It's a Hot Economy, but Not for Janitors, Others

The L.A. Times

The American economy is so hot that Alan Greenspan, chairman of the
Federal Reserve Board, is worried it's overheating. Dot-com billionaires are
blooming like spring crocuses. The average pay of chief executives of major
companies rose 18% in 1999 to $12 million. Across the managerial,
professional and executive ranks of the United States, pay (including
bonuses, stock options and perks) is skyrocketing. Afraid of losing their
talent to the dot-coms, big law firms just hiked the pay for first-year
associates to $120,000.

Greenspan worries that all this prosperity is causing consumers to buy too
much--more than the economy can produce--which means inflation is just
around the corner. That's why he and his pals at the Fed have hiked
interest rates five times since last June in an attempt to cool things down
and head off inflation.

But wait. What about Los Angeles' striking janitors? What about all
workers at the lower end of the economy? Raising interest rates hurts
people at the bottom, causing them to pay more for first mortgages and
car loans, and maybe even costing them their jobs when the economy
sags.

Unionized janitors in Los Angeles earn $6.80 to $7.90 per hour--less than
$16,000 a year. Cleaning companies say they can't afford to pay the
janitors a dollar more per hour. Yet the janitors have been watching the
rents soar in the office buildings they take care of, where they mop the
floors, wash the tiles, clean the sinks and toilets and empty waste
baskets--offices in which executives and professionals are pulling in larger
and larger multiples of their take. Adjusted for inflation, janitors are
earning less now than they did 15 years ago.

Janitors are not the only ones working harder for less. More than 2 million
Americans work in nursing homes, bathing and feeding frail elderly people,
cleaning their bedsores, lifting them out of bed and into wheelchairs and
changing their diapers. They earn, on average, about the same as janitors.
About 700,000 people work as home health care aides, attending to the
elderly, sick or disabled at home. Their pay averages between $8 to $10
an hour, less than $20,000 a year. Another 1.3 million Americans work in
hospitals as orderlies and attendants, at about the same rate.

The list goes on. An estimated 2.3 million Americans are paid to care for
young children in child-care centers or as nannies at a median wage of
$6.60 an hour, usually without benefits. This is less than what funeral
attendants earn ($7.30 an hour) or pest controllers ($10.60 an hour). And
700,000 Americans are social workers or human service workers who
attend to individuals and families with severe problems--alcohol and drug
abuse, domestic violence and mental illness--at an average pay of
between $8 and $15 an hour.

Why are top lawyers, executives, financiers and dot-com impresarios
earning so much more than ever before, while the nation's caretakers are
earning less? Economists will tell you that people earn what they're
"worth" in the market. It's just supply and demand. Here's the irony: The
demand for lawyers, executives, financiers and dot-com impresarios can
almost never be filled. The more you have of them, the more you need of
them. Because of intense competition, they virtually create their own
demand.

Meanwhile, the people who take care of buildings or people are in
abundant supply, and the demand for them is not self-generating. The
president of the Los Angeles Building Owners and Managers Assn.
explained last week that janitors aren't actual employees; they're more
like commodities. They're a "purchased service, like so many others," he
said. If unionized janitors charge too much for their services, he said, then
building owners will give the work to non-unionized janitors who charge
less.

The problem is, the economy doesn't always reward people according to
what they're worth to society. Janitors, nurses aides, child-care workers
and others like them are doing the sort of work that keeps the rest of us
going--taking care of the things that the rest of us don't have time for or
just don't want to do. They haven't participated in the economic boom.
They didn't get raises in the roaring '90s. Most of them don't own any
shares of stock, so they don't ride the booming market. Many of them rent
their homes, so they don't get the benefit of the big rise in home prices
over the last decade.

When Greenspan worries that Americans are doing too well and spending
too much, he's worrying about the wrong people. The big spenders are at
or near the top, where most of the money has gone. This year, the richest
2.7 million Americans, making up the top 1%, will have as many after-tax
dollars to spend as the bottom 100 million put together.

If Greenspan wants to put a damper on excessive spending brought on by
too much wealth, he ought to set his sights on where the wealth is
accumulating. He should urge Congress to make the income tax code more
progressive, to increase capital-gains taxes and to pass a wealth tax on
households whose net worth exceeds a million dollars.

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