America's Shrinking Middle Class

On the campaign trail this political season one hears much of about the decline of America's middle class and what should be done to stop the financial hemorrhaging and slide of many from once somewhat comfortable middle class status.  As the image above shows, out of twenty one (21) advanced countries in the world, America now places last in terms of the percentage of the national wealth that it holds.   Things did not used to be this way.  The irony is that the Republican solution is more of the very policies that have so ravaged the middle class: continued attacks on labor unions, efforts to slash the social safety net, massive wealth transfers to the 1% and corporations, and opposition to increasing the minimum wage.  Yet, through appeals to religious extremism and racism, too many Americans are duped into voting for those who are their true threat.  A piece in Business Insider looks at the bleak picture. Here are excerpts:

A study from the Pew Research Center in December showed that middle-class Americans are no longer in the majority. Whereas in 1971 middle class Americans totaled 80 million, and lower- and upper-income classes combined equated to 51.6 million, the 2015 data looks far different. As of last year, 120.8 million adults were in the middle class but this figure now takes a back seat to the 121.3 million combined lower- and upper-income households. Aggregate wealth for middle-class households is also shrinking according to Pew's research, from 62% of all wealth in 1970 to just 43% as of 2014. 

However, one report released last year highlighted a middle class statistics so shocking that you'll probably do a double-take.

The 2015 Credit Suisse Global Wealth Report is now in its sixth year of examining and analyzing wealth across the world in order to get a better understanding of wealth creation, consumption, saving, and asset allocation. Every year Credit Suisse picks a specific wealth topic to focus on, and in 2015 it was the middle class.

Now here's where things get interesting . . . Credit Suisse also looked at what percentage of wealth the middle-class comprised within a country. Of the 21 countries individually examined . . . As a percentage of total country wealth, the U.S. middle class accounted for the lowest share of wealth among developed countries, such as Germany and France, as well as emerging markets like China, India, and Brazil.

Why do U.S. households have so little net wealth relative to the total wealth of the country as a whole? It looks to be a number of factors at play.

First, the housing bubble from late last decade really sapped the net worth out of middle-class households. Although home prices have recovered from their lows, some areas have recovered slower than others. The housing price collapse is still fresh in many Americans' minds, and many fear overreaching on home prices even in today's growing economy.

Secondly, access to credit is arguably easier in the U.S. than in many other regions of the world. During the housing boom in the mid-2000s, this was a great way for middle-class families to grow their wealth. However, the housing bubble, combined with high debt levels, have chipped away at middle-class household wealth.

A third issue? Stagnant wage growth. According to data from the U.S. Census Bureau, median household income has actually dropped by roughly $5,000 since 1999 to a median of $51,017 as of 2012. Pew Research pointed out that in spite of nominal wage growth of 727% between 1964 and 2014, in constant 2014 dollars (meaning when taking inflation into account) real wage growth has totaled just 7.8% over 50 years. College tuition, medical care, and even fuel costs have risen at a faster pace, thus diminishing the buying power of the middle class.

Fourth, there's quite an income gap between the richest Americans and the middle class in the United States. According to CNN, the U.S. has 42% of the world's millionaires, and basically half (49%) of all people with $50 million or more in assets. 

Finally, near record-low lending rates aren't helping. The middle class, which was hammered by the stock market decline during the Great Recession, has few avenues of safety to turn to with CD and money market rates losing to an already reduced inflation rate.

The piece goes on and looks at things middle class families can try to do to improve their circumstances, but sadly fails to look at the systemic problems and failed policies that are accelerating the economic and financial downfall of the American middle class.

Wages Stagnant For 40 Years - But Not Because of American Workers

Jeb Bush thinks that American workers need to work longer hours to increase their stagnant wages. Scott Walker seeks to destroy labor unions so that workers are at the total mercy of their employers, be they private or public.  In fact, most of the Republican presidential candidates support policies that support the creation of a new Gilded Age while throwing average Americans in the gutter despite sound bite lip service to the contrary.  A piece in Think Progress looks at the stagnant wages that have plagued American workers for 40 years even as worker productivity has soared.  The take away?  Wages are stagnant, but not due to the laziness or actions of workers.  Here are excerpts:

Americans keep working harder and producing more economic growth. But they’re not getting rewarded with any extra pay for it, according to a new report from the Economic Policy Institute (EPI).

After the end of World War II, the country experienced decades of steady economic growth that also translated into steady increases in pay for the workers who were fueling it. As the report’s authors write, “For decades following the end of World War II, inflation-adjusted hourly compensation (including employer-provided benefits as well as wages) for the vast majority of American workers rose in line with increases in economy-wide productivity.” 

But that link was severed starting in 1973. Between then and now, productivity, or the amount of economic output generated by an average hour of work, grew 72.2 percent. On the other hand, pay for the typical worker rose just 9.2 percent. 

Compensation for the median worker, or the person making exactly the middle of compensation, adjusted for inflation, grew just 8.7 percent between 1973 and 2014, or a 0.2 percent annual rate. Yet net productivity grew at a 1.33 percent annual pace in the same time. Things have gotten even worse since 2000: net productivity has grown 21.6 percent since then, yet inflation-adjusted compensation for the median worker grew just 1.8 percent.

What this means is that just 15 percent of the extra growth workers generated between the early 1970s and the present has translated into higher wages and benefits for them. Since 2000, just 8 percent of productivity growth has gone back to workers.

And it means that stagnating wages aren’t workers’ fault. . . . The paper notes that there are three dynamics that can explain the divergence between growth in productivity and growth in wages and benefits: growing inequality in compensation, or skyrocketing pay for those at the top of the economy compared to everyone else; a greater share of income going toward corporate profits and not wages; and the increase in consumer prices that means wages don’t stretch as far. The first two basically indicate growing income inequality, and together they account for more than two-thirds of the divergence between productivity and pay between 1973 and 2014.

[I]ncome inequality has resulted from deliberate government policy choices, “policy decisions made on behalf of those with the most income, wealth, and power that suppressed wage growth.” Research has consistently shown that the government is more responsive to the desires of the rich than everyone else. The policies Mishel points out are those that undercut labor standards, such as allowing unemployment to remain too high, failing to raise the minimum wage, letting overtime protections erode, and the corrosion of collective bargaining rights.

[A]ny proposals that increase economic growth without also finding ways to make sure that growth translates into higher wages won’t benefit the vast majority of Americans. Otherwise, the current break between productivity and pay will simply continue.

Wal-Mart Among Retailers Involved in Deadly Factory Fire

I have long avoided shopping at Wal-Mart because I view the Walton family as the retail equivalents of Mitt Romney's vulture capitalists.  Wal-Mart employees get lousy pay while the Waltons amass billions.  Now, following a deadly factor fire in Bangladesh where 112 workers died in a scene reminiscent of the horrible Triangle Shirtwaist Factory fire in New York City a century ago, it turns out that Wal-Mart had been warned of the unsafe factory conditions a year ago.  Decent wages and worker safety apparently meant nothing to Walmart and the unsafe conditions continued.   While Wal-Mart wasn't the only American retailer that was served by the factory, it does seem that it most personifies the indecency that excuses anything that adds to the company's bottom line and which adds to the Walton Family fortune.  And, of course, Wal-Mart opposes unions which might force it to change its greedy ways.  ABC News looks at the avoidable tragedy in Bangladesh.  Here are highlights:

The 100-plus workers who died in a fire late Saturday at a high-rise garment factory in Bangladesh were working overtime making clothes for major American retailers, including Wal-Mart, according to workers' rights groups.

Officials in Bangladesh said the flames at the Tazreen Fashions factory outside Dhaka spread rapidly on the ground floor, trapping those on the higher floors of the nine-story building. There were no exterior fire escapes, according to officials, and many died after jumping from upper floors to escape the flames.

As firemen continued to remove bodies Sunday, officials said at least 112 people had died but that the number of fatalities could go higher.

The Tazreen fire is the latest in a series of deadly blazes at garment factories in Bangladesh, where more than 700 workers, many making clothes for U.S. consumers, have died in factory fires in the past five years. As previously reported by ABC News, Bangladesh has some of the cheapest labor in the world and some of the most deplorable working conditions.

"The industry and parent brands in the U.S. have been warned again and again about the extreme danger to workers in Bangladesh and they have not taken action," said Scott Nova, executive director of the Worker Rights Consortium, an American group working to improve conditions at factories abroad that make clothes for U.S. companies. Nova said the fire was the most deadly in the history of the Bangladesh apparel industry, and "one of the worst in any country."

They say they found labels for Faded Glory, a Wal-Mart private label, along with labels they said traced back to Sears and a clothing company owned by music impresario Sean "Diddy" Combs.

Nova also said that Wal-Mart "knew exactly what's going on at these facilities. They have staff on site in Bangladesh."  Wal-Mart actually was warned of dangerous conditions at the Tazreen factory last year, in a letter posted online by the factory owner.

This tragedy is an example of the regulation free type of capitalism favored by today's Republican Party -  the same crowd that wears it religiosity on its sleeve while rejecting the Gospel message through its actions.

Virginia GOP Rejects Federal Help for Unemployment

Providing yet further proof that they are out of touch with reality and care nothing for individuals and families finding themselves unemployed - and likely without medical insurance - the GOP controlled Virginia House of Delegates voted to reject $125 million in federal funds that would have expanded unemployment benefits to Virginians. These folks worry about an unborn fetus but care nothing about the already born - typical hypocrisy for the GOP in general and RPV in particular. I truly do not understand the mentality, but then maybe it's a good thing that I don't get it. I'm an employer and I cannot fathom leaving people without relief when it would only cost $4.50 per year per employee. Here are some highlights from the Virginian Pilot:
*

House Republicans turned down $125 million in federal stimulus money for expanded unemployment benefits to Virginians on Wednesday, saying the windfall ultimately would force higher business taxes. The deeply partisan, 53- 46 vote in the GOP-controlled House of Delegates made Virginia one of the first states to formally reject stimulus dollars and looms as a key issue this fall when all seats in the chamber are up for election.
Earlier in the day, the Democratic-controlled Senate narrowly chose to accept the money on a party-line 21-19 vote.

*
A visibly angry Gov. Timothy M. Kaine, who is chairman of Democratic National Committee, denounced the vote as "completely unfathomable." Kaine is scheduled to appear this morning in Martinsville, a city whose 20 percent unemployment tops the state's jobless rate.
*

"This wasn't a debate about when we're going to say 'no' to Washington except for people who are sunk in a party of no mentality," Kaine said. "It was about could we find a way to provide meaningful relief to Virginians who are hit by the toughest economy this state has faced in the past 50 years?"

*

To receive the federal dollars, Virginia was required to enlarge its unemployment program, which offers fewer benefits than all but a handful of states. Kaine asked lawmakers to provide benefits to idled part-time workers who do not want to seek full-time jobs and extend the length of time unemployment aid is available to those enrolled in job retraining programs.

*

Democrats said it was ludicrous not to take the federal money. They said the new programs could be rescinded when the stimulus runs out. Should the General Assembly decide to keep the programs for the long term, they would cost companies about $4.50 per employee per year in additional unemployment taxes. "Unemployed people are in crisis, and this money can help them," said Del. Jennifer McClellan, D-Richmond. "These are people who are hurting, who through no fault of their own lost their jobs and in many cases cannot pay their bills."