Aside from stagnant wages, soaring unemployment and plummeting home values, the major tragedy of this recession is the havoc it has wreaked on the retirement incomes of millions of Americans who have planned and saved their entire lives, only to watch that money drain out of their accounts much sooner than they anticipated.
Retirement statistics are grim. The percentage of American workers who said they have less than $10,000 in savings grew to 43 percent in 2010, according to a recent survey by the Employee Benefit Research Institute. Nearly a quarter of the workforce said they have postponed their planned retirement in the past year and a CareerBuilder.com survey reports that 61 percent of workers say they are now living paycheck to paycheck, as compared to 43 percent in 2007.
In a long article on the Financial Times site, The Crisis of Middle-Class America, I read the following
Alexis de Tocqueville, the great French chronicler of early America, was once misquoted as having said: “America is the best country in the world to be poor.” That is no longer the case. Nowadays in America, you have a smaller chance of swapping your lower income bracket for a higher one than in almost any other developed economy – even Britain on some measures. To invert the classic Horatio Alger stories, in today’s America if you are born in rags, you are likelier to stay in rags than in almost any corner of old Europe.
The piece is a discussion of the collapse of the ‘American Dream’ for most Americans, using two families to provide context. As the HuffPost article quoted above notes, the vast majority of Americans are barely getting by. The FT essay describes the lives of two families, both with gross incomes above the national average and the difficulties they face in today’s economy.
The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the multiple is above 300.
The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.
Sure – some people will post about their personal experience and how things are just fine and dandy. Others will say, “See, if we only cut taxes and deport all those illegals, everything will be just like it used to be.”
Folks, things were never “just like they used to be”. That image of the stay at home mom and a dad working and making enough money to buy a house and for two kids to go to college – it seldom was true for more than a minority of Americans. Yes, as the FT article describes, there was a time when a guy could work at a manual labour job and make enough to support his family – he probably belonged to a union that pushed for, and got, retirement and health benefits. Those benefits that some Americans now blame on the high cost of American made goods – those benefits that Social Security and Medicare were meant to supplement not replace. Those benefits that supposedly drove American industry to move their manufacturing overseas, never mind the tax breaks they received for dumping American workers for foreign workers, don’t think about how their profits were moved offshore also, again protected by arcane provisions in various tax laws.
Yep, let’s get rid of all those restrictions and let us experience a real ‘free market’ – that will cure all of America’s problems. Of course the small matter that more people working for less money will mean a smaller market for even cheap goods produced in other countries shouldn’t bother the company owners – they’ll just have more people willing to become serfs. Yeah, I think a return to the Middle Ages would be simply fantastic. With no good paying jobs available, teh oligarchs will have plenty of people to choose from when they need butlers, housekeepers, gardeners and security. When things deteriorate far enough, people will be willing to work for shelter and food. THEN, the church could return to its rightful place, controlling people and acquiring land – all for the benefit of God and his chosen minions of course.
Of course such a disaster is not going to happen overnight, why it might even take 10 or 20 years to take place. We have one party, unable to move forward as they attempt to compromise with the other party in efforts to pass at least some beneficial legislation. And we have the other party, quite willing to destroy the economy and the Presidency in their efforts to return to power, of course the last time they were in control they showed a rather appalling lack of ability to do anything other than to enrich themselves and their financial backers.
So yes, I am deeply pessimistic about the future. I think I could survive in a fairly nasty world because of unique skill sets and what some might call an ‘interesting’ past but why should my personal survival be worthwhile if others are not given the same or similar opportunities in the world to come.