|Image source: Center for Financial Social Work, 2013.|
According to former Secretary of Labor Robert Reich, some businessmen are looking at the economic data, and they’re worried. The problem, from their perspective, isn’t taxes. The problem isn’t regulation. No; from what they can see, the problem is that the middle class — the people who buy their products — don’t have enough money.
Mirabile dictu, some people are finally beginning to connect the dots.
As I’ve noted in this blog before, since 1999 real income has been declining for everyone in the bottom 80%. For those who need the explanation, you get paid today in nominal dollars; real dollars are nominal dollars after inflation has been taken into account. Theoretically, real wages stay flat when income increases match price increases, and rise when wage increases outpace price increases.
And in fact, nominal wage increases did outpace price increases throughout the Clinton Administration, such that the real wage increase by 2000 was 15.79% across the bottom 80%. But from 1999 to 2012, real wages declined an average of 10.59% across the bottom 80%, until they were only marginally better than they had been in 1980; in the case of the bottom 20%, almost all gains were wiped out.
Real wages only tell part of the story. Between January 1983 and November 2013, personal savings dipped alarmingly, from 10.4% of disposable income to 4.2%, while the real consumer debt per household more than doubled, from $11,386 to $23,238. Between 1980 and 2012, the middle classes’ share of aggregate income diminished from 51.7% to 45.7%; as of 2010, the bottom 80% had only 11% of total net worth and 5% of financial wealth. And while median net worth and financial wealth decreased across racial lines, for the average black and Hispanic household such things practically disappeared between 2006 and 2010.
|Image source: Fed. Reserve Bank of San Francisco, 2013.|