Do you understand how come it got so bad for so many households these days? I’ve been looking at “The American Middle Class Under Stress” report by Sherle R. Schewenninger and Samuel Sherraden of the New America Foundation. It probably won’t make you feel any better, or suddenly fill up your bank account, but sometimes understanding a situation can make it a bit more bearable. Here’s the skinny, in just three short paragraphs!
Right now, even though the recession is technically over, unemployment remains unusually high. The rate at which jobs are opening up is agonizingly slow. In addition, middle class jobs have disappeared, and most of the new jobs are low wage jobs that don’t require advanced training or education. Many who are at work now are more educated than their job requires. While not unemployed, they are viewed as “under-employed” and are earning less than they would if workers’ abilities matched job requirements.
Pre-dating the current employment mismatch between supply and demand, workers were in an increasingly precarious position because wages have remained flat for decades. To the extent that household incomes went up, they did so primarily because women entered the workforce and brought home a second paycheck. While wages were static, the cost of health care continued a sharp upward rise, and the cost of living increased, squeezing incomes across the country. Many people simply stopped paying the exorbitant premiums for health insurance, which went up astonishinly fast. About 50 million Americans now have no health insurance coverage.
To top off these two factors, the value of home ownership has fallen right off the cliff, taking trillions of savings dollars with it. Before the bubble burst, Americans would sell their homes and live off the proceeds in retirement. Falling home values mean that source of savings has shrunk, and retirees have far less to support themselves than they anticipated. As a consequence, Social Security benefits make up a greater share of income for more seniors. For decades the most economically efficient government program, and the most successful at keeping millions of people out of poverty, gutting Social Security is now seen by some as the ticket to deficit reduction. Others are understandably alarmed by this approach, as it would push millions of people into poverty.
Okay, maybe you don’t feel any better. But at least you know.
‘Til next time,
Your (Wo)Man in Washington