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American Standards of Living:1918-1988

Consumtion Norms and Economic Distance (continued)

The War on Poverty had reduced, but not eradicated, poverty by 1973. Black husband-wife families had finally made it into the working class, but black single-mother families, which were rapidly multiplying, usually lived in poverty. Black families had become bifurcated by their family composition.

Families living at the poverty threshold did not have sufficient budgets to purchase the basics for employed families. However, their budgets allowed them to purchase the dependency basics, except for cloth-ing. Many low-income families preferred to spend money on an automo-bile, so they would not have to rely on public transporta-tion or friends, rather than spend money on appearance (clothing and personal care). For the 45% car owners, their cars made life easier and integrated them into their social stratum, but owning a car was costly and forced them to cut back severely in other areas. Still, low-income families spent consid-er-ably less than laborer families on transportation, as well as recreation and gifts.

In 1973, economic distance within the working class had shrunk to the lowest point witnessed in this book. Wage earners now had budgets only 16% higher than laborers’ budgets. Wage earners favored spending the incre-ment to create economic distance from laborers by making home life easier and more pleasant with spending on furnishings and household operations, by improving appearance with more hair cuts and perms, and by having more active social lives through paying for recreational admissions and vacations.

Salaried families continued to spend their higher incomes relative to wage earners on recreation, gifts, and clothes as their social activities separated them from working--class families. Higher spending on home furnishings also allowed them to bring part of their social lives into the home. Salaried families augmented spending on housing and household operations at a much lower rate, however, in improving their living stan-dard over wage earners. Ownership of the proper equipment and clothing for a particular activity, both at home and in public, and taking vacations had become markers of class status.

The period following 1973 brought disillusionment to Americans, who had begun to believe that they could control the economy, improve the lot of the disadvantaged, and maintain ascending living standards for employed families. When these expectations were not met, and when income growth lagged, social conflict over income distribution surfaced.1 The steady and impressive economic improvements of the previous period left Americans unprepared for the challenges imposed by an increasingly interconnected world economy that was largely the result of U.S. policies. With high and unmet expectations, both developed and developing countries made claims for a larger share of resources and improvements in living stan-dards.

By 1988, the shifting of the budget from home life to social life had noticeably slowed down. Families allocated their budgets in a remarkably similar fashion to 1973. Homeownership edged upward for wage-earner and salaried families, and the favored minority of working-class families owning more than one car expanded. But families increased their spending rates in order to improve their consumption norms in an attempt to meet unrealis-tic expectations based on the past. Technological innovations, especially those based on the applications of microelectronics to communication and audio-visual equipment as well as personal computers, provided the major source for ameliorated living standards between 1973 and 1988.

Over the years, miscellaneous expenditures, which are primarily transactions costs (banking and legal services, finance charges, real estate fees), rose steadily.2 Except in 1973, this category was always the third largest. These transactions costs represent the expenses imposed by an increas-ingly complex and more regulated economy. Although they are required for economic functioning, their value added to the standard of living is neither visible nor obvious.

Economic distance between salaried and wage-earner families dis-played the same pattern in 1988 as in the previous two surveys. Salaried families spent their higher budgets relative to wage earners on recreation and furnishings as they bought modern electronic equipment. Similarly, wage earners distanced themselves from laborers through purchas-es of modern electronic equipment. Surprisingly, wage-earner families also distanced themselves from laborer families by spending considerably more on cloth-ing.

The 1973 poverty rate of 11.1% turned out to be the lowest rate achieved so far by the United States. After falling steadily in response to income support programs enacted in the 1960s to help the disadvantaged, the poverty rate rose after 1973 to a peak of 15.2% in 1983 before falling to 13.1% in 1988. The heightened inequality of the 1980s still generated poverty rates below those of the years prior to the 1960s. Poor families' standard of living rose during the 1980s because their expenditures rose much more rapidly than their reported incomes.3

Both poor families and seniors made gains relative to employed families between 1973 and 1988, but the source of their gains was not the same. Seniors had consider-ably higher living standards in 1988 than in 1973 because Social Security benefits expanded and are indexed for inflation. Seniors’ budgets, which were only slightly higher than the BLS Retired Intermedi-ate Budget in 1973, were 77% higher than the BLS budget in 1988. In retirement, seniors spent only 56% of what laborer families spent in 1973. In 1988, seniors spent 72% as much as laborer families, who had additional financial obligations with growing children and home mortgages. Seniors were likely to own their homes without mortgages, and they had much higher assets than middle-aged, working-class families. Although they spent more on medical care than employed families, they had access to basic medical care through the Medicare program. Employed families who did not have employer-sponsored insurance were left to hope that no one in their family would require hospital-ization or ongoing doctor’s care.

Poor families in 1988 were typically better off than families at the poverty threshold in 1973 because of the substantial increase in unreported income, especially for the lowest income families. In 1973, families at the poverty threshold were significantly better off than the average poor family, but by 1988 the relationship between reported income and expenditures had disintegrated for poor families.

The poverty threshold, which had been constructed assuming families would spend one-third of their budgets on food, reflected consumption norms of the 1960s when food absorbed a larger part of the budget. By 1973, low-income families spent only one-fourth of their budgets on food; in 1973, only one-fifth. Although few commentators express confidence in the poverty thresholds as being up-to-date in defining minimum material requirements, no attempt has been made to calculate new thresholds. What light does the data presented here shed on the adequacy of the official poverty thresholds? The dependency budget standard developed in this book for nonemployed families in 1973 and 1988 indicate that the poverty thresh-olds are not too low. In fact, poor families in 1988 spent 21% more than the dependency standard. However, compared to the dependency standard, poor families economized on housing and appearance (clothing and hair cuts) in order to reach or exceed the working-class basics for transportation, recreation, and household operations. Their standard of living, at least in their social integration, had improved considerably between 1973 and 1988. As is often the case, the actual consumption practices of families diverge from the patterns advocated by the experts. In order for poor families to consume the depen-dency standard for housing and clothing, they would have to forego part of their spending for cars and recreational activities and increase their spending for appearance and housing, or else they require considerably higher incomes to entice them to spend more for housing and appearance.

Laborer families experienced a substantial decline in their living standard relative to the poor between 1973 and 1988. At the same time, laborer families fell behind

wage-earner families as the economic distance within the working class expanded back toward a more common historical relationship after falling to an atypically low level in 1973. Laborer families were feeling squeezed by diminished job opportunities and a living standard that was not keeping up with the other employed classes. Mean-while, the economic distance that protected them from poverty was shrinking.

The economic security of families steadily improved from the Depres-sion until the 1980s. After falling since the Depres-sion, spending rates for employed families rose in the 1980s; after rising since the Depression, the real value of liquid assets fell. Only the economic security of seniors had continued to improve in the 1980s. As the United States borrowed against the future to maintain and improve current living standards, the country incurred massive Federal government debts and trade deficits while invest-ments in plant and equipment languished. Low savings and investment reinforced the slow growth of income and productivity, and Americans found themselves in a vicious cycle.

Even though many families were disappointed by the slow economic growth of the 1980s, we see that the economic growth of the previous seventy years had brought phenomenal improvements in the daily lives of people. Instead of revolving around physically demanding work, life was filled with a variety of stimulating activities using an array of goods. Advances in medical care had dramatically reduced the tragic experiences of losing a child and had prolonged the years of life so that most adults would enjoy a period of retirement. Complaints of physical exhaustion were replaced with complaints of pressure to do too many things in too little time. The array of options in how to spend one’s time, coupled with the time required to comply with complex consump-tion norms, generated widespread feelings of stress. The transformation of consumption norms was accomplished through a process of emulation and innovation coupled with economizing and lowering the savings rate as families attempted both to replicate past practices and to incorporate new goods and services into their consumption patterns.

We leave our families in 1988 facing a more complex and rapidly changing world and experiencing vastly different lifestyles than in 1918. The age and cause of death encompasses as well as symbolizes the improvements made in living standards. A person born in 1988 could look forward to twenty more years of life, living almost 40% longer, than a person born in 1918. Death of a young parent or child was a familiar occurrence in 1918 that few families escaped. Working for forty years and then retiring only became an expected part of life in the second half of the century.4

The process of birth had become much more traumatic as it became less danger-ous. Infant and maternal mortality rates in 1989 were one-tenth the 1918 rates. Doctors’ knowledge and the tools available to them had also improved the life chances of children and young adults. A one year old in 1989 was only one-twentieth as likely as a one year old in 1919 to die before age 14 or before age 24 years old. In 1919, before antibiotics and immunizations, 12 in 1000 one-year-olds would not live to cele-brate their fourteenth birthday and 17 in 1000 would not live to their twenty-fourth birthday. In 1989, 1 in 1000 one-year-olds would not live to their twenty-fourth birthday. (See Table 8.1.)

Compared to a M.D. in 1918, who often carried all the tools of his trade in a physician’s black bag, the M.D. in 1989 used a impressive array of medicines, procedures, and equipment for diagnosing and treating medical problems. Some killers, such as tuberculosis, typhoid, diphtheria, and whooping cough, along with other dreaded diseases that often left debilitating aftereffects, such as polio, scarlet fever, and measles, had almost vanished in the U.S. Other diseases, such as flu and pneumonia, had dwindled to become a threat only to those already weakened by infirmity or age. In 1919, heart disease, flu or pneumonia, and tuberculosis were the three leading causes of disease. In addition, occurrenc-es of measles (4.7 per 10,000 people), diphtheria (1.0 per 1000), scarlet fever (.9 per 10,000), smallpox (.8 per 10,000), and typhoid (.5 per 10,000) were common. By 1989, heart disease and cancer were the leading causes of death. The death rates of flu and pneumonia had fallen by 86% and of tuberculosis by almost 100%. Reported cases of diphtheria, scarlet fever, and smallpox could be counted on one hand. The most virulent, and spreading, communicable disease in 1989 was AIDS.

The transformation of the cause of accidents symbolizes the complexity of the economic changes being made. In 1989, one was more likely to be in a fatal accident while riding in a car rather than working on a job, and the probability of surviving an accident had been considerably improved since 1918. The death rate from accidents rose between 1918 to 1935 as automobile accidents became more common. As work become more automated and as the medical profession’s ability to treat trauma improved, industrial accidents fell more rapidly than automobile accidents, and the total accident rate began to fall in the second half of the century. With improvements in car safety, the death rate from automobile accidents finally began to fall. By 1989, the death rate from accidents was only 60% of the 1919 rate.

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