Wednesday, September 27, 2017
Skewering the "Americans Are Getting Richer" Trope
It seems very plausible now that the basis for much of the nation's polarization is the mutation of the culture wars into class wars. The latter primarily driven by slowing economic growth and an increasing poverty especially among the lower middle class. Even Jon Caldara of the Independence Institute worried when he wrote (Denver Post, Sept. 17):
"A warning to my friends on the political right: Economic inequality is real....the difference between 2 percent and 3 percent growth isn’t 1 percent. It’s a difference of over 33 percent (check a calculator if you need). Compound that over a decade and you get an idea what was lost. Lost was what gave past generations their first real job, a first home, a college education without crippling debt, a savings for retirement and the sense of security ...What I’m talking about is the end of The American Dream. The difference between 2 percent and 3 percent is the hope and security of a nation."
So even Caldara admits economic conditions are worsening and that must include incomes, So how can the WSJ in one editorial (Sept. 14, p. A16, 'Americans Get Richer') claim:
"Last year real median income rose 3.2% the second consecutive increase as 2.5 million Americans rose out of poverty".
Leading to the assertion of a new median income (last year)of $59,200. But is it real? Or better, what exactly underpins the claims? The website 'Motley Fool' provides an answer how, in a piece headed 'Here's How 44 Million Americans Are Getting Richer':
"According to a new Bankrate survey, there are 44 million Americans who currently have some sort of side hustle on top of a regular job. Not familiar with the term? A side hustle is basically a way of generating income outside of one's primary paycheck...Side hustles come in many shapes and forms. Walking other people's dogs on the weekend is a legitimate side hustle, as is telemarketing during evening hours. Want to wait tables twice a week? Welcome to the side hustle club. No matter what sort of additional work you're willing and able to take on, committing to even a small amount could mean the difference between struggling financially and paying your bills -- and it's encouraging to see so many folks making the effort."
Yes, it may well be "encouraging" but it shouldn't be necessary in a normal and equitable economy to have to work extra gig jobs to have sufficient income to meet one's needs. This, of course, gets to the heart of Caldara's complaint about slowing economic growth. It basically means Americans have to work more and longer just to keep pace. Even the temporary "good news" won't last because there's no assurance growth will even stay paced at 2 % per year, it could easily slip to 1 percent. See my extensive post on exactly why this growth erosion is occurring - to do with the continual degradation of energy quality, e.g.
Strangely, very few authors have managed to look at the real culprit preferring to be distracted by x number of red herrings.
In the interest of completeness, one day after the WSJ cheery editorial came out, some other rather more sober news did on page A9 ('The Flip Side Of The New U.S. Economy) noting the transition of millions of steady American workers, e.g. with steady jobs, to now doing "contract" work.
"Millions of contractors now do heavy lifting, paper pushing and other jobs for American companies that have replaced employees with outside workers. Within the next four years nearly half of the private sector work force in the U.S. will have spent at least some time as a contractor, temporary employee or other type of outside job estimates MBO Partners, a provider of support services to self-employed professionals.
The contractor model offer companies lower costs, more flexibility and fewer management headaches. Workers get far less from the arrangement. The costs hit home in every paycheck and every day on the job, according to interview with dozens of current and former contractors, s well as many of the more than 150 responses to a survey by The Wall Street Journal. The survey also asks readers to describe their experiences as a contractor".
So here again we see the underbelly of the "richer" trope which really isn't richer at all. Outside of the numerical value of the "higher income" a contactor (or gig worker) may get are the costs not mentioned: no health care benefits (the contractor has to pay himself), no sick days, no 401k plan or other perks or vacation days. As the WSJ reality check piece put it:
""While regular employees get a relatively stable paycheck and benefits contract workers are on their own."
That seems like a pretty high extra cost to me! SO yeah, maybe a guy like one of these contractors discussed is getting $59,000 a year - and more than he'd get at another job. But what about after he has to pay $1,000 a month for a COBRA or other health insurance policy? Well, that brings that fantastic "richer" income down to a pedestrian $37,000 a year - and we aren't even factoring in saving for retirement such as a 401k plan would allow.
The Federal Reserve's own stats disclose that 46 percent of Americans are unable to scratch up even 400 bucks to meet a minor emergency. More sobering and tied to it, the personal savings rate is now 3.5 % the lowest since the worst of the Great recession in 2008. In terms of those who do have 401ks there is the massive problem of "leakage" or borrowing from one's 401k plan and undermining retirement savings.
Bottom line? Americans aren't getting richer, they are working harder than hell as freelancers and contractors- including doing extra jobs- just to stay afloat because wage stagnation is real and persistent. It is time the financial press stop the propaganda when anyone in an extra gig or contractor job can see right through it.