to realize their dreams. Dr. Harbin can be reached at james.harbin@tamut.edu.
TOP
The American Dream: A Promise Half-Empty or Half-Full?
The American Dream: A Promise Half-Empty or Half-Full? This article originally appeared in the Texarkana Gazette on September 27, 2009 Dr. James Harbin, Professor of Management, Texas A&M University-Texarkana, College of Business The American Dream has always been that each generation could, if they worked hard and got an education, live better than their parents did. Is this dream still achievable? While no one knows what the future holds, let me share some trends that would support both the glass being half-empty or half-full. First, the case for the promise being half-empty. In the past, a college degree, combined with a little luck and determination, was an automatic ticket up the American ladder. I am a living example of that. Today, that degree is still very helpful, but it doesn't come with the same degree of assurances that it once did. Those that didn't want to pursue a college degree had another viable option. That of the blue-collar ranks whose jobs paid middle income salaries combined with great benefits and life-time employment. America has lost millions of those jobs. From December 2007 to August 2009, our economy lost nearly 7 million jobs. In the past, when the U. S. exported high-paying jobs to low-wage countries, we replaced them with even greater numbers of high-paying jobs in industries whose inception could be traced back to science done decades earlier. The PC, Internet, and the cellular industries, born in the 1980's and 90's, more than offset the losses of high-paying jobs in the consumer electronics, steel, auto, and other sectors. But in recent years, outsourced software and manufacturing jobs have largely been replaced by millions of low-wage service jobs in fast-food, retail and the like. That trend is likely to continue in the near future. Several talking heads on the financial networks have advocated that the salvation of America's economy will be small businesses. They will be an integral part, and it is true that 60% of all new jobs will be created by firms employing less than 100 workers, but small businesses mean small salaries. Small businesses provide few if any employee benefits. For approximately every 100 small businesses that start up another 90 go out of business. A third of small businesses don't last 4 years. If you're under 30 in American today, you're likely to have seven jobs by the time you are thirty. General Motors had 853,000 employees in 1980, they will be lucky to finish this year with 63,000. What America needs is big businesses that provide high-value jobs. Small wages, few benefits, and lack of job stability makes it very difficult for families to commit to long-term decisions, like buying a house, getting married, or having children. The gap between the haves and have-nots in America has widened. Average income continues to increase in the U. S. But a focus on averages masks significant differences in trends for lower versus higher-wage workers. One of the things that has transpired is the people at the top are getting more, the middle group is decreasing in numbers, and the lowest group is losing ground. Jobs at the lower end (bottom ½) of the wage distribution lost ground during 1973-2003, while jobs at the upper end (top ½) gained in both absolute and relative terms. Rather than being bunched together in the middle as in the past, today more and more Americans have been earning either a lot more or a lot less than the average. A second reason the "average" income has increased is the addition of a second wage earner in the household. For the vast majority of families, this second income is not treated as fun money, but became an integral part of their budget: mortgage or car payments, buying food, paying medical bills, etc. But this second income also put that family at double jeopardy. A loss of either spouse's job would be a devastating financial blow. Talking about averages - of the roughly 130 million jobs in the U. S., only 20%, or 26 million, pay more than $60,000 a year. The other 80% pay an average of $33,000. Those averages do not provide a good foundation for a strong middle class and a prosperous society. When 80% of Americans are making an average of $33,000 a year, and when the average home price is $181,000, that 80% doesn't come close to qualifying for buying even an average house. Slow job growth combined with suppressed wage growth could likely keep our economy in the dumps for years to come. Some were jumping for joy recently when the rate of job losses lessened. Unemployment has hit 9.7%, a 26 year low. It will be in double digits shortly. The rate is already above 10% in 15 states. If we factor in the number of people who have given up looking for a job (which is not included in the unemployment rate) the rate would be over 20%. It wouldn't take much more to break the rate experienced during the Great Depression. Now the case for optimism and seeing the promise as one half full. While the half-empty case is based on past trends and statistics, the half-full argument is based more on faith in the American system. The fact that America has weathered all past crises, and that this rough spot will also pass. It is a given that future generations will have it better in many respects. Who knows what inventions are just around the corner? The quality of health care will improve and technology will continue to astound us. People will live longer. They will have more things to enjoy and entertain. All of this will be made available at a cheaper price. The number of educated people around the world has greatly expanded. Annual worldwide yearly enrollment in post-secondary education has gone from 30 million in 1970 to a 150 million in 2007. America used to graduate 50% of the world's PhD's, now we only produce 15%. Ten years ago the U. S. had the highest percentage of adults worldwide with college degrees. Now we're tenth. A generation ago, patents didn't even exist in China. The country didn't adopt patent laws until 1985. Today, China's patent office has become the third-busiest in the world, ranking behind only Japan and the U. S. It is expected to pull ahead of both of those by 2012. While America might not always remain the dominant country in the world, other than loss of pride, that would not be the worst thing that could happen. Some of the developing countries around the world can now help shoulder the world's responsibilities and challenges. As education and training increases around the world, combined with stronger economic ties, world peace will be more valued. Americans are now saving more. The U. S. personal savings rate was 9.59% in the 1970's and fell all the way to 1.83 during 2005-07. In the last few months it has risen to 5%. This is good, but it has also aggravated the current recession. We need people to not only have money, but spend it. Interest rates are close to an all-time low. I can remember paying 12 percent on one of my home mortgages. Home sales are rising again; and manufacturing data last month started to grow. Some American firms are beginning to rethink the advantages of off-shoring and have begun to bring back jobs. The NCR Company is bringing back the manufacturing of ATM's from China and Brazil to Columbus, Georgia. Expectations concerning investments are more realistic. Loans are being scrutinized more closely. Politicians and CEO's have learned many lessons concerning ethics and responsibility. The stock market has had a tremendous run the last 6 months. My 410 plan has experienced a 50%+ rate of return in just the last six months. Thank goodness I remained a glass half-full guy concerning the market. Out of depression – in times of great crisis come opportunity. History is full of stories about companies and products that were invented or launched in bad times. Many of American's entrepreneurs made their billions during especially tough times. Maybe we should redefine what our expectations of the American Dream should be. Do we have to have a 5,500 square foot McMansion; a KOBE steak at $35 an ounce; and a Whole Foods Market free-range chicken in every pot? A recent lottery winner, after saying she felt she wasn't being extravagant, lived her American dream by running out and buying $20,000 worth of purses and $100,000 of Disney figurines. The dream could incorporate a little more frugality. One in which each of us does our part to insure that we pass America and the world on to the next generation just a little better than we had it. We should practice those Native American proverbs of "the frog does not drink up the pond in which he lives", and "we should treat the world well; it was not given to you by your parents, it was loaned to you by your children. We did not inherit the Earth from our ancestors, we borrow it from our children." Our dream should be that each of us, individually and collectively, strive to ensure that our children, and their children's children, live in a world where they at least have an opportunity to realize their dreams. Dr. Harbin can be reached at james.harbin@tamut.edu.
TOP