Now a new article in the Financial Times contains similar data (hat tip: Rod Dreher):
What is most troubling about the Freemans is how typical they are. Neither Mark nor Connie – his indefatigable wife, who is as chubby as he is gaunt – suffer any chronic medical conditions. Both have jobs at the local Methodist Hospital, he as a warehouse receiver and distributor, she as an anaesthesia supply technician. At $70,000 a year, their joint gross income is more than a third higher than the median US household.
Once upon a time this was called the American Dream. Nowadays it might be called America’s Fitful Reverie. Indeed, Mark spends large monthly sums renting a machine to treat his sleep apnea, which gives him insomnia. “If we lost our jobs, we would have about three weeks of savings to draw on before we hit the bone,” says Mark, who is sitting on his patio keeping an eye on the street and swigging from a bottle of Miller Lite. “We work day and night and try to save for our retirement. But we are never more than a pay check or two from the streets.”
Mention middle-class America and most foreigners envision something timeless and manicured, from The Brady Bunch, say, or Desperate Housewives in which teenagers drive to school in sports cars and the girls are always cheerleading. This might approximate how some in the top 10 per cent live. The rest live like the Freemans. Or worse. [...]
The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the multiple is above 300.
The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.
But doesn't this "median wage stagnation" idea only reflect what's going on right now, in a recession? Weren't middle class wages just fine before that?
Not really, according to this economic article written in 2007:
The statistics available in that article concur with what the Financial Times article says: in real terms, wages of 90 percent of American workers have only increased by 10 percent. Has the cost of living, in real terms, risen only ten percent since 1973? I'm not an economist, so I don't know, but it doesn't seem likely.
As of Labor Day 2007, the economic recovery that began in 2001 is six years old, and the economy has consistently expanded over this period. Productivity growth, though slower of late, has been particularly strong, and after a long, slow start, employment has been consistently growing, albeit slower than past recoveries.
But most American workers have not shared in the growth and prosperity they have been helping to create. Surely, one measure of the success of an economic growth period is how much of that growth finds its way into workers' paychecks. In a period of sharply rising inequality, however, this is no "slam dunk." In fact, as much of the data in this brief reveal, many workers' wages have been stagnant for a number of years, after adjusting for inflation, particularly those at the middle and lower end of the pay scale. For example, while productivity is up nearly 20% since 2000, the real median hourly wage is up 3% overall and 1% for men, with none of this growth occurring over the three-and-a-half years since 2003. At the top of the wage scale—at the 95th percentile—real wages are up 9%.
My maternal grandfather was a middle-class man of his day. On a blue collar salary, he could, and did:
--build his own home on a piece of land he owned (and when I say build, I mean that he personally built it)
--send all five of his children to Catholic schools (yes, in those days parishes supported the schools and tuition wasn't the five to ten thousand dollars per year that it is here where I live now)
--own an extra piece of land in a different state that was to be his retirement property (alas, my grandmother's early death changed those plans)
--retire fairly young, and purchase a camping trailer with which to travel around America,
--travel and live in various places, sometimes with family, for much of the rest of his life.
How many of us middle-class people now have that much freedom? How many of us own our homes and land outright (not to mention an extra piece of property)? How many of us could afford to travel extensively after an early--or even an age 65, which is starting to be considered early--retirement?
How many of us have made a good start on retirement savings? How many of us put $10,000 per year into our savings, or have saved at least two years' worth of income by the time we're in our forties, as most retirement savings experts suggest? How many of us, with families and single-incomes and other obligations, could even begin to do either of those two things?
As the economy stutters and falters, and as more and more people face possible job losses, the reality that the middle class is being squeezed out of existence may begin to hit home for a lot of people. We can't compensate forever for rising prices, higher taxes, stagnation of income, and the like--not to mention the pervasive loss of freedom that impacts us as much, if not more, than any of these things.