A new Bloomberg story, Americans on Wrong Side of Income Gap Run Out of Means to Cope, is a zeitgeist indicator: the normally-well-insulated-from-realty investing classes have noticed that large swathes of what was once the middle class aren’t just downwardly mobile but are struggling. Some facts from the story:
The top 10 percent in the US captured a biggest share of income in 2012 than any year since 1917
Real median income of college-educated men 25 or older fell 10% since 2007
Of people who lost jobs in 2009 through 2011 that they’d had for three or more years, only half the women and 61% of the men were re-employed by the start of 2012 (and remember, a mere one paid hour of work a week counts as employment)
Only 1/3 of adults 18 to 32 lived in their own household, only marginally higher than the 38 year low set in 2010
But the Bloomberg story find it hard to capture what this distress means in human terms. It does have this anecdote at the close:
The growing calls for action to reduce income inequality have translated into a national push for a higher minimum wage. Fast-food workers in 100 cities took to the streets Dec. 5 to demand a $15 hourly salary.
Latoya Caldwell, 30, of Kansas City, Missouri, is among those who took part. She’s been employed at a Wendy’s Co. restaurant for six years and earns the state’s minimum wage of $7.35 an hour. Working 25 to 30 hours a week, she has asked for more shifts to help support her four children, with whom she lives in one bedroom of her aunt’s house.
More older workers — including one over 65 years — as well as college-educated are joining her team, showing that rough economic times have swelled the ranks beyond the typical teenager at the register, Caldwell said.
“We’re making barely enough to even survive,” Caldwell said. “We’re not even surviving — we’re dependent on state assistance while our CEO makes $5.8 million and he’s sitting in an office.”
The nouveau pauvre are not much better off. I suspect some NC readers are feeling the pinch despite concerted efforts to live frugally. An email today had the subject line “Poverty is expensive”:
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My expenses are beginning to get the better of me and month’s end is stretching beyond my dollars. Next year is looking the same. So, yesterday I was pointedly reminded how expensive it is to be poor. Instead of buying a lot when something I use is on sale, I have to buy what I have dollars for. No savings for me! And instead of buying by unit price–I’m a ferocious unit price shopper–I have to buy whatever size I have dollars for. And now I have to make more trips because I can only buy small dollars worth at a time.
Being poor is MUCH more expensive than being not poor. Not even wealthy, just not poor. Back in the day when there were two kids in the house, I bought detergent on sale, saved $10.00 per buy, and had detergent for months and months. Any sale of stuff I used I snarfed up a bunch. Makes a difference just in trips to the store. We tried to keep wkly shopping to the perishables and we pretty well succeeded. Sometimes went to DE for taxable items and calculated so the trip, gas and bridge toll, was worth it: loaded the car and considered a sale a small gold mine.
Can’t do that anymore. I don’t need eight gallons of detergent anyway, but even smaller lots are beyond my cash means. Does anyone who matters in economics realize how expensive being poor is? I think some do and most don’t care. Not their problem. I do so wish it were.
The one wee bit of good news in the Bloomberg account is that things have gotten so bad that pundits and politicians are starting to make noise about the destruction of the middle class, which is a necessary but far from sufficient condition for change. For instance:
“The middle has really collapsed,” said Lawrence Katz, an economics professor at Harvard University in Cambridge, Massachusetts, and a former chief economist at the Labor Department in Washington….
“Wall Street is roaring and Main Street is struggling,” Representative Kevin Brady, a Texas Republican and chairman of the Joint Economic Committee, said in an interview. “Quantitative easing has really exacerbated income inequality.”
The Brady quote and others in the article show that the Republicans are looking to get mileage from the increase in income inequality under Obama, which was greater than that under Bush. There’s a reveling lack of defenses for the President’s policies. And the Fed isn’t too convincing either:
Janet Yellen, nominated to take over as Fed chairman next year, defended the central bank’s actions at a Senate Banking Committee hearing on Nov. 14.
“The policies we’ve undertaken have been meant to generate a robust recovery,” Yellen told the committee.
Oh, puhleeze. Robust recovery for who? The Fed not only threw staggering amounts of firepower at salvaging bank balance sheets, while showing no interest in rescuing ordinary Americans. It was also all-in on the Administration’s program to paper over the banks’ chain of title problems and their widespread servicing abuses, and didn’t bother to obtain any meaningful concessions or reforms, the most important of which would have been principal modifications, a remedy favored by investors as well as homeowners. The Fed has been all too happy to accept mission creep rather than speak up forcefully for the need for more fiscal stimulus.
So it may be that even as the stock market roars ahead, more investors are coming to recognize the shoddy foundations of this so-called recovery and perhaps more important, that the legitimacy of the ruling classes erodes quickly when ordinary citizens recognize how badly the deck is stacked against them. But the upper crust and the technocratic elites are sufficiently cloistered that it will take more than an article or two for them to recognize the mess they’ve created for their fellow citizens, and ultimately, themselves.