Global Policy Forum

Most Americans feel the business boom
has left them out in the cold

By Michelle Conlin

It seems as if they're everywhere, these legends of the New Economy. The millionaire janitors, Gucci-clad day traders, and set-for-life twentysomethings. Experience? You don't need it. Track record? Nobody's looking. Earnings? Better if you don't have 'em. VA Linux Systems, a computer company that has yet to make a dime and isn't expected to in the -foreseeable future,- saw shares of its initial public offering zoom a gravity-defying 700% on Dec. 9, the biggest first-day gain in history. The day before the IPO, founder Larry M. Augustin was still driving a beat-up, eight-year-old Volvo and living in a 1,250 square-foot house. The day after, he was worth as much as Donald Trump. Never before, it seems, have so many had it so good, so fast, and so easy--at least on paper.

But even as the U.S. economy exits the millennium with an unprecedented bang, there are signs of unease. For every Larry Augustin, there are millions of hourly workers and even seasoned middle managers bumping along with 4% annual wage increases and not a stock option in sight. According to a new Harris Poll commissioned by Business Week, most Americans feel as if the New Economy's good-'n'-plenty train is passing them by.

What the poll and other surveys show is that, at least in part, the public shares much of the frustration voiced by those angry demonstrators at the World Trade Organization meeting in Seattle. Some 52% of respondents said they were sympathetic to the concerns of the protesters. Echoing the anti-business theme that ran through the sound bites and across the banners there, the BW-Harris poll also found that most Americans believe that business now has too much power. More than a third say they have less confidence in business leaders than they did a decade ago.

It's the puzzling anomaly of the New Economy. In the greatest period of wealth creation in U.S. history, the average American, it seems, is living in another era. "In the real world, people are still living from paycheck to paycheck,"says Princeton University economist Henry Farber. "The tremendous wealth creation has by and large gone to the people at the top."

FINE WHINE

To some, this sounds like whining by the envious haves over the riches being piled up by the have-mores. After all, the +90s have brought low interest rates, boosting home ownership to unprecedented levels. And stock-market investing seems to be the new national pastime: Some 48% of Americans now have a stake in the market. -It seems as if the public is beginning to take economic growth for granted,- says Barry K. Rogstad, president of the American Business Conference.

Still, the unease across the land is something that business leaders and policymakers are keeping a close eye on. While the apprehension may seem exaggerated, it is easy to see why so many Americans are torn over the benefits of the New Economy and globalization. For instance, while Americans generally credit the productivity boom with creating new wealth and low inflation, most say it has not led to rising incomes for them.

One reason: Real wages are barely budging and only 21% of Americans have stock-market assets outside retirement funds. So these people can look forward to a comfortable retirement, but they're getting no fun out of that money now. Perhaps that's why 75% of those surveyed say the benefits of the New Economy have been distributed unevenly.

Jerry Jasinowski, president of the National Association of Manufacturers in Washington, figures that there is -substantial angst in the public because of rapid technological change.- That, he says, may result in an inappropriate anti-business response, caused by what he calls -a high degree of economic illiteracy in this country.

The anxiety has also stoked support for the growing backlash against genetically modified food in the U.S., says Cornell University entomologist Anthony M. Shelton. " There seems to be an overwhelming sense that people are not in control of their lives-- and they see large businesses as the evil empire."

Whatever the motive or the justification, these sentiments are bound to find their way into the political dialogue. Already, signs of a populist tilt are apparent. The promise of campaign reform and opposition to mega tax cuts that benefit the rich by self-styled outsiders Bill Bradley and John McCain appeals to anti-Big Business, anti-Beltway voters.

Free trade could be another target. While most who participated in the poll agree that it's good for the economy, they aren't persuaded that it creates jobs in the U.S. And more Americans say globalization harms the environment than don't.

LOUSY TIP?

The biggest fault line, however, seems to be between Americans who are getting an extra income boost from the stock market or a employer, and everybody else. Indeed, the most striking development in the New Economy for many has been the end of the 40-hour week: Americans now log more hours on the job than workers in any other industrialized nation. But growth in real hourly compensation has dropped from a 4.3% annual rate in the third quarter of 1998 to 2.3% this year. Annual raises will be 4.2% in 1999, down from 5.2% in 1990, according to Hewitt Associates. -That's like a tip,- sniffs Thomas Flannery, a compensation consultant for Arthur Andersen's human capital group.

Further down the economic ladder, the mood is grimmer still. While execs at (AMZN) in Seattle watch their paper-wealth mushroom, optionless customer-service reps complain of toiling away for $10 an hour in cybersweatshops. In Vermont, 33-year-old Nancy Bercaw scrapes by on $22,000 as a public relations specialist for the University of Vermont. "I feel left out, "she says "We pride ourselves in Vermont that material things don't matter, but at some point in the world, unfortunately, they kind of do."

This may explain why 51% of Americans say they feel cheated by their employer, according to a new study from Opinion Research Corp. International. The biggest gripe on the part of employees? Money. Twenty- five percent of those polled feel as if they aren't making as much as their chums in other companies. It's no wonder. Unless you're able to change jobs, don't count on seeing a double-digit hike.

If so many folks are feeling left out, why aren't these ranks of the overexhausted and overworked stomping their feet? Because even as unemployment stays glued at just over 4%, constant restructuring and consolidation by large corporations is driving layoffs to record highs. On Dec. 15, for instance, the recently combined Exxon Mobil (XON) said it planned to lay off another 7,000 workers, bringing merger-related layoffs to a grand total of 16,000.

Federal Reserve Chairman Alan Greenspan continues to cite this lingering worker anxiety as explanation for low wage gains. But that could change: "Once people realize it's the day of the employee, they'll start pounding the table, and we'll see it in the stats," says John R. Stanek, CEO of Chicago-based International Survey Research, a company that polls employees for the country+s biggest corporations. When and if workers finally recognize their bargaining strength, the battles won't be in the streets like they were in Seattle--they'll be at the office.

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