The Future of Success (13 page)

An inverse relationship between creativity and age has long been established, although most of us with graying heads would rather avoid the subject. The field of mathematics is built almost entirely on the creative breakthroughs of young mathematics whizzes; great musical compositions typically come from young composers; great research, from young scientists; great poetry, from younger muses. What older people lack in creativity, they make up for in experience, wisdom, and judgment—attributes that continue to be valued, although not to the same degree as creativity. As a consequence, more older and middle-aged workers are experiencing flat or declining earnings, and middle-aged people who lose their jobs have difficulty finding new ones, even when the overall rate of unemployment is low.
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There’s no coasting, no cruising altitude. Work requires continuing effort. Home is no longer a haven from paid work; the border between the two is vanishing. Most women with young children now have paying jobs. And regardless of the official hours of employment, many men and women must be “on call” at all hours. The physical distinction between the place of paid work and the home is blurring; almost a third of the workforce works out of their homes at least part of the day. And wherever they are, cell phones, beepers, e-mail, and faxes keep them connected to customers and clients. Or they’re in the air, traveling to and from one project or client to another. Sometimes they travel so much, they have no settled place of work but only temporary “hot desks” in a variety of locales.

Eight-hour days and forty-hour workweeks are becoming obsolete. Working hours now extend in all directions. The emerging economy runs twenty-four hours, seven days a week. This is partly because spouses or partners both work during the day and need the remaining hours to shop, run errands, and eat out—requiring other paid workers to be there for them at those odd hours. And it’s also due to an increasingly globalized marketplace that never sleeps. Global companies, worldwide stock markets, and clients suffering insomnia demand around-the-clock attention.

Widening inequality.
Firms no longer compress the wages of people who work within them. To the contrary, firms are competing furiously to attract and keep valuable performers—rewarding them with high wages, signing bonuses, stock options, year-end bonuses, memberships in health spas, and on-premises exercise rooms with hot tubs—while at the same time slashing the wages and benefits of routine workers. A similar divergence is occurring in nonprofits, although not quite as extreme. Professors of finance are earning far more than professors of English on the same faculties. The chief executives of giant foundations are earning many multiples of lowly staffers.

As enterprises morph into contractual networks, such disparities are widening. Workers are summoning what they’re “worth” in the market. As noted, the demand for talented innovators is outrunning the supply. At the same time, routine production work can be done more cheaply by digital machines or by workers elsewhere around the world. Surely, some routine workers could learn the skills needed to become innovative geeks and shrinks, but the widening earnings gap suggests that not enough are doing so to keep up with the demand or to outrun the burgeoning supply of low-cost replacements.

Data on inequality are not free from controversy, but the trend is unassailable. By the end of the 1990s, according to the U.S. Census Bureau’s Current Population Survey,
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family incomes in the United States were diverging more widely than they had at any time since the 1920s, before the upheavals of the Depression, the New Deal, and World War II. From the late 1940s until the eighties, the top fifth’s share of total family income had remained remarkably steady, claiming about 40 percent. The large middle three-fifths of families received close to 54 percent of total income. The poorest fifth got what remained. Then in the early 1980s the gap began to widen, and widened further in the nineties. The top fifth’s share began rising, reaching almost half of all income by the end of the century, while the share going to the middle three-fifths dropped to 48.6 percent, and the share going to the bottom fifth shrank. Even
within
the top fifth, income and wealth shifted to the top. While the share of family income claimed by the top 5 percent had also been stable for most of the postwar era, at about 15 percent of the total, this portion, too, began rising in the eighties, reaching almost 25 percent by century’s end. And the top 1 percent soared from 11 percent of total income in 1990 to nearly 18 percent in 1999.
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Since the early nineties, the incomes of people at or near the top have grown twice as fast as those of people in the middle. Despite the decade’s boom, the median income has barely increased.
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And although stocks have become far more widely held, most of the boom in the booming stock market of the nineties also went to the top. According to computations based on Federal Reserve data, about 85 percent of the value of the stock-market gains during the decade went to the wealthiest 10 percent of families; 40 percent, to the top 1 percent.
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These widening gaps in income and wealth paralleled a widening benefits gap. Health coverage for workers in the bottom fifth of the income scale dropped more precipitously than for any other group—from about 41 percent covered in 1980 to 32 percent by the late 1990s. Employer-provided pensions diverged as well. The top 5 percent of households with incomes above $100,000 received almost a quarter of all pension tax benefits.
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These changes have large consequences. The rich and the middle class are now living in parallel universes, and the poor are almost invisible to both. By the end of the century, the richest 1 percent of American families, comprising 2.7 million people, had as many dollars to spend, after they had paid all taxes, as the bottom 100 million. And they owned most of America. (Bill Gates’s net worth alone equaled the total net worth of the bottom 50 percent of American families.)

Some argue that inequality is not nearly the problem it seems. They point out that, starting in 1996, real incomes of workers at the bottom of the ladder stopped declining and actually began to rise.
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True enough, but this welcome reversal was due almost entirely to an unusually low rate of unemployment—so low that bottom-rung workers could easily find one or more jobs, and put in many more hours than before. But we can’t count on the economy continuing to remain robust forever; it seems doubtful that the business cycle has been permanently repealed. And even though their incomes rose, they still became poorer
relative to
the top 5 percent, whose incomes rose at a faster rate. Others point out that measures of inequality are mere snapshots of incomes at one point in time, and fail to account for the movement of people out of the bottom into higher levels of income. True, but research shows that most people who start out at or near the bottom end up there.
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Others argue that poor people are still better off than they were several decades ago, before inexpensive long-distance telephone service, drugs to control hypertension, and other advances.

These perspectives contain important truths, but they don’t contradict the blunt fact of widening inequality. Controlling for the ups and downs of the business cycle, the entire spread of wages and benefits has elongated: Workers at the top earn vastly more than top workers used to earn, those at the bottom earn relatively less than workers at the bottom used to earn, and workers at every point in between are wider apart than before. The same trend toward widening disparities can be observed in most other advanced economies, although it is not yet as pronounced as in the United States.

America is splitting because the old bureaucratic organizations are disappearing, along with their wage scales. Increasingly, people are being paid whatever they’re “worth” on the market. During the Roaring Nineties, the average yearly compensation of Silicon Valley’s one hundred highest-paid executives nearly quadrupled, to more than $7 million a year (about $2,800 an hour, assuming a fifty-hour workweek). Add in stock options, and the figure was far higher. Why were they worth so much? Because consumers wanted their inventions, and investors wanted a piece of the action even though profits were still far in the future for many of these enterprises. During the same interval, the wages of the bottom quarter of workers in the Valley—doing everything from assembling computer parts in their homes to caring for the children of software engineers—dropped 20 percent, to just over $9 an hour.
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Why were they worth so little? Because they could so easily be replaced. In King County, Washington (comprising Seattle and Redmond, the home of Microsoft), 23,500 software workers each earned an average of $287,700 in 1999, including share options. The median household income of everyone else in the county was $34,300.
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Why so large a large gap? Because the software workers’ services were in high demand in the world; most other residents of the area provided retail, restaurant, hotel, hospital, and transportation services, which were not.

Comedian Jerry Seinfeld received $22 million for the last season (1997–98) of his widely popular television show. The NBC network apparently thought he was worth it. During each episode, NBC pulled in $1 million per minute of advertising. Advertisers figured many of us were watching and would buy their products as a result. We were, and we did. NBC also relies on an increasing number of freelancers—studio technicians, makeup artists, and “stringers”—to whom it pays the lowest wages it can, lower than its old union wage rate. Other broadcasters are doing the same, including the cable channels that are eating away at network-TV audiences, making it all the more imperative that NBC take these cost-cutting steps if it’s going to do well by its parent, GE, and by GE’s investors—among them, my teachers’ retirement fund. The laundry worker down my street earned $13,500 in 1999, she tells me. Even though the American economy was booming, the brute fact was that the laundry where she worked could easily find someone to replace her if she demanded a penny more. And, in truth, I didn’t want to pay any more than necessary to have my laundry done, although I didn’t admit that to her.

FULL CIRCLE?

It’s not coincidental that the old ideals of personal responsibility and freedom of contract heard in the years before industrialization are being heard once again. Legal protections against employers seem increasingly irrelevant where the employer-employee relationship is coming undone. The forty-hour workweek is meaningless to a taxi driver who leases his cab and medallion, or to a day trader who sits at his computer and gambles on stock prices. Both put in as many hours as they wish; it’s up to them. The right to bargain collectively makes little difference to them, either—or to growing numbers of people who work in small businesses and move from project to project, or who style themselves as free agents or professionals. With whom, exactly, would they bargain?

Laws ensuring a minimum level of workplace safety don’t reach the one-third of workers who work from their homes at least part of the day. An “ergonomic” standard intended to guard against repetitive-strain injury doesn’t protect me, now sitting at my home computer, writing this book. (For one brief day in January of 2000, the Labor Department extended rules governing workplace safety to work done at home, until the absurdity of the order became so apparent that the department quickly and unceremoniously withdrew it.) For that matter, I’m not particularly helped either by the Family and Medical Leave Act, which guarantees workers the right to leave work in the event of a family or medical emergency. Should there be an emergency in my house, I’ll turn off the computer and rush downstairs. If the condition is troublesome but not critical, I may have a heated debate with myself about whether to leave work, and for how long, but I don’t need to involve anyone else in that debate.

A mandatory minimum wage made sense when large-scale enterprises established prevailing wage rates and when most people were permanently employed. But in the post-employment world it’s easier to argue, or to perceive, that people are paid what they’re worth in the market. They determine their incomes on the basis of their skills, talents, and willingness to work hard. On this view, if they can’t find someone willing to pay them more, it’s their own fault. Similarly, unemployment insurance seemed reasonable when dips in the business cycle could hurt millions of innocent employees. But in the post-employment era, people without jobs seem more responsible for their situation: If they can’t find a job, maybe it’s because they’re charging too much for their services. Maybe they should charge less, or get additional skills, or market themselves more effectively.

In the era of employment it seemed fitting that employers were the chief conduits for health insurance and private pensions, and contributed to Social Security. Employers had a legitimate interest in their employees’ health security, and their employees had a stake in one another’s productivity. But in the post-employment era, when people move from project to project and job to job, it seems reasonable that individuals take more responsibility for their own health care and retirement savings.

Yet there are some important differences between the pre- and post-employment eras that suggest it can’t all be a matter of personal responsibility. In the pre-employment era, markets were mostly local and sellers faced little competition, so they had some power to set prices. They could also rely on their communities to come to their aid if they fell on hard times or needed help raising a barn or digging a new well. Communities, in that sense, provided an early form of social insurance. In the post-employment era, by contrast, most working people face the full gale force of a highly volatile market in which customers and investors can switch to better deals all over the world. And, increasingly, working people are on their own. Social insurance is eroding. Even informal neighbor-to-neighbor social insurance is waning; many people barely know their neighbors.