The New Deal: U.S. Workers Increasingly Shoulder Risks

By most conventional measures, Paul Fredo is an American success story.

The son of a coal miner, he made almost $200,000 in the last year, enough to place him in the top 2% of wage earners. As a financial manager for the U.S. unit of Alstom, the French bullet-train maker, he has lived an expense-account life, spending most nights in hotels and jetting to meetings in Washington and Paris.

But look carefully at Fredo's circumstances and a less appealing picture begins to emerge -- one in which, over the last 25 years, economic risk has been steadily shifted from the broad shoulders of business and government to the backs of working families like his.

By the time Fredo joined Alstom here last year, he had become an itinerant executive, a contract worker brought in for a particular purpose, then sent packing."They tell me every Friday whether to come back," the 57-year-old explained.

Between his last regular job as the chief financial officer of another company and his hiring at Alstom, Fredo was unemployed for nearly two years and saw his income decline by two-thirds. He has long been without health benefits, holidays, paid vacation or job security.

"We come from the old school that you work hard and give it your all, and the job will be there for you," said Fredo's wife of 35 years, Donna."It's different today."

From his perch several rungs down the economic ladder, Ron Burtless sees the same forces at play -- forces that have caused his family's income to swing sharply up and down.

Unlike Fredo, Burtless never aspired to the executive suite. Instead, almost three decades ago, he reached for a union card and went to work as an electrician at a Bethlehem Steel Corp. plant in Indiana. Until recently, he seemed the very embodiment of Middle American stability, with a $60,000 annual wage, two grown daughters, a red Ford pickup and a five-bedroom suburban home.

But in a matter of just two weeks last year, Burtless' finances were thrown into disarray when Bethlehem collapsed and, adding injury to insult, he was badly hurt on the job and saddled with more than $90,000 in medical bills. Having fallen through cracks in the workers' compensation system, he now ponders a wrenching question:"Am I going to have to go bankrupt?"

In their own ways, the problems encountered by Fredo and Burtless can be traced to the same source -- a set of economic policies shaped by government officials and corporate executives intent on creating a more prosperous America.

Starting in the late 1970s, the nation's leaders sought to break a corrosive cycle of rising inflation and stagnating output by remaking the U.S. economy in the image of its frontier predecessor -- deregulating industries, shrinking social programs and promoting a free-market ideal in which everyone must forge his or her own path, free to rise or fall on merit or luck. On the whole, their effort to transform the economy has succeeded.

But the economy's makeover has come at a large and largely unnoticed price: a measurable increase in the risks that Americans must bear as they provide for their families, pay for their houses, save for their retirements and grab for the good life.

A broad array of protections that families once depended on to shield them from economic turmoil -- stable jobs, widely available health coverage, guaranteed pensions, short unemployment spells, long-lasting unemployment benefits and well-funded job training programs -- have been scaled back or have vanished altogether.

"Working Americans are on a financial tightrope," said Yale University political scientist Jacob S. Hacker, who is writing a book called"The Great Risk Shift.""Business and government used to see it as their duty to provide safety nets against the worst economic threats we face. But more and more, they're yanking them away."

...

* Government used to provide substantial help in coping with joblessness. In the mid-1970s, jobless workers could collect up to 15 months of unemployment compensation. By last December, Congress had pared the program to just six months. Additionally, federal legislation in 1978 and 1986 effectively reduced the value of benefits by making them taxable. And state eligibility restrictions imposed in the late 1970s and early '80s shrank the fraction of the workforce entitled to collect benefits from about one-half to a little more than one-third. Of the 8 million people who were unemployed last month, only 2.9 million were collecting benefits.

* The minimum wage was once the government's chief means of ensuring that"work pays" -- that those willing to head to a job each day would make enough to live on. For decades, Democratic and Republican administrations alike maintained the minimum wage at about half of average hourly earnings in the U.S. But starting in the early 1980s, the minimum wage was allowed to slip. At $5.15, it is now only one-third of average hourly earnings, its lowest level in 50 years.

* Washington once sought to help people adjust to global competition, industrial restructuring and technological change by offering job training. Twenty-five years ago, the federal government spent $27.3 billion annually (in 2003 dollars) through the Comprehensive Employment and Training Act, or CETA. Even if one doesn't count CETA's"public service" jobs, which were widely criticized as boondoggles, it was still spending $17.1 billion. By contrast, the government now spends about $4.4 billion on CETA's successor, the Workforce Investment Act."It's largely a place holder," said Anthony P. Carnevale, an authority on education and training who was appointed to major commissions by presidents Reagan and Clinton."It gives politicians something to point to but doesn't do much good."

* Welfare was created to protect poor women and children, but starting in the late 1970s a growing chorus of analysts complained that the system had backfired by fostering a culture of dependency. In 1996, President Clinton and a Republican-controlled Congress approved a"work first" law that has cut welfare rolls by one-half and reduced inflation-adjusted welfare spending by at least one-third, or about $10 billion a year. On balance, the changes appear to have benefited people who can find jobs and hold them. But those who can't work or have lost their jobs can often find themselves in far worse shape. Twenty-five years ago in California, a mother of two who depended on welfare collected about $15,000 in cash assistance and food stamps. By last year, a woman in the same circumstances brought in $3,300 less, in inflation-adjusted terms.

"Washington," said Hacker,"has been in a quarter-century-long retreat from what was once one of its primary responsibilities: helping provide economic security."

[Editor's Note: This is a brief excerpt from a long, in-depth article. Please visit the Los Angeles Times for the entire piece.]