Obvious To Some

It is a useful rule that whenever a consensus forms among the lumpen intelligentsia-that is, among those in the press, [...]

November 1 1992 by JP Donlon

It is a useful rule that whenever a consensus forms among the lumpen intelligentsia-that is, among those in the press, TV, academia, and politics-it is time to take a contrary view. There has been a fairly constant chatter, reaching a crescendo in this election year, about the U.S.‘ “loss of competitiveness.” Whether in the pages of Business Week, in the writings of Harvard economist Robert Reich, or in the numerous public appearances of MIT’s Lester Thurow, the drumbeat is familiar. The nation needs some form of economic “strategy” (i.e., policy) between business and government, whereby a sage group-presumably led by folks like Reich and Thurow-would help business leaders overcome their shortsightedness.

Competitive damage reports have been thick and fast. One of the more serious comes from Thurow himself, who argues that declining U.S. productivity has hurt our standard of living. Having moderated a panel discussion about global work force issues at the CNN World Economic Congress in Washington recently, I heard the good professor-also an advisor to Bill Clinton-underscore just how bad our situation has become. Among men age 18 and older who had full-time jobs in 1980, he said, 18 percent had incomes below the poverty line. By 1990, however, that figure had risen to 40 percent. (The focus invariably shifts from the maladjustment in our economy to the maladjustment in income.)

This is a serious charge, but alas, the facts are otherwise. Says Manhattan Institute fellow Ed Rubenstein, “Thurow’s figures are from a highly misleading Census Bureau report” issued last March, entitled, “Workers With Low Earnings: 1964 to 1990.” According to the study, 39.7 percent of men 18 to 24 years old who worked full time in 1990 had low earnings, compared with 18.1 percent in 1979. The percentage of all low-earning full-time workers was 18 percent in 1990, up from 12.1 percent in 1979.

As defined by the survey, however, “low earnings” does not mean poverty. Any full-time, male worker with an income below the poverty line for a four-person family was labeled a low earner regardless of his actual family size. Since few men 18 to 24 years old are married, much less heading a family of four, the census report vastly overstates the case. In fact, says Rubenstein, only 12.9 percent of men with low earnings were poor in 1990. Among all full-time workers, the official poverty rate in 1990 was only 2.6 percent.

Income aside, what is the truth about U.S. productivity-the ultimate yardstick of competitiveness-when compared to other industrial nations? As it happens, the McKinsey Global Institute recently completed what The New York Times called “the most authoritative comparison to date.” It turns out the U.S. commands a significant lead over Japan and Europe in output per worker. Calculating purchasing power parity to iron out exchange rate anomalies, an American full-time worker in 1990 produced $49,600 in equivalent goods and services a year, compared with $44,200 for a German worker and $38,200 for a Japanese worker.

Perhaps most important, the report offered two conclusions, as reported by the Times. First: “America‘s secret productivity weapon is not bigger companies or more robots but Washington‘s relative reluctance to protect companies from the rigors of international competition.” Second: “America‘s biggest advantage consists of Washington‘s relatively hands-off attitude, compared to Tokyo or Bonn.”

In other words, as project director William Lewis was quoted as saying, “It’s not obvious that the U.S. should be copying a model elsewhere.”

Well, not obvious to those not living in Cambridge, MA.