For anyone coming out of high school, college, or even prison these days, the best job opportunities in generations are available in the U.S. Thanks to the New Economy, a 101-month expansion has so tightened job markets that even those at the very bottom of the economy are being drawn up into a vortex of national prosperity. The educated offspring of suburban Baby Boomers are getting terrific first jobs at salaries that often make their parents gasp. Inner-city kids, even those without high school diplomas, are earning more than they or their parents ever dreamed, and the unemployment rate for blacks is the lowest ever measured. Upward mobility is working again in America, and the once-popular sociological wisdom about a "culture of poverty" is being disproved by the dynamics of a high-tech, global New Economy.
But there is also a new asymmetry to American prosperity that could have troubling political consequences. A gap is opening between those doing well and those doing much better. The divide runs right down the crack between the Old and New Economies. People working in information industries--software, media, financial services, consulting, computers--have seen their average real wages rise 11% since 1994 (not counting options and capital gains), while real wages for everyone else are up only 3%. For people at the bottom with a good first job that allows them to buy a house (a record 67% of Americans own their own homes), a prosperity gap may not matter now. But it could soon.
It all depends on the transformative power of the New Economy. Right now, information industries are pulling ahead of the rest of the economy. New Economy companies have higher productivity than Old Economy ones, make more profits, and--this is critical--pay significantly higher salaries plus options. The stock market tells the story. A rising share of the profits made in Corporate America is being generated by New Economy companies. The Nasdaq, much more of a pure New Economy play, is up nearly 30% for the year, nearly three times as much as the broader Standard & Poor's 500-stock index and twice the Dow Jones industrial average.
This could change fast. No one really knows how much of the Old Economy will make it across the high-tech divide or how fast it will happen. Old brick-and-mortar companies, such as Office Depot, Barnes & Noble, and Charles Schwab, are transforming themselves into Net companies capable of creating the kind of efficiencies that are common to New Economy enterprises. How many will follow? Who will find the courage to cannibalize their distribution systems, confront shareholders, and leap to the Net? No one really knows.
But migrations will help. A brick-to-click migration is sending a horde of experienced managers and just-out-of-college kids into New Economy companies as they search for far higher compensation and the thrill of being on the edge of something new. A smaller, yet significant, click-to-brick migration is also taking place, as Old Economy companies hire the talent to make them Net-savvy, often paying big bucks and options to get them there.
The prosperity gap is a new phenomenon of unknown magnitude and scope. As long as the economy is powering along, providing jobs and mobility for nearly all, it may not matter. But come the inevitable recession--or a sharp stock market decline--the gap could play political havoc, sharply dividing New and Old Economy populations. The grim specter of Pat Buchanan running on a Reform Party platform of protectionism, isolationism, and nationalism is just a faint glimmer of what may come. Better to focus policy now on promoting the New Economy and hastening its integration with the Old.