Take Your Low-Paying Job and Shove it!

MENU: Unemployment Numbers | Personal Incomes at a Glance | Demographics of households in U.S. | About Inflation and the Cost of Living | Two Household Incomes | Women in the Workforce | The Income Gap | Cheap Housing Myth | Clashing Economic Philosophies

Intro

Just "creating jobs" (as just any old job) shouldn't be the corporate, political, or governmental main goal. Creating full-time jobs that last and paying a real "living wage" should be the ultimate goal. Don't offer a college graduate a job at McDonalds or Wal-Mart (promising to move up them up a fictitious ladder) and then tell them that they should be thankful that they even have a job -- or that they should be grateful because millions of people are unemployed here or starving in China -- because China is on track to pass America as #1 (Read: China's Greatest Generation and the Chinese Dream

Unemployment Numbers

Bureau of Labor Statistics: Released April 6, 2012 for March 2012 - "The unemployment rate was little changed at 8.2 percent. Employment rose in manufacturing, food services and drinking places, and health care, but was down in retail trade. The number of unemployed persons was 12.7 million. The number of long-term unemployed (those jobless for 6 months or more) was essentially unchanged at 5.3 million."

Bud Meyers calculates that at least 8 million Americans have already exhausted all their unemployed benefits without ever finding work again, and they are no longer being counted by the BLS (either as "marginally attached" or as "discouraged workers", and are known as the "99ers".

The civilian labor force participation rate (63.8 percent) and the employment-population ratio (58.5 percent). There were 3.5 million job openings. See new hires and turnovers, mass layoffs, and real earnings. (Latest releases from the BLS)

Personal Incomes at a Glance

There are 154.7 million Americans in the entire labor force.

• 50% of all U.S. workers in the labor force (77.3 million) earned less than $26,364 a year and were being paid in regular hourly wages (not with stock options, bonuses, dividends, carried interest or SWAG Investments).
• 55.8 million receive some form of Social Security benefits (retirement averaged $14,760 a year or for disability $13,332 a year).
• 12.7 million are unemployed, but of those, only 6.7 million currently receive unemployment benefits ($15,340 a year)
• 7.7 million were only working part time but wanted full-time work. Full-time minimum wage pays $15,080 a year.
• 8 million exhausted all their unemployed benefits without ever finding work again. ZERO income.
• 1.7 million active duty military. Typical pay in the military for an enlisted 20-year-old E-2 is $37,637 a year
• 1.4 million make up the very top quintile of taxpayers.

The stats show that big-time CEO pay outpaced average worker pay by 380 times in 2011, up from 343 times in 2010. The average CEO pay of companies in the S&P 500 Index rose to $12.94 million in 2011. (See all their tax brackets and tax rates here.)

Demographics of households in U.S.

Bloomberg - After adjusting for inflation, the federal minimum wage has dropped 20% since 1967, even as the nominal figure climbed to $7.25 an hour from $1.40.

A jobless rate that has exceeded 8 percent since February 2009, the longest stretch of such levels of unemployment since monthly records began in 1948, is one reason why workers have little leeway to press for higher wages. Adding in part-time workers who would prefer full-time jobs, and discouraged workers who would take a job if one were available, pushes the unemployment rate up to 15.6%.

The loss of better-paying manufacturing jobs in the last three decades and the growth of service industries may be another reason why wages have failed to keep pace with inflation. Between 1979 and 2007 pre-tax, pre-transfer wages dropped 33% for the bottom quintile. Companies have found ways to replace or negotiate down low-income workers.

Based on payroll taxes reported to the Social Security Administration, David Cay Johnston at Reuters picks out the most important takeaways, including:

• Half of all workers made less than $26,364 a year and that the typical wage is at its lowest level since 1999, after adjusting for inflation.
• The number of working people fell by 5.2 million since 2007 - - but based on population growth estimates, 4.5 million more would have joined the workforce between 2007 and 2011. Add it up, and you get a 10-million-worker gap. (Read more...)

The last Census enumerated 308.7 million people in the United States (now it's almost 313.6 million). Of the total population, at least 300.8 million lived in 116.7 million households according to the 2010 census.

Family accounted for 262 million people or 87% of the population. The husband-wife households numbered 56.5 million and made up 73% of all family households (households containing at least one person related to the householder by birth, marriage, or adoption). Family households maintained by a female householder with no spouse present numbered 15.3 million, more than twice the number of 5.8 million maintained by a male householder with no spouse present.

Those who live in households but who were not related to the householder were identified as housemates or roommates (5.2 million*), roomers or boarders (1.5 million), and unmarried partners (7.7 million). This latter group includes people who initially identified themselves as being same-sex spouses of the householder. Other non-relative was 3.9 million. People who were not related to the householder numbered 18.3 million (6.1% of the household population). In fact, 1 out of every 8 homes contained one or more people not related to the householder.

* Housemates or roommates who were co-equals with the householder and who shared maintenance of the housing unit had more economic equality with the householder. Looking at the age structure of these 5.2 million people, 61% were young adults ages 18 to 29 who might be sharing living expenses. The percentage declined sharply for the next older age group, 30 to 44 years old at 21%.

Among non-family households, one-person households predominated (31.2 million) and were more than three times as common as non-family households with two or more people (8.0 million). More women (17.2 million) than men ( 13.9 million) lived alone. 8.0 million people lived in group-quarters arrangements such as school dormitories, nursing homes, and military barracks.

Opposite-sex unmarried partner households increased by 40 percent since 2000, almost four times the national average. For same-sex households, the preferred estimates for 2000 and 2010 showed an 80 percent increase. However, same-sex partner households made up less than 1 percent of all households in both 2000 and 2010. There were 646,000 same-sex unmarried partner households in 2010.

Other statistics: The unmarried partner population numbered 7.7 million and grew 41 percent between 2000 and 2010, four times as fast as the overall household population (10 percent). Unmarried partners were generally older than housemates: 2.6 million (34 percent) were 18 to 29 years old, while 2.7 million (35 percent) were 30 to 44 years old. In addition, 26 percent of unmarried partners were 45-to-64 year olds, compared with 15 percent of housemates. This difference in age profiles reflects the transitions occurring first when a young person shares expenses as a housemate or roommate after leaving the parent’s home and later when that person develops a more permanent and personal relationship with an unmarried partner. (More on the employment characteristics of families here at the Bureau of Labor Statistics) (Back to top of page)

About Inflation and the Cost of Living

The Bureau of Labor Statistics just reported on April 13, 2012 - "On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers rose 0.3 percent in March after rising 0.4 percent in February. The index for all items less food and energy rose 0.2 percent in March. Over the last 12 months the "all items index" increased 2.7 percent (includes energy and food).

In 1919 the Bureau of Labor Statistics began publication of separate Consumer Price indexes for 32 cities. Regular publication of a national index, the U.S. city average began in 1921, and indexes were estimated back to 1913 using records of food prices.

In 1983 housing prices were replaced with rents because rents were more considered more stable, because housing prices rose and fell more than rents during the housing bubble and crash, so housing's effects on inflation and deflation are not reflected in the CPI. (Housing and rents have skyrocketed in the past 30 years.)

The CPI is suppose to measure the change in expenses required for people to maintain the same standard of living. But because of changes to the way that the Federal Reserve's CPI is calculated, and because energy and food price changes are currently excluded from the calculation of "core inflation," the inflation rate is being dramatically underestimated.

The Federal Reserve's policy of ignoring food and energy prices is often confused with the Bureau of Labor Statistics' measurement of the CPI. The BLS publishes both a headline CPI which counts food and energy prices, and also a CPI for all items less food and energy, or "Core" CPI.

The chart below in the Bureau of Labor Statistics' measurement of the CPI which includes food and energy prices, the biggest drivers of average household's cost-of-living. (Source: Check "all items" and then set dates on the next page and "include charts".)

The Great Paradigm Shift In Commodity Prices by Dave Cohen May 2, 2011 - "The index shown in the chart below starts 110 years ago and trends steadily downward, in apparent defiance of the ultimately limited nature of the price of commodities and resources. The average price falls by 1.2% a year after inflation adjustment to its low point in 2002. Prices were 65% higher at the end of 1977 than they were at the beginning of 1970. A 65% increase in the cost of living in just eight years."

The Real Mega-Trend That Guarantees the Cost of Living Will Rise February 21, 2012 - " The chart below and population demographics tell us in no uncertain terms that higher prices will be a reality going forward. Put another way, the days of cheap food and cheap resources is over."

Click chart to enlarge

The tremendous increase in the price of oil began with the oil crises in 1973 and 1979. Petroleum is such a crucial part of American consumer activity and industrial production that the entire cost of living and doing business was affected in the 1970s almost overnight. The prices for goods and services can rise rapidly for a number of years -- such as the value of commodities and finite assets like land, oil and gold, which can rise almost indefinitely. But what if wages don't rise to keep up with the cost of living? The wife (or husband) has to get a job, or one finds a roommate to share expenses to maintain a middle-class standard of living. (Back to top of page)

A dollar then and now:

$1 in 1775 = $29.00 today
$1 in 1825 = $22.40 today
$1 in 1875 = $20.20 today
$1 in 1925 = $12.20 today
$1 in 1950 = $8.91 today
$1 in 1975 = $3.98 today
$1 in 2000 = $1.25 today

Two Household Incomes

From Two Breadwinners to One by Louis Uchitelle May 4, 2011

Born of the women’s movement and the income stagnation that started in the 1970s—soon making one income inadequate—the two-income family became a means of staying in the middle class (or striving for that status).

Now, one of those incomes is rapidly disappearing as more and more husbands or wives lose a job and, in a period of minimal job creation when they can’t get back into the workforce. Once the unemployment benefits expire for the jobless (husband or wife) the working spouse’s income then becomes the couple’s jobless pay, sustaining them, but at a lower—sometimes much lower—standard of living.

“We started out after World War II telling people that one person could support a family, and after a while that one income was not enough,” notes Heather Boushey, senior economist at the Center for American Progress, in Washington. “Then we said that if the husband and wife both worked, they would get into the middle class. And now more and more the second person isn't working.”

Remember, 77.3 million who ARE working earn less than $26,364 a year. 55.8 million receive some form of Social Security benefits (retirement or disability). 12.7 million are unemployed (of those, 6.7 million currently receive unemployment benefits), and 7.7 million were only working part time (8 million long-term unemployed are no longer counted.)

According to the Labor Department 5.2. million are reported as "long-term unemployed, while Bud Meyers reports at least 8 million Americas are unemployed who have already exhausted all UI benefits and are no longer counted by the Bureau of Labor Statistics.

There were more than 58 million “married-couple families” in the United States on the eve of the Great Recession, and in more than 30 million of those families (51.7%) both the husband and wife worked according to the Bureau of Labor Statistics.

Since then the percentage of two-earner families, in which either the husband or wife became unemployed in a given year, has doubled from roughly 1.5 percent to 3.1 percent for wives and 3.7 percent for husbands, this according to an analysis of government data by Boushey at the Center for American Progress.

In 2010 alone, more than 1 million two-earner married couples were reduced to one earner. That loss helps to explain the rise in mortgage defaults and home foreclosures, and the likelihood that both will continue at an abnormally high rate well into any economic recovery until (or unless) the unemployed in two-earner families re-enter the workforce -- and in many cases, not at their previous wages, but at jobs that pay much less.

The labor force participation rate—the percentage of the population either employed or actively seeking work—dropped to 64.8%, its lowest level in over twenty-five years, according to the Bureau of Labor Statistics.

The Middle Class on the Precipice by Elizabeth Warren January - "Middle-class families have been threatened on every front. Rocked by rising prices for essentials as men’s wages remained flat, both Dad and Mom have entered the workforce—a strategy that has left them working harder just to try to break even. Even with two paychecks, family finances are stretched so tightly that a very small misstep can leave them in crisis.

In just one generation, millions of mothers have gone to work, transforming basic family economics. The typical middle-class household in the United States is no longer a one-earner family, with one parent in the workforce and one at home full-time. Instead, the majority of families with small children now have both parents rising at dawn to commute to jobs so they can both pull in paychecks.

Income risk has shifted in other ways as well. Incomes are less dependable today. Layoffs, outsourcing, and other workplace changes have trebled the odds of a significant interruption in a single generation. The shift from one income to two doubled the risks again, as both Mom and Dad face the possibility of unemployment. Of course, with two people in the workforce, the odds of income dropping to zero are lessened. But for families where every penny of both paychecks is already fully committed to mortgage, health insurance, and other payments, the loss of either paycheck can unleash a financial tailspin.

Even the economic risks of divorce have changed. A generation ago, the end of a marriage was an economic blow, but a nonworking spouse usually took a job, bringing in new income to stay afloat. Now, whatever the two-income divorcing couple earns has to cover both their old and new expenses. Evidence mounts that post-divorce, both women and men are struggling to make ends meet as they try to support two households on the same combined income. A divorced woman with children, for example, is about three times more likely to file for bankruptcy than a man or woman, single or married, without children. And men who owe child support are about three times more likely to file for bankruptcy than men who don’t.

The data can be summarized in a financial snapshot of two families, a typical one-earner family from the early 1970s compared with a typical two-earner family from the early 2000s. With an income of $42,450, the average family from the early 1970s covered their basic mortgage expenses of $5,820, health-insurance costs of $1,130 and car payments, maintenance, gas, and repairs of $5,640. Taxes claimed about 24 percent of their income, leaving them with $19,560 in discretionary funds. That means they had about $1,500 a month to cover food, clothing, utilities, and anything else they might need—just about half of their income.

The modern single-earner family trying to keep up an average lifestyle faces a 72 percent drop in discretionary income compared with its one-income counterpart of a generation ago.

But the position today is very different. Fully 75 percent of family income is earmarked for recurrent monthly expenses. Even if they are able to trim around the edges, families are faced with a sobering truth: every one of those expensive items—mortgage, car payments, insurance, childcare—is a fixed cost. Families must pay them each and every month, through good times and bad; there is no way to cut back from one month to the next, as can be done with spending on clothing or food. Short of moving out of the house, withdrawing their children from preschool, or canceling the insurance policy altogether, they are stuck.

Household income is the total income of anyone living at a particular address. Since 1967 the total number of households in the U.S. has grown 95%, while the population has only grown 56%. When a household splits in half, you get two households. Say mom and dad get divorced and each make $25k a year. You go from having one household that makes $50k to two that make $25k. A single income household is economically less efficient. The rise of divorce and single parent households has contributed to the increase in income inequality. In the book The Income Trap the following statistics are based on the research according to Harvard Law professor and bankruptcy expert Elizabeth Warren:

1. Two-income families today make 75% more in inflation-adjusted dollars, but have less money to spend than one-income families did 30 years ago.
2. Two-income families today spend: 21% less on clothing, 22% less on food, and 44% less on appliances compared to one-income families a generation ago.
3. Every 15 seconds an American family files for bankruptcy.
4. This year, more kids will live through their parents' bankruptcy, than through their parents' divorce.
5. 1.6 million families will file for bankruptcy this year, 9 million more are already in credit counseling.
6. Home mortgage foreclosures are up more than three-fold over the last generation and car foreclosures have hit record levels.
7. More than 62% of families say that they worry about making ends meet.
8. The average family spends 69% more in inflation-adjusted dollars on their home mortgage than their parents spent a generation ago.
9. The average family spends 61% more on health insurance, than their parents spent a generation ago.
10. Credit card default rates are at a record high.

The Myth of the Ideal Worker: The New and Outdated Workplace by Lauren Aguilar April 16, 2012 - "According to the Bureau of Labor Statistics, 48% of married couples are in dual-income households where both the man and the woman work, and there are more working mothers than there are working fathers in the U.S."

77% of all households now have two or more incomes. 30 years ago when people moved in together, or a spouse entered the workforce, it was to increase their standard of living. But with stagnate wages and higher prices, the second income has been borne out of necessity. (Back to top of page)

Women in the Workforce (For Ann Romney)

According the Labor Department, between 1969 and 1996 the number of working married women with children increased by 84 percent. By 1998, two-thirds of all mothers in married-couple families were employed.

Single parents who work not only face the challenge of raising children without the assistance of another parent in the home, but they usually must do so with much less income than a two-parent family.

The number of single-parent families, especially those headed by women, has increased significantly since the 1960s, more than doubling over the last 30 years, up from 11% in 1970 to 27% of family households today.

The percent of single mothers with children under 18 who work increased from 53% in 1969 to 66% in 1996. About three of every five mothers with children under age six are employed.

Over the last 23 years, the percent of mothers employed with spouses present grew more rapidly than the percent of single mothers employed.

The growth in households headed by single fathers outpaced the growth in those households headed by single mothers, but men still make up only one in six single parents. Single fathers grew from 1.7 million in 1995 to 2.1 million in 1998. There is likely to be a continued increase in the number of custodial fathers as gender equality increases.

An estimated 10 to 20% of non-working mothers with young children do not seek employment because child care is not available or affordable. In addition, about 20 to 25% of employed mothers would work longer hours if they did not have childcare constraints.

In the fall of 1994, only about six percent of preschool children were cared for by their mothers in the workplace or while their mothers worked at home. 43% received primary care from relatives other than their mothers, and about 29 percent went to an organized facility such as a daycare center. The number of children cared for in organized facilities has increased by five percentage points since 1987. Poor families, those receiving government assistance, and mothers who work part time or on shifts other than day shifts rely more on relatives for child care (over 50 percent).

Childcare problems do not end once children are in first grade. In some ways, these problems become more difficult because part-day child care is needed and it can be harder to arrange than full-day child care. Using the most generous calculations, only about 64 percent of a full-time worker’s standard work schedule is covered by the hours children are typically in school.

To the extent that parents, especially single parents, work nonstandard hours, there is an increased need for child care around the clock. Nonstandard-hour and -day child care are usually more expensive and less readily available. On the other hand, some parents choose to work non-standard hours because that is when family caregivers are available.

Less-educated mothers are more likely to work a nonstandard schedule than are other women, largely because of the occupations in which they work, such as cashiers, nursing aides, and waitresses. These occupations are likely to grow in the future. Women with preschool children are more likely to work nonstandard hours than women without children or women with older children. One-third of mothers of young children who work nonstandard hours report that the major reason they work those hours is to accommodate child care, likely by the father or other family member. About 38 percent of all women cite child care or the care of other family members as reasons for working nonstandard hours.

Unions and management sometimes negotiate for extensive childcare services as part of collective bargaining.

According to the Bureau of Labors Statistics, labor force participation rates among married women have increased dramatically in recent decades. From 1970 to 1993 the proportion of dual-earner couples increased from 39 percent to 61 percent of all married couples. Since the 1980s we've seen falling real earnings for men combined with rising labor force participation for women. (Back to top of page)

The Income Gap

Breaking Down the Income Gap Into Real Terms By David Francis January 4, 2012 - "What does the income gap mean in real terms? What has changed over the past three decades that has allowed this gap to grow? And what are the actual dollar amounts that separate the middle from the upper class?

The Great Compression: By the 1980s the income growth rate for the wealthy and the middle class began to diverge. Conservative economic policies, as well as changes to the tax code that favored wealthy Americans, caused an uptick in income growth for the rich. At the same time, many of the manufacturing industries that were the backbone of middle-class growth began to shrink [outsourced]. Once-reliable sources of income became not so reliable.

According to a recent Stanford University study:

• 65 percent of U.S. families lived in a middle-income neighborhood in 1970 while 15 percent of families lived in affluent neighborhoods.
• 44 percent of U.S. families lived in a middle-income neighborhood in 2007 and 33 percent of families live in affluent neighborhoods.

But the areas of poverty have grown significantly. In other words, middle-class areas are shrinking, while poor and rich areas are growing. According to a report in the International Business Times, 6.3 percent of Americans live below the poverty line, or with an income of about $11,000 for a family of four, the highest level in the 36 years since this statistic was tracked.

Look at actual changes in wages over the past 30 years. The Congressional Budget Office recently found that the income of the top 1 percent of earning households grew 275 percent from 1979 to 2007. At the same time, the income of other American households grew just 62 percent.

The income gap doesn't just impact those middle-class families whose income growth has stagnated. It also impacts the ability of the U.S. economy to get back on track. Without increases in income, middle-class families have less to spend and attempt to save more. Without spending, growth is almost impossible. So until the middle class has more money to invest back into the economy, growth will be difficult.

At the same time, rich Americans are able to save more. They have the ability to invest this money. Any money made on these investments benefits the investor, not the economy in general.

According to the Gini Index, which measures global income gaps, the separation between the rich and poor in America is among the worst in the world.

"There has been class warfare going on," said Warren Buffett, famed investor and chairman of Berkshire Hathaway, in a September 30 interview on PBS. "It's just that my class is winning. And my class isn't just winning, I mean we're killing them."

Rich vs. No Income Tax American Households by Joel S. Hirschhorn April 11, 2010 - "The number of households in the United States: now at 115 million [now 116.7 million], which equates to an average of 2.6 people per household. 16 percent of households have annual incomes of $100,000 or more. Households with incomes of $250,000 or more, however, number just under 2 percent of the nation’s total. This group equates to about 2.3 million households (6 million individuals) that really are rich in terms of both wealth (assets) and income. These people can afford to pay more taxes because they have benefited disproportionately from past tax cuts and probably are not hurting much in this recession.

American Pie: Wealth and Income Inequality in America (lots of charts) - "Today the top 1 percent of Americans control 43 percent of the financial wealth while the bottom 80 percent control only 7 percent of the wealth. Incredibly, the wealthiest 400 Americans have the same combined wealth as the poorest half of all Americans -- over 150 million people.

Income for the top 20 percent has increased since the 1970s while income for the bottom 80 percent declined.

Despite an economy that's twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they're employed they're earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That's less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better, but that's only because so many families now have to rely on two incomes.)

Household Income Short of $68K? Welcome To the New Poverty by Ken Layne April 1, 2011 - "A study last year proves that a family of four needs $67,920 a year (pre-tax) to survive in America. But the median household income in the United States is $52,029 — nearly $16,000 shy of what it actually costs to keep your head above water if you’ve got a two-income two-child household."

A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker.

Today day in 2012 the average mean wage for a steelworker is $24.11 an hour, or $50,160 a year -- about what a typical teacher, fireman, or police person might earn. That's because they are represented by unions, and their wages have kept pace with the rising cost of living over the past sixty years. They're not over-paid as the Republicans like say, they're just earning an average and comfortable middle-class living....like most of us did back in the 1950s. Bud Meyers calculated that a middle-class wage today would be about $21.63 an hour BEFORE payroll taxes, nor including emergency savings for repairs, clothes, entertainment, or a savings account for retirement and college -- and that that's why most of the new jobs being offered pay less than $10 an hour...less than half that is required to maintain a middle-class standard of living, and why two incomes are needed for one household.

That compares with the national poverty level of $22,050 for a family of four. The most recent data from the Census Bureau found that 14.3 percent of Americans were living below the poverty line in 2009.

As for single people, the government says anything beyond $10,830 means you’re not in poverty. This new study gives a more realistic number, based on the actual cost of basic shelter and food and electricity (and getting to your job if you’re lucky enough.): you need $30,012 a year. It almost seems like enough until you start paying for groceries and rent.

If you’re in the top 20% of income earners in this country, you’re doing better with $180,000 in annual income -- not rich, but comfortable. The 1% who control 70% of the wealth in this country and have household incomes above $400,000.

So we are now officially living in a country where more than 60% of households are not making enough money for a basic household.

Consumer Credit Crisis Looms By Bradley Blakeman February 2012 - "The average American family owes $8,000 in credit card debt, according to the American Bankers Association. According to the U.S. Census Bureau, the real median gross household income is approximately $50,233...with most having two incomes within the same household.

And it's the same in Europe: “We also have to a larger degree become dependent on two incomes per household to keep up with the increased standards of living we've seen in the past 40 years." (Back to top of page)

Housing

The fallacy of cheap home prices and the two income trap – "Dual income households underscore massive housing inflation. Nationwide home prices overvalued by 25 percent. Housing inflation has run at an elevated pace since the 1970s and ramped up starting in the 1990s until the housing bubble finally burst.

Since the late 1960s there has been a steady rise in dual income households. With one spouse working, a family would have saw a household income decline, but rose with a second income.

In the 1950s and 1960s it was very doable for one blue collar job to support one household. That is, purchasing a home with a 30 year fixed rate with one blue collar income was not an extraordinary accomplishment. But what pushed the rate from 47% in 1967 to 77% today?

Of course the obvious part is the rise of women in the workforce, but the more sinister reality is that households now need two incomes just to stay within the middle class. It was more out of necessity. You need only look at the data on manufacturing jobs to see the trend.



We have the same raw number of people working in manufacturing as we did in the 1940s! Of course our population has expanded dramatically over that time. It is amazing that 4 out of 10 Americans work in the low paying service sector (i.e., McDonalds, Wal-Mart, cashiers, etc). That is why the median household income of Americans is roughly $50,000 (that's $25,000 per worker).

The reason home sales have collapsed is the fact that the employment market is so weak and fragile. People are shifting their spending habits to “needs” from “wants".

Everything has gone up in price over this time...healthcare, college costs, mortgage payments, rents, gasoline, electricity, etc. With the single income household, you didn’t need two cars or needed to pay for daycare/babysitting. These are added costs that come when per capita incomes have shrunk.

Now with many households becoming one income households again, because of this recession and high unemployment, we see now how bad things really are. Home values aren't really cheap, nor were they ever; but have been covered up by dual income households and massive amounts of debt. Remove both of those and you get a very ugly economic picture. (Back to top of page)

Clashing Economic Philosophies

The Keynesian Revolution (as an example of a "paradigm shift") saw the neoclassical understanding of employment that demand, and not supply, is the driving factor determining levels of employment. This provided Keynes and his supporters with a theoretical basis to argue that governments should intervene to alleviate severe unemployment. The Keynesian Revolution is typically viewed as a major shift in macroeconomics.

In all fairness, I present to you the right wing's point of view:

And from an Ayn Rand website: "When a divorce splits a two-income household into two separate single-income households, the economy’s median household income will be lower as a result—even though the individuals in each household may be doing just as well financially. Now consider that not only have we had a skyrocketing divorce rate since the 1960s, but that divorce rate is not evenly distributed among demographic groups: the poorest Americans have by far the highest divorce rates. Result? More and more single-income households at the low end of the income scale, dragging down the economy’s median household income even further."

Followers of Any Rand like Rep. Paul Ryan believe in a Laissez-faire capitalism ("let them do as they please"), an environment in which transactions between private parties are free from state intervention, including regulations, taxes, tariffs and enforced monopolies (by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation, or other mechanisms of government enforcement).

In other words, according to Ayn Rand, anybody should be able to buy plutonium or a stinger missiles over the counter.

But Frank Bourgin's 1989 study of the Constitutional Convention shows that direct government involvement in the economy was intended by the Founders. The reason for this was the economic and financial chaos the nation suffered under the Articles of Confederation. The creation of a strong central government able to promote science, invention, industry and commerce, was seen as an essential means of promoting the general welfare and making the economy of the United States strong enough for them to determine their own destiny.

How the Dual Income Destroys the Lower Classes by Jeremy Egerer September 25, 2011 - "This article, recognizing the above socioeconomic maxims, will seek instead to show how two-income households have played an equal, if not a greater role in impoverishing American lower classes." Jeremy Egerer is a recent convert to Christian conservatism from radical liberalism and the editor of the Seattle website www.americanclarity.com

And I can't leave out the right-wing Heritage Foundation -"Top earners are the target for new tax increases, but the federal income tax system is already highly progressive. The top 10 percent of income earners paid 71 percent of all federal income taxes in 2009 though they earned 43 percent of all income. The bottom 50 percent paid 2 percent of income taxes but earned 13 percent of total income. About half of tax filers paid no federal income tax at all." (Whine, whine, whine! See my post Lowest Income Earners Always Get Screwed the Most, and scroll half way down to see this claim fully explained without their right-wing slant.)

Of course, right-wing groups like the Manhattan Institute for Policy Research and the Heritage Foundation has been busy trying to debunk the real facts. Diana Furchtgott-Roth of the Manhattan Institute has published a study saying it's a “misguided assumption that income inequality in the U.S. has increased in recent years.” She claims that the gap between the highest and lowest income quintiles has in fact not changed much over the past 25 years.

And yet Furchtgott-Roth admits that the Tax Reform Act of 1986, which lowered the top income tax rate to 28 percent [capital gains] and the corporate rate to 35 percent, created an incentive for business owners to file as individuals rather than companies. That flow of income bloated personal income tax filings, pushing up the earnings of the highest categories. (Bill Clinton lowered capital gains to 20% and George W. Bush lowered capital gains again to a mere 15%, the lowest since 1921.)

Greater access to capital markets have increased payouts for business owners too. It’s now fairly easy for founders of companies to sell them than it was years ago. With more bidders, the price increases. Back in the 60s, wealth was tied up in a company, and if you didn’t keep running the company your wealth was gone. Now, a small business owner with 20 stores can sell to the national chain and exit the business a multi-millionaire. Some of these things can be fixed with policy, but most of it is just a function of our economy today. Sometimes it’s
greed, sometimes it’s not. Back to top of page

And finally, though it's not relevant to middle-class and low wage earners, I had to include this: CEO Pay, Low Tax Rates & Tax Evasion