Above Photo: Anjan Sarkar/Flickr
As one who writes often about the economy, and often hears gasps of bewilderment and groans of boredom, I have tried to find ways to entice readers into the subject matter. But there is no corny joke to start this essay off. A litany is a list, and 8 items should give the reader a quick oversight of the failing economy. Added is a list of 4 reforms, simple and common sense. So let’s plunge in.
1. The “average weekly earnings” of eighty percent of U.S. workers was higher in 1965, 54 years ago, than in 2019, reports the Bureau of Labor Statistics.
2. The average income for all Americans has nearly tripled since 1965, 54 years ago, states the Bureau of Economic Analysis, Department of Commerce (Table 2.1, Disposable Personal Income per capita). It was $15,052 in 1964, today it is $44,455. Economic growth of the past 54 years has improved the lives of only a minority. Between 1973 and 2007 58.7% of growth was captured by the top one percent, is the finding of a report titled “The New Gilded Age.
3. In the past ten years, 2009 to 2019, total private household wealth has doubled, increasing from $48 trillion to $108 trillion, states the Federal Reserves report “Flow of Funds” (page 2, and page 104). While wealth doubles, economic growth for the decade was slower than any preceding decade since 1950. While private wealth increased by nearly $60 trillion, the federal government’s expenditures were $41 trillion. Although the average savings per adult stands at $403,974, half of all adults own less than $62,000, or 15% of the average, and the lower half owns just 1.2% of all wealth. Wealth is highly concentrated, and even more than before.
4. The average savings per adult is over $400,000, but 40% of adults report they would be unable to pay a $400 emergency expense within a 30 day period, states the Federal Reserve report on Household Well Being.
5. The combined yearly wage income of half of U.S. workers, 82 million workers, amounts to less than 8% of the national income, states the Social Security Administration report on wage income. An income of less than $25,000 a year is earned by 42% of U.S. workers, and their average yearly income is $10,687.
6. The United Way charity reports, in its ALICE report, that 40% of U.S. households cannot afford seven basics of life: food, housing, utilities, transportation, phone service, health care, child care. And 40% of workers earn less than $15 an hour. The Federal Poverty Level for a family of four, $23,850 in 2014, comes to just 42% of the ALICE Basic Survival Budget for this family, $55,381.
7. Over half of U.S. workers are employed in firms employing more than 500 employees, states the Small Business Administration. A study of the use of profits of the largest 500 corporations over a ten year period shows that 93% of profits were disbursed as stock dividends or stock “buybacks”, leaving little for research or employee wage raises. In 2018 over $1 trillion of profits were used for corporate stock buybacks. If instead of spending the trillion on buybacks corporations had increased employee pay, then for 61 million workers employed in companies with over 500 employees, each worker would have received a raise of $16,300. If the 30 companies comprising the Dow Jones Index had not purchased stock but had spent the money on wage increases, then each of the eight million employees would have received $46,000 in added pay.
8. In 2013 one of the authors of the U.S. Census’s Supplement Poverty Measure wrote (on page 30) that 30% of U.S. families would be characterized as not able “to meet its basic needs and achieve a safe and decent standard of living.” This is a definition of poverty.
This litany is startling and depressing. It’s a picture of a society drowning to death. What might we as a society do?
Another list, much shorter:
1. A raise of the minimum wage would affect the 69 million workers earning less than $25,000 a year.
2. Passing the Protecting the Right to Organize (PRO) Act would enable at least 61 million workers, those who labor in large corporations, to negotiate for higher pay.
3. Creating national corporate charters for the largest companies, and passing the “Reward Work Act” would require “public companies to allow workers to directly elect one-third of their company’s board of directors.”
4. Creating a large publicly funded infrastructure project, such as the Blueprint plan outlined by the Center for American Progress, would tighten the labor market, raise wages and employment, and pay living wages to all employed in it. The Green New Deal mentions the potential for this approach.
The true wealth of a nation is not money, but lies in its population, its human assets, their training, skills, and opportunities. The two reforms most needed are to 1) lower key household expenses, such as housing, medical care and child care, and 2) create a tight labor market with full employment combined with workers’ rights to bargain for higher wages. If we could achieve the income distribution ratios of the years between 1946 and 1980, then ninety percent of households would, on average, enjoy a $20,000 rise in their incomes. This benign ratio is not a new concept, it existed for about 40 years. That would eliminate poverty and re-create the broad middle class that we’ve lost.