BUSINESS PORTFOLIO
Fly the gum-free skies For the Doublemint twins, Lambert International Airport in St. Louis would bring double the disappointment.
Nowhere - not in the concession store, not in the snack bar, not even in the candy machine - could they find a single stick of Wrigley's chewing gum. Or any gum, for that matter. The airport doesn't sell it.
The twins would find the same problem at other airports, including Tucson, Ariz.; Portland, Ore.; and Tampa and Orlando, Fla.
``I wouldn't say it's a backlash against the usage of gum, but against users who don't dispose of it properly,'' says Carolyn Fennell, a spokeswoman for the Orlando airport. ``We're a very aesthetic terminal. We pride ourselves on cleanliness, and the residue of gum detracted'' from the cleanliness, she says. So in May, when the concessionaire's lease was up, the airport authority gave out new contracts, minus the right to sell chewing gum.
As airports are remodeled, upholstered, and carpeted, airport authorities are looking closely at maintenance problems brought on by gum deposits.
``We get calls from other airports, asking how we got away with it,'' says Paul MacAlester an official of the Tampa airport. The airport, lined with 6 acres of carpeting, decided to go gum-free when it opened in 1971.
Them as has, gits
Courtenay Slater quibbles with Americans' reputation of being ``financial profligates.'' Sure, they save far less than what the Japanese save, and they tend to borrow more on credit.
``But if you look at the balance sheet of the US economy, you see that their assets far exceed their liabilities,'' says Dr. Slater, president of the economic research firm CEC Associates and former chief economist at the Commerce Department.
Slater has organized the assets, liabilities, and net worth (assets minus liabilities) for the 60 million American households in the same way that companies do. Assets include physical assets (houses, cars, boats, dishwashers, etc.) and financial assets (money in checking accounts, savings accounts, stocks, bonds, etc.). Liabilities include mortgages, consumer and other debt.
Slater found that the Americans' balance sheet shows them to be a robust lot financially, with assets exceeding liabilities by $13 trillion. That's about double (in real, i.e., non-inflationary terms) from what Americans had in 1965. The spoils haven't been divvied up equally, however - especially during the 1980s. Between 1982 and '85, the rise in the stock market accounted for 40 percent of the $3.1 trillion increase in wealth. Only a fraction benefited, however, since only 20 percent of the population owns stocks and bonds.
By contrast, real estate - the middle-class investment, with some 60 percent of the population owning their own homes - contributed only 7 percent of the increase in wealth.
This is a marked change from the 1970s, when the middle class enjoyed rapid gains in its net worth. Between 1978 and 1981, real estate prices accounted for 37 percent of the increase in wealth, stocks and bonds for 12 percent. Slater thinks the balance will shift back toward middle-class investments, because ``the bull market has got to peak. Then again, I've thought that for a long time.''
Mergers: bad news for wages
Anyone who was at Continental Airlines four years ago knows firsthand what Richard Belous's econometric models are saying - that mergers, acquisitions, and corporate raiding spell trouble for workers' wages.
After Frank Lorenzo merged the unionized Continental Airlines with his non-union Texas Air, he took Continental through bankruptcy, voided the union contracts, and set up a non-unionized shop. Wages fell.
Dr. Belous, a senior labor economist at the Conference Board, goes one step further than the Continental message. Not only has the financial impact of mergers, acquisitions, and increased debt been important in holding down wages, he says, it has been the most important factor.
Until the 1980s, if a company, industry, or the economy ran into trouble, people would lose their jobs, but only in rare cases would people take a pay cut. Today, wages are much more ``flexible'' downward.
Economists typically point to several reasons for this increased flexibility: competition from imports; having more women and part-time workers in the job market; a drop in union membership; recession; and deregulation.
But Belous says this is not enough. The ``missing link,'' he says, is the financial revolution of mergers, acquisitions, and short-term debt.
With the likes of Carl Icahn, T.Boone Pickens, or some other corporate raider on the prowl, many management teams feel vulnerable to being ``thrown out,'' Belous says. To fend off unwanted suitors, they have to make their company too expensive to buy by keeping its stock price and short-term profits high. And to boost profits quickly, they have to slash costs, which includes labor costs.
