The U.S. economy reveals a complex picture
Tuesday, June 19th, 2012
The economic story of the past 40 years — wage stagnation, increased poverty rates, rising consumer debt — stands in sharp contrast to earlier periods in American history, when an expanding economy brought broader prosperity and created a large and dynamic middle class. The charts below tell the story in ways that words, alone, cannot.
How wages have changed
After World War II, Americans experienced constant wage growth, but that began to stagnate in the early 1970s. Since then, median income, while growing in real dollars, has barely kept up with inflation. U.S. Census data show median wages have increased less than 2 percent since 1979. In the same time frame, revolving consumer credit has increased 15 times over.
“What it takes to maintain a middle-class lifestyle with that median income has become more and more difficult,” said Steve Schnapp of United for a Fair Economy.
It’s not that the economy was less productive, however. Technological innovation has made it possible to be more productive, with a smaller workforce.
“All these increases in productivity did not result as an increase in returns to workers,” said Schnapp.
Child poverty rates in the United States are among the highest of wealthy countries. There has also been a staggering constant gap in child poverty among different ethnic groups — despite anti-poverty programs.
“Compared to other countries, first, we have more unequal incomes to begin with, and second, we do less to try to have a strong safety net for families with children,” said Julia Isaacs, a visting scholar at the Institute for Research on Poverty at the University of Wisconsin-Madison.
Isaacs says the introduction of Social Security and Medicare made great improvements to poverty rates among the elderly. Nearly 35 percent of the elderly population lived in poverty in 1959 compared to roughly 10 percent today.
“We are very cautious in how much government assistance we provide to children,” said Isaacs.
More than $19 trillion of household wealth was lost in the Great Recession, according to the Treasury Department. Besides the stock market, nowhere was this loss of wealth felt more than in home values.
As prices soared over the last decade, some buyers purchased out of fear they would be priced out of the market. Despite the fall in home prices, Jeff Lubell at the Center for Housing Policy says affordability for homeowners has worsened.
“We hear a lot about how home prices today are more affordable relative to incomes than they have been for a long, long time. And that very well may be,” said Lubell. “But when you look at the share of income that homeowners today are spending on housing, it actually suggests that housing is much less affordable that it was even just a few years ago.”
Declining incomes of 5 percent for homeowners and 4 percent for renters have aided in the erosion of affordability. Lubell says nearly a quarter of all working households are spending half or more of their income on housing costs.
Workshop staffers Kat Aaron and Madeline Beard contributed to this report.
SOURCE: Institute for Policy Studies analysis, BusinessWeek magazine, Associated Press, Bureau of Labor Statistics
SOURCE: Bureau of Labor Statistics, Barry T. Hirsch and David A. MacPherson, U.S. Census Bureau
SOURCE: U.S. Census Bureau, Bipartisan Policy Center
SOURCE: Calculations by the Project on Student Debt on data from U.S. Department of Education, National Center for Education Statistics, National Postsecondary Student Aid Study (NPSAS) and Peterson's Undergraduate Financial Aid and Undergraduate Databases, copyright 2011 Peterson's, a Nelnet company, all rights reserved, Federal Reserve
SOURCE: U.S. Census Bureau
SOURCE: U.S. Department of Agriculture report, “Household Food Security in the United States in 2010,” U.S. Census Bureau