We all like to step into the New Year with the hope “this year will be better.” Many are stepping into 2014 without that hope.
A recent CNN poll shows 68% of Americans expect the economy to stay in “poor shape” in 2014. Ironically, just released economic data shows the economy grew at a 4.1% rate for the third quarter of 2013. That’s pretty sporty growth!
The disconnect between real growth and Americans’ attitude results from the lack of benefit this growth provided for many Americans.
While the economy spurted, job growth lagged. Only an average of 143,000 new jobs per month were created in the third quarter, down from 182,000 in the second quarter, and far below the 250,000 average needed to keep pace with population growth.
How can the economy grow without job growth? By existing workers producing more, i.e., improved productivity. Productivity in the third quarter grew at a rate of 3.0%. However, average wages for the workers who produced more only increased 1.6%.
Meanwhile corporate profits grew at a 4.5% rate. Investors did well too. The Russell 2000 index grew 10.2% in the third quarter.
This data points, again, to the long-term trend of increased income inequality in America. The top 1% of Americans receive about 22.5% of all pre-tax income, while the bottom 90% receive 49.6%. Seven decades ago the bottom 90% got 67.5%, while the top 1% got 11.3%.
More startling are total wealth numbers. The top 1% of American households in 2010 controlled 35.4% of all privately held wealth. The bottom 80% owned just 10.1%.
Nobel Prize winner Robert Shiller calls this “the most important problem that we are facing today.”
A good job with a good wage has been the foundation of the American dream. Three things are ruining this dream for many Americans: 1) businesses outsourced most low-skill production jobs overseas; 2) ever-improving technology has eliminated many mid-level jobs and made others much more productive; and 3) business has focused more and more on short-term profits.
The harsh reality is our economy no longer provides decent job opportunities for thousands of high school drop-outs and marginal high school graduates. Indeed, high GPA college graduates with liberal arts and general business degrees face a tough job market.
Lack of good jobs yields declining hope. Declining hope puts immense pressure on politicians. Hope for a better tomorrow is all they have to sell.
President Obama and Democrats are trying to seize the issue with talk of a minimum wage increase, but have no real plan to put more people to work. Incredibly, most Republicans seem oblivious to the problem, apparently content to cater to a shrinking bubble of better-off Americans.
Somebody needs to take charge! Dwindling hopes and dreams won’t cut it.