Personal Virtue and Corporate Markets

Paul O'Neill, a former corporate executive in a high political position, has a way of speaking his mind regardless of the consequences. The Treasury secretary recently shocked the Washington establishment with the view that "Able-bodied adults should save enough on a regular basis so that they can provide for their own retirement and, for that matter, health and medical needs." His invocation of an older business and middle-class ethic requires a more searching reply than it has received in most media. My home state of Maine, where O'Neill's traditional virtues of saving and self-reliance have long been celebrated, is an especially apt case study to examine the merits of his homily.

The business class has long charged that Americans don't save enough. Though their complaint has some overall merit, it begs the larger question of who saves and why. If Americans have become spendthrifts in the last couple decades, the wealthiest among us, those for whom saving would be the easiest, have initiated waves of luxury consumption not seen since the '20s. Paul O'Neill's peers clearly could save more, and if his strictures were confined to upper level management, his point would be well taken.

The situation for poor and working class Americans is much different. A Maine worker hoping to save for retirement and healthcare requires a steady and relatively well-remunerated job. Yet the Maine economy over the last 15 years has ridden a boom and bust cycle that has left relatively few in position to set aside substantial savings.

In a symposium earlier this summer on "The New Economy and the Old Poverty," USM labor economist Michael Hillard presented an analysis of the Maine economy with clear implications for O'Neill's cheery faith in individual savings. In the mid and late eighties, Maine did witness a burst of prosperity that allowed the incomes of all but the poorest to rise. Nonetheless, that economy, built on real estate speculation and the Reagan era military budget, was a house of cards.

Many of the best working class jobs were lost in the early '90s. Those losses were not the consequence of laziness on the part of Maine workers but rather of changes in budgetary priorities, trade policies, and Federal Reserve miscalculations -- all beyond the reach of Maine workers.

Maine has experienced new job creation in recent years, but of the jobs added between 1991 and 1998, 63% paid $20,000 a year or less. Only 6% of the new jobs paid more than $30,000.

Despite substantial gains in worker productivity over the last decade, real working-class income has only recently passed levels achieved at the height of the last boom. In addition, even in those communities such as Portland where wages for the bottom of the workforce have finally started to rise, increases in housing costs have more than outpaced income gains. Poor and working-class families in the most rapidly growing Maine communities (where vacancy rates can be as low as 1%) must save for housing long before they can set anything aside for retirement.

I fully expect that if O'Neill continues in office long enough, he will have another facile response to complaints about low worker wages. Maine citizens need only study harder and get better jobs. Unfortunately, as Hillard points out, Maine is near the bottom in terms of the affordability (costs versus typical student family income) of its state university system and provides woefully inadequate opportunities and resources for vocational training. Nor are Maine businesses generally topping the charts in their willingness to nurture and engage the full capacity of their employees.

In the world O'Neill and his colleagues have fashioned, the average Maine worker must already set aside a substantial portion of his or her modest income to pay for housing, postsecondary education, and the unexpected loss of a job. O'Neill now asks those workers to save more for retirement and medical expenses. Carried to their ultimate conclusions, O'Neill's principles would also leave these workers willing to embrace his principles at the mercy of private insurance conglomerates. These corporations would be free to maximize profits by cherry picking those likely to enjoy the longest lives and best health.

Enacted in 1935, the original Social Security legislation included disability insurance, "welfare" for single mothers, unemployment insurance, and old age pensions. There were differences as to the criteria for and administration of each section of the law and none were perfect. Nonetheless, the old age provisions were especially successful in ensuring modest retirement for many even amidst markets already well beyond the control of individual workers.

A world where workers could hope that if they worked hard they could be sure to earn and save enough for a comfortable old age is long gone. Paul O'Neill can wistfully invoke that nostalgic vision, but most Maine citizens will face an even more insecure future if they embrace his vision.

John Buell lives in Southwest Harbor, Maine, and writes regularly on labor and environmental issues. He invites comments at

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