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-- high energy costs;
-- the burst housing bubble;
-- millions of defaults on home loans followed by foreclosures;
-- declining financial markets and frozen credit;
-- less health care coverage and fewer higher-paying jobs with good benefits; and
-- "for the first time since the mid-1940s, the real incomes of middle-class families are lower at the end of this business cycle than they were when it started;" as a result, "prosperity is eluding working families" as they fall further behind, now more than ever as depression takes hold.
EPI calls family income "the core building block of American living standards." Yet during the last business cycle, significant productivity growth was accompanied by stagnant or falling real incomes. "That has never happened before." The latest economic recovery bypassed the middle class and created greater income inequality. The Bush administration's tax cuts exacerbated the problem by helping the top 1% mostly, the middle class marginally, and low-income families not at all.
Clear racial disparities show whites consistently better off than blacks and Hispanics, men doing better than women, huge class distinctions, and mobility up the income ladder bypasses most at lower levels. One study showed that about 60% of families starting out in the bottom fifth stratum were still there a decade later. At the same time, over half the top income ones kept their position.
EPI concludes that "where you start out in the income scale has a strong influence (over) where you end up (so) the rate of economic mobility is low" in the richest country in the world where the select few alone benefit. All others lose out as their incomes don't keep pace with inflation and their living standards erode.
Another study implies that a poor family of four with two children needs nine to 10 generations to reach middle-income status. It means where you're born is where you'll stay. So-called rags-to-riches tales are just folklore, and stagnant or downward mobility today is more serious than ever.
Wages and salaries comprise three-fourths of family income, and for the middle class, it's even higher. Yet since 2002, they didn't grow at all despite historically high productivity, meaning business benefitted, not workers who fell further behind. Women and minorities fare worst plus everyone in lower income categories. During the 2002 - 07 recovery, no progress was made "in reducing the share of workers with low earnings (in) all race/ethnic groups and for both genders....The very highest earners have done considerably better than other workers for at least (the past) 30 years, but they (did) extraordinarily well over the last 10 years."
In addition, eroding "employer-provided benefits, most notably pensions and health insurance, is an important aspect of the deterioration in job quality (and economic security) for many workers." Most harmed are young workers facing bleak prospects, older ones losing jobs and not wanted, and the erosion of unionization since the 1950s, especially since the late 1970s.
Overall, 2002 - 07 growth was a jobless recovery followed by the subsequent wiping out of five years of modest gains. From 2000 - 2007, average annual job growth was an anemic 0.6%, well below the 1990s 1.8% figure. In addition, the unemployment rate rose 0.7% from March 2001 (the last business cycle's peak) to December 2007 even though average workers age increased and the labor force participation rate shrank - "both of which should have put downward pressure on the" unemployment rate. The great American job creation machine faltered badly in the new millennium and now has collapsed.
Net family wealth also determines household well-being, particularly from income and financial assets, including real estate. Yet in America, the top 1% controls more than the bottom 90% combined and the disparity is growing. In 1962, the bottom 80%'s share was 19.1%. In 2004, it was 15.3%, the difference shifting to the top 5%.
In addition, until the current downturn, average household debt grew much faster than income, fueled by increases in mortgages, home equity loans, and high credit card balances. Since the housing bubble burst and home prices collapsed, the damage done has been enormous with still more to come.
The result is growing poverty levels as discussed above with numbers increasing as economic conditions weaken. "The backsliding against poverty in the 2000s is most notable among the least advantaged," especially blacks, Hispanics, mother-only families, and the poor unable to keep pace.
