Our politicians stood idly by as millions of good paying jobs were shipped overseas, our economic infrastructure was absolutely gutted and multitudes of small businesses were choked to death by miles of red tape.
Now, we are reaping the consequences. In America today, nobody has a job in one out of every five families, and there are more than 100 million working age Americans that are currency not working. And thanks to our transition to a “service economy”, many of those that are actually working are deeply struggling too. According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year. And the Federal Reserve says that 47 percent of all Americans could not pay an unexpected $400 emergency room bill without borrowing the money from somewhere or selling something. That means that about half the country is flat broke, and things get even more precarious for working families with each passing day.
Of course the plight of working families is not something that is new. Back in the 1950s and 1960s, wages and salaries earned by workers accounted for around half of all gross domestic income. But since 1970 there has been a precipitous decline, and during the Obama administration we hit an all-time low. In other words, the share of the pie being enjoyed by working families just keeps getting smaller and smaller and smaller.
All over the country, median incomes have been falling for years. This is putting an incredible amount of financial stress on working families, and we have seen poverty grow explosively in the United States during the last couple presidential administrations. According to one study, median incomes have fallen in over 80 percent of the major metropolitan areas in this nation since the year 2000…
A major new analysis of income in America published by Pew earlier this month found that more than 80% of the country’s 229 metropolitan areas have seen real (inflation-adjusted) incomes fall steadily since the start of this century. Some of the steepest declines in median incomes have been seen in cities hit by industrial decline – for example a 27% drop in Springfield, Ohio and 18% in the conurbation that includes Detroit. But, ominously, even fast expanding success stories have seen incomes falling.
The area around Denver, Colorado, has seen its population grow by 600,000 since 1999, but its median income has fallen from $83,500 to less than $76,000. Similarly Raleigh, North Carolina, is a fast-growing city buoyed by a cluster of research universities and biotech firms; the population has shot up from 800,000 to 1.3 million this century. Yet its middle class has shrunk from 55% of the population to 50%, and median incomes have fallen by more than $11,000 to about $74,000.
Once upon a time, the middle class was a solid majority in this country.
In fact, 61 percent of all Americans were considered to be middle class back in 1971.
But now, the middle class in the United States is becoming a minority for the first time ever…
“After more than four decades of serving as the nation’s economic majority, the American middle class is now matched in number by those in the economic tiers above and below it,” the Pew report said. “Since 1971, each decade has ended with a smaller share of adults living in middle-income households than at the beginning of the decade, and no single decade stands out as having triggered or hastened the decline in the middle.”
One of the big things that is destroying the middle class is the death of entrepreneurship. For decades, small business creation was one of the primary engines that helped fuel the growth of the middle class, but in recent years small business creation has fallen to depressingly low levels…
Fewer new businesses were created in the last five years in the US than any period since at least 1980, according to a new analysis (pdf) by the Economic Innovation Group (EIG), a bipartisan advocacy group founded by the Silicon Valley entrepreneur Sean Parker and others. Businesses that did form are also far more concentrated than ever before: just 20 counties accounted for half of the country’s total new businesses. All of them were in large metro areas.
“It’s hard to put into scale the collapse of new business formation. We have no precedent for that rapid and steep of a collapse,” said John Lettieri, co-author of the report and co-founder of EIG, in an interview. “It will have a ripple effect in the economy. You‘re going to feel that impact five, 10, and 15 years in the future.”
Of course just about every other economic indicator shows the dramatic decline of the middle class as well. As you can see from this set of charts from Zero Hedge, median family income, the labor force participation rate and the rate of homeownership are all way down over the last decade. Meanwhile, the U.S. national debt, the number of Americans on food stamps and healthcare costs are way up. Does that sound like a “healthy economy” to you?
Unfortunately, this is about as good as things are going to get. A major new economic downturn is already brewing, and layoff announcements at major firms are running 24 percent higher this year than they were last year.
The America that most of us grew up in is dying, and what we have seen so far is just the tip of the iceberg. If you follow my work closely, then you already know that I believe that much, much worse is coming. But our leaders just continue on with business as usual. They keep doing the same things over and over again, but they keep expecting different results.
What they are doing to “fix” things is not going to work, and that should be exceedingly apparent to everyone by now.
We need to start valuing working families again, and that means encouraging the growth of small businesses and encouraging the creation of middle class jobs.
Sadly, we have already entered the early stages of the next great economic crisis, and so things are going to get a whole lot worse for the working class before there is any chance of them getting better.