Today the stock markets rocketed up on news of a plan to protect European banks from the sovereign debt crisis. But there was also stark new evidence why the mood of many Americans doesn’t match that of the markets.
Two researchers looked at U.S. Census Bureau figures for the two years extending from when the recession in the U.S. officially ended, in June 2009. So during the two years of slow economic growth that followed, here’s what happened to typical household income: It fell 6.7 percent even as U.S. gross domestic product was supposedly rising. That’s twice the drop recorded during the actual recession.
The study, reported in today’s New York Times, was a startling reminder of how unemployment is hurting millions of Americans, and how a lot of people lucky enough to have jobs are struggling to make ends meet.
We talked to Adam Looney, the policy director at The Hamilton Project — a think-tank that promotes policy initiatives to help broaden economic prosperity. He says he’s not surprised by today’s household income figures. In fact, they confirm what he says is a longer term crisis for American workers. He says if you look at the situation of American men over the last four decades, you’ll find that, adjusted for inflation, annual earnings are down 28 percent. And Looney says this is caused both by a stagnation in wages and by the fact that a surprising number of American men no longer work at all. He says getting low skilled American back to work in jobs with good take-home pay is an intractable problem.
The study also revealed that, among the unemployed, when they do get a job, it often pays significantly less than their old one. Looney says this is the problem of displaced workers. When, say, a plant closes, not only does the job disappear, but often the skills required to do that job are no longer needed in the American economy. So the skilled worker is forced to take an unskilled job at a lower salary. He says that you’ll find Americans in that situation are making less money even 10 years out from losing their high-skill, high-pay job.
Another revelation from the study of Census Bureau figures is that education does matter. College graduates are more likely to be employed and they make significantly more money than high school graduates. Looney says that’s where government policy comes in to play. But if there’s one thing we’ve learned over the past year, anyone hoping for policy action from Washington is bound to be disappointed.
So the next time we look to a rising national GDP to prove that the economy is no longer in recession, we might be wise to remember that the GDP of the average American household moves to a very different beat.
Also on the show today, Ben and Jerry’s lent its impeccable liberal credentials to the Occupy Wall Street protests. Or its cows did, at least. The ice cream company’s website now features cows holding signs with “Occupy” on them, above the statement: “To those who Occupy: We stand with you.” News of such sweet support for people protesting the disparity of wealth in this country is strengthening the Marketplace Daily Pulse today.
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