A Recovery Without Steady Incomes
The U.S. unemployment rate is currently at 5.8 percent—the lowest since the financial crisis of 2008. The U.S. economy has grown at a rate of 3 percent for the past four to five quarters encouraging analysts to say that our country “is finally casting aside the shackles imposed by the financial crisis.” Corporate profits are at a record high. And yet, household incomes remain volatile—especially for low and middle-income households. Reports the Times:
A more recent national survey by the Federal Reserve, based on 2013 data, suggests the problem has not only persisted as the economy recovers but may even have worsened. More than 30 percent of Americans reported spikes and dips in their incomes. Among that group, 42 percent cited an irregular work schedule; an additional 27 percent blamed a span of joblessness or seasonal work.
The data show “a clear upward trend in income volatility,” according to a report from U.S. Financial Diaries, which on Wednesday released the first results of an in-depth study of low- and moderate-income families.
In the diaries’ research, nearly all of the 235 households studied experienced a drop in monthly income of at least 25 percent in a single year. The main culprits were reduced work hours, health problems and shifts in household size, like a needy relative coming to stay.
And in an Atlantic article titled, “The Incredible Shrinking Incomes of Young Americans,” Derek Thompson writes that “since the Great Recession struck in 2007, the median wage for people between the ages of 25 and 34, adjusted for inflation, has fallen in every major industry except for health care.”
Thompson points out, as we did last month, that falling and stagnant wages have made it difficult for young workers to save any money—especially when you combine shrinking incomes with the rising costs of health care and student loan debt.
The evaporation of real wages for young Americans is a real mystery because it’s coinciding with what is otherwise a real recovery. The economy has been growing steadily since 2009. We’re adding 200,000 jobs a month in 2014. That’s what a recovery looks like. And yet, overall U.S. wages are barely growing, and wages for young people are growing 60 percent more slowly than overall U.S. wages. How is a generation supposed to build a future on that?
Of course, it’s not that much of a mystery about what’s happening here. We’ve talked about the kinds of jobs that we’re adding to the U.S. economy: low-paid ones. When you lose scores of jobs during an economic crisis and then replace them with mostly “retail salespersons, personal care aides, laborers, food preparers and cashiers, which all pay less than $25,000 per year,” you’ll cause wages to fall and incomes to become more volatile due to hourly schedules fluctuating for workers on a weekly basis. As Talia Frye, a director of a nonprofit community center, tells the Times about the struggling families she helps: “They might even be able to get a 12-, 13-, 14-dollar-an-hour job at an Amazon, or an eBay. It’s income; it’s just not sustainable income.”