3/2/2011 2:25 PM ET|
It's a recovery only if you're rich
The economy is looking up. But the latest numbers show ever more clearly why, if you're on the lower rungs, things haven't improved. Conditions are now changing, though.
Clearly, the economic situation is improving. Corporate profits are at record highs. New jobs are slowly being created and the unemployment rate is falling. Consumer spending is up. Stocks have nearly doubled in the last two years. We're a long way from the dark days of 2008-2009.
Yet the gains have not been equally distributed. Where you sit in the socioeconomic strata largely determines how you view the economy and how much you've benefited from the recovery so far.
If you are well-educated and relatively well-to-do, and you have a sizable portfolio of financial assets, chances are you're feeling pretty good right now. You're probably working. You've enjoyed the stock market's doubling from its bear-market low. And you've probably even managed to convince your boss to give you a raise.
If you are less fortunate, with fewer assets and no college degree, and you are more reliant on that day-to-day paycheck, things have hardly improved at all. And now, with the costs of fuel and food on the rise, things have taken a turn for the worse.
By all indications, this is a recovery only if you're rich.
It's worth remembering that rising inequality was largely responsible for getting us into this mess in the first place. Over the last 10 years, in the wake of the dot-com blowup, Americans used cheap credit and rising home equity to mask the fact that in inflation-adjusted terms, their wages weren't growing. There were social consequences, too: People were forced to work longer and harder, and embrace the two-income earner lifestyle to keep up.
After the Great Recession, there was hope that these problems would fade. But they haven't. Now, our two-speed recovery could be sowing the seeds of the next crisis. But instead of financial turmoil, the next iteration will likely play out in the political sphere, as it has in places like Greece, Egypt and even Wisconsin as new pressures are placed on the working class.
Thankfully, there are signs that change -- positive change -- could be coming.
There are structural problems at work here. They relate to the fact that over the last 40 years, labor has become less and less valuable relative to capital in the global economy. Those with cash to invest or machinery to sell have done well. Those selling a hard day's work with their hands, their backs or their minds have suffered.
Factors for this include technological innovation, globalization and, recently, record productivity gains as businesses have used the threat of firings to squeeze more and more work out of each employee.
And of course, there has been a massive influx of new laborers into the global workforce: According to the IMF (.pdf file), there has been a fourfold increase in the number of workers competing in the global market since 1980. And this army of new workers has been cheap to hire. Workers in places like China, India and the former Soviet Union have been willing to accept wages from one-half to one-tenth those seen in rich countries.
To put it bluntly, U.S. workers were simply too expensive. And as executives has engaged in wage arbitrage (thanks to lower trade barriers) and defanged private-sector unions, wages and benefits in the United States have been pulled down toward the global mean.
As a result, heading into the recession, more U.S. jobs were cut than historical models would suggest based on the depth of the economic contraction. And as we've recovered, job creation in the United States has lagged that of places like Australia, Canada, Germany and the United Kingdom. Because of all this, corporate profits have surged, and they continue to represent a larger and larger share of the overall economy -- a trend that started 30 years ago.
On the other hand, labor's share of the economic pie has dropped to its lowest levels since records started after World War II. This is a global trend that is affecting all of the advanced economies. But it's hitting the United States particularly hard.
It's better on top
For those on top, things are great. They've benefited from their ownership of corporate bonds and stocks. And they've benefited from the wage gains that have accrued to the highly skilled and educated -- setting them apart from the great masses of unskilled laborers in Asia, Africa and Latin America. Right now, the unemployment rate for those with less than a high school education is a whopping 14.2%, compared with just 4.2% for those with a four-year college degree or more. That's up from unemployment rates of 5.8% and 1.7%, respectively, in 1999.
The evidence suggests that much of the recovery in consumer spending has been driven by the upper crust. You may have heard that the University of Michigan's Index of Consumer Sentiment jumped 4.4% last month to a three-year high as people became more optimistic about the economy. But the gains were driven exclusively by high-income earners: The sentiment index rose by 9.7% for households with incomes above $75,000 but fell by 1.4% among lower-income households.
This is a continuation of a trend that's seen since the recession ended back in 2009. As shown above, improvements in the Conference Board's Consumer Confidence Index have varied by income level. While confidence has bounced back for those in the upper-income brackets, it continues to languish for everyone else. For those making between $25,000 and $35,000, there has been hardly any improvement since the recession officially ended in the summer of 2009.
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Oh yes, it's sure getting better. My job of nearly a decade was eliminated two weeks ago. I'd feel blessed to get a job making half what I was making.
I don't know about most companies but the Fortune 500 company I worked for was bought out last year by a Canadian takeover company and they're gutting us and getting all products made in China, India, Vietnam, etc...
methinks chilidog needs a chill pill. this is a story about the widening divide between the haves and have nots. the elites and the pseudo slaves. the koch billionaire brothers working behind the scenes with walker and kasich to bust the public unions so they can then bust the private unions. heaven knows they could use the extra billions.
have you been living under a rock? this situation killed tens of thousands aristocrats in france, the czars and the bourgeoisie in russia, and ended the roman empire. it recurred in recent WEEKS in egypt and is sweeping across the middle east, maybe into india, maybe into china. when you leave a man with nothing it can only make him mean. this affects all Americans as a wake up call.
wake up and smell the coffee before you are awakened in the night .....
This article is the closest that I have seen to getting to the truth. The author misses the fact that these other countries discourage unions and any real environmental regulations including that workers get very little to no benefits which hurts his diminishing supply argument
And coincidentally, those countries have much smaller economies. When you look at the countries who's economies are growing, they all have one thing in common: Raising wages, and a strong/growing middle class.
The recovery was always a sham for most Americans. The bottom 50 percent of income earners in the United States own less than one half of one percent of all the stocks on the stock market. The top 10 percent of income earners own over 90 percent of all the stocks. Consequently, the only people really enjoying this recovery are the top ten percent of income earners. The rest of the citizens of the United States haven't benefited at all.
However the recovery of the stock market is a falsehood even for the wealthy who are invested in it. The instability now in the Middle East and it's affects on oil production create a real possibility of a huge spike in oil prices and a huge increase in inflation that even Ben Bernanke can't lie and pretend doesn't exist. This will lead to a higher interest rates, a huge devaluation of the dollar ( and possibly a loss of it's reserve currency status), and another possible derivative market collapse that will destroy the 5 major banks ( JPMorgan, Citbank, Bank of America, HSBC, and Goldman Sacs). If this perfect storm of financial disaster happens the rich can kiss their stock market gains goodbye. In fact if their assets are in dollars when this mother of all financial meltdowns occurs they will join the ranks of the poor because they will be wiped out due to the dollars devaluation.
Consequently, the next 12 months in the Middle East will be critical in determining the fate of this "recovery". I'm not optimistic about the outcome but maybe things will stabilize. I hope it does but I'm preparing for the worst.
FrEddddd gets it Colorado, He says he is poor always has been, but he is happy. He states he has a new car and an old boat, those were things he WANTED and chose to get for himself. Unlike you though, he doesn't expect someone else to pay for those things for him. So again it boils down to choices, everybody has to decide for themselves what is most important to them and pick accordingly whilst staying within their means.
You are right to question whether our government treats all people equally, but wholly wrong to blame "liberals" for treating some people "more equal" than others.
The truth is that in government, like in almost all aspects of public life, money talks and almost all of the inequalities in the way people are governed will benefit those who have the resources to influence political decisions.
Look at any aspect of government services:
For Public education: Schools are far better in wealthy neighborhoods and areas than in poor ones, the same is true for road quality, police coverage, fire department coverage, general cleanliness and upkeep of public areas, etc.
For criminal behavior, the wealthy are far more likely to get off with a warning or community service for crimes that could lead to imprisonment in poorer areas
For zoning laws, power rates, building contracts, water rates, military contracts, research funding... really pretty much any government function, those with money to influence the decision will get the best deal
It simply makes sense... Politicians in general are self-interested and the people most likely to benefit them directly in the most ways possible are those who have money, so almost all government decisions are biased towards those that have money. It is true in both the Republican and Democratic parties. The democrats just tend to espouse being "for the people" more. In the end, most decisions and laws tend to end up biased toward the wealthy no matter the politicians espoused.
But to say that because we have a Democratic administration we are somehow biased towards the poor is just silly. That would require a majority of Congress to be more motivated by their ideals than by their best interest and that is never going to happen.
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