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STEALTH WEALTH By Joseph P. Francini The late President Reagan made the most out of one of the most effective
political phrases of recent times: "Are you better off now than you
were four years ago?" As we approach this year's Presidential elections chances are we will hear the same or an equivalent question and, as a corollary to the above, we will most assuredly also hear from pundits and politicians that our economy continues to grow and our country remains the wealthiest Nation on earth. Most of us take it from granted; yet I believe we are all being lulled, or lulling ourselves, into the falsehood of what I've come to call stealth wealth. Let me explain. My first job after graduating with a Master's Degree in Engineering was in 1960 as a Junior Engineer with the then largest computer company in the world: UNIVAC. My wife of just days and I rented a one bedroom apartment in New Rochelle, twenty minutes from Manhattan, in a complex inhabited by people in my income bracket, then $116 per week, with fully paid medical insurance, or about $6,000 per year. The rules of the time said that one week of gross income should pay for housing, one for food, one for clothing, car, insurance etc., and one should be saved. We did just that and our life was modest, yet comfortable. By 1963 I had advanced enough in my job to be making $11,000 per year
and we were tickled pink to purchase a brand new three-bedroom, split-level
house on the outskirts of Philadelphia, PA, for $ 18,500, less than twice
my annual income. That year I hired two Junior Engineers at $8,000 per
year, about the same salary as the experienced Technicians that helped
them become real professionals. For them, the ratio of a house price to
salary was about 2.3 to1. My new position also entitled me to a 200 shares stock option worth $1,000 as a bonus and, on the paperwork that came with it, I enviously saw that our company president had received $120,00 in salary and $30,000 in stock options which made the ratio of compensation of the highest officer to that of the most junior professionals equal to 19. By 1971 the ratio of the purchase price of my home to my salary had risen to 3 and as a senior executive in 1990 it had maintained about the same ratio. I had paid little attention to these personal statistics until last year when I had the pleasure of participating in a senior management reunion of one of the first companies where I had reached that level. The then CEO was a wonderful man who has honored me with his friendship for decades and, as we reminisced of times gone by we found ourselves staring at what to us seemed a crater of disparity. In 2003 a Junior Engineer was hired at one of the company's labs in Northern New Jersey with a starting salary of $45,000 per year, clearly a reasonable sum although his medical insurance co-payment had gone from zero to two hundred ten dollar per month. Yet, my friend confessed having earned a salary of $1 million and bonuses for an additional $2 million for the same period, making the ratio of his compensation to that of the young fellow equal to 66.6! Worse than that was the fact that the median price for a three bedroom home in that part of the country was $310,000, making the ratio of that price to the young man salary equal to 7.75 and, to make things more interesting, a four-bedroom home next to my CEO friend's house in Bel Air had just sold for $8.5million! Let's put it in perspective. Forty years ago it would have taken a senior craftsman or a junior professional slightly over two years' salary to pay for a nice home, and a car was less than one third their salary (I paid $2,700 for a new, huge 1964 Ford wagon). Today in the same neighborhood the ratio would be almost eight and a car will take almost the entire year's salary. On the other hand the ratio of the compensation for highest paid employee of a corporation to that of an entry level professional went from 19 to over 87, while for the former a gorgeous house was worth only two and one half times his annual pay. I am sure the above analysis does not hold up for every case and in every part of the country but I will take odds that the ratios discussed have gone up, not down. I am also sure that the magic formula of one week's salary per major expense category of times gone by is no longer valid. If the wealth of a country is to be measured by how all its productive members share in its prosperity, are we wealthier now than forty years ago? Is the country going in the right direction?
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