WEALTH: STATIC WAGES, EXCEPT FOR THE RICH

By JOHN ROTHCHILD

Here's the state of the economy in the typical U.S. household: the principal breadwinner (let's say it's a he) brings home the same paycheck he was bringing home in 1970, when Richard Nixon was President and the Grateful Dead had hair. He may think he's got raises, but when you subtract for inflation, he hasn't. Yet his family is better off than it was in 1970, with 20% more buying power.

What's the reason the typical household has more money to spend, while the typical paycheck has failed to grow? There's now a second breadwinner in the house. Couples have also let up on babymaking (the rate dropped from 18.4 births per 1,000 people in 1970 to 16 in 1992), so there are fewer mouths that need braces and not as many teenage phone bills to finance. More workers with fewer dependents makes for more income per family.

The above analysis comes from Frank Levy, an M.I.T. economist and expert on family incomes. The way Levy sees it, politicians are rushing to the aid of a vanishing middle class that isn't really vanishing. While there has been a big drop in the number of families making $20,000 to $40,000 a year, it has been offset by a sizable increase in the number of families making $50,000 to $90,000.

The two groups that have been helped most in recent decades are senior citizens and rich people. At one time, the elderly sat alongside small farmers on the poverty rung of the economic ladder, but they've been pushed up by rising Social Security benefits. President Nixon deserves much of the credit for this. Before he came along, Social Security payments were raised only when Congress decided--usually around election time--to give retired voters a bonus. Since Nixon put in the automatic cost-of-living increase, the surest way to improve your lot in life is to get old.

According to Ed Wolff, an N.Y.U. economist who tracks wealth, the very rich have improved their lot in life by getting richer. Half a million U.S. households (one-half of 1% of the population) now own 39.3% of all assets (stocks, bonds, cash, life-insurance policies, paintings, jewelry, etc.). This makes the U.S. No. 1 among prosperous nations in the inequality of income.

Wolff's statistics on the distribution of wealth during the Reagan years are particularly stunning. He calculates that the nation's net worth increased from $13.5 trillion to $20.2 trillion during the rewarding years of 1983 to 1989, and that $3.9 trillion of the reward was captured by the fortunate top one-half of 1%. That works out to a $3.9 million bonanza per wealthy household. Wolff says the last time the national assets were so unevenly distributed was in 1929, just before the stock-market crash.

The biggest losers of the latest quarter-century are the people who didn't go beyond high school, particularly the men. They are the only group that has less money to spend now than it did in 1970--more than $6,000 dollars less in inflation-adjusted annual income. Back in 1970, a high-school diploma could still be a ticket to the middle-income bracket, a nice car in the driveway and a house in the suburbs. Today all it gets is a clunker parked on the street and a dingy apartment in a low-rent building.

If Americans in general are better off than they were 25 years ago, why all the Depression rhetoric about hard times and strapped budgets? Levy thinks the answer lies in the sluggish paycheck. It's not like the post-World War II period, when the nation's income doubled. Families are living comfortably, and working long hours to do it, but short of turning polygamous in the interest of a third paycheck, they don't see much hope of getting ahead from here.

--By John Rothchild

With reporting by DAVID BJERKLIE AND SHARON E. EPPERSON/NEW YORK, ANN BLACKMAN/WASHINGTON AND RICHARD WOODBURY/DENVER. CHARTS RESEARCHED BY DEBORAH L. WELLS, KATHLEEN ADAMS, ELIZABETH L. BLAND, RATU KAMLANI AND RICHARD RUBIN