The Reagan Economic Legacy

Budget of the United States Government: Fiscal Year 1989

US Government Printing Office, 616 pp., $18.00

Economic Report of the President, Transmitted to the Congress, February 1988, Together with The Annual Report of the Council of Economic Advisers

US Government Printing Office, 374 pp., $10.00


The twelve million new jobs that were created during the Reagan years fall into four main categories. The first group consists of services to wealth, or to the rich. Two million new jobs between 1981 and 1987 were created in finance, insurance, real estate, and legal services. 1 “Sales representatives, securities and financial services,” “investigators and adjusters, except insurance,” “managers, properties and real estate.” These are among American occupations that have grown most rapidly in the 1980s.2

The second category is the semiprivate welfare society that I have described in the June 30 issue. Health, education, social services, and government provided 3.1 million new jobs in the Reagan years. “Managers, medicine and health,” “administrators, education,” and prekindergarten teachers—these, too, are boom American jobs; they are dependent on government programs, and they are very largely for women.

The third category consists of services provided by the poor, or poverty jobs, such as for cooks and salesclerks. Of the new jobs 3 million were in industries, such as retail trade and hotels, that pay poverty wages. People in “service occupations” are the worst paid of all American workers (except in agriculture); they have the highest concentration of black or Hispanic workers, and their number has increased by 1.8 million from 1981 to 1987.3

The fourth category of new jobs is for people, most of them men, who handle and move material things. There were 2.3 million new jobs in construction, trucking, and wholesale trade, mostly for “operators,” of vehicles, for example, and for production workers. The most successful single occupation of the recent boom—increasing more than five times as fast as all employment—was that of “light truck drivers.” There are other expanding occupations, of course (such as computer equipment operators), and other expanding industries (such as guided missiles and horticultural services). But the new jobs consist largely of services to the rich; of services such as education to the welfare society; of services supplied mainly by the poor, such as retail trade; and of jobs in trucking, moving, and building.

The high-employment service economy is the principal economic success of the Reagan period. Mr.Reagan’s Council of Economic Advisers say in their 1988 Annual Report that the US expansion was shaped by “market-oriented, policies,” which are thereby a “blueprint” for world-wide economic growth. This hypothesis is difficult to verify, as was shown in an earlier article.4 Taxes were in fact higher during the Reagan period than in preceding years; transfer payments, made to individuals for social security and welfare, were higher; government spending was higher, and so was the government deficit. Investment was lower and savings slumped; profits were sharply lower; and the economic advantages of deregulation and privatization were not yet evident.

The rate of US economic growth was virtually the same, from 1981 to 1987, as the average rate for OECD countries, and the growth of productivity was much less. The rate of inflation fell in the US after 1980, but it also fell in…

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