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5 Divident Stocks T0 Own Forever
Not Happy Holidays for Half of the U.S. Lombardi Letter 2017-09-07 02:14:22 Economic recovery U.S. economy wage growth. Stagnant wage growth for the bottom 50% of Americans has created an inequity that could undermine long-term U.S. economic growth. U.S. Economy

Not Happy Holidays for Half of the U.S.

U.S. Economy - By John Whitefoot, BA |

Zero Wage Growth for Half of Americans

Much has been made of the U.S. economic recovery, but it all depends on your perspective. If you’re a one percenter or enjoying a cushy life on Capitol Hill, the economic recovery has been resplendent. But, if you’re part of the bottom 50% of Americans, the economic recovery has been nothing but depressing.

Virtually all of the headlines right now show the U.S. economy chugging along. Unemployment is down, wages are starting to creep up, gross domestic product (GDP) growth is picking up; what isn’t to like? Plenty, if you’re hoping for sustained economic growth.


5 Divident Stocks T0 Own Forever

The fact of the matter is, the U.S. economic recovery has left (or continues to leave) a massive swath of the U.S. population behind. According to new research, while the broader U.S. economy is improving, for half of the U.S. population, their share of the economic pie is shrinking.

Approximately 117 million adults are stuck on the bottom rungs of the income ladder and have been cut off from economic growth since the 1970s. Think about it: for the bottom half of working age adults, the wage growth has been close to zero. (Source: “A Bigger Economic Pie, but a Smaller Slice for Half of the U.S.,” The New York Times, December 6, 2016.)

Because of stagnant wages, the income generated by the so-called bottom half of the population has shrunk to 12.5% from 20% of the total in 1980. The money didn’t vanish. It went to the top one percent of working Americans, whose income nearly doubled to more than 20% during the same 34-year period.

Unfortunately, President-elect Donald Trump’s desire to roll back benefits that help the lower 50% of working Americans (including a large number of people who voted for him), like Medicaid and Obamacare, and increase tax cuts to the top 10% could be counterproductive … in the long run.

But that’s a hard story to spin, especially when you consider that 30% of the country’s income goes to federal, state, and local taxes. Military spending aside, most of that goes back to America’s working poor in the form of Social Security checks, Medicare benefits, and veterans’ benefits.

Is Inequity the Defining U.S. National Issue?

The massive growth in income at the top has significantly outpaced the small increase at the bottom and widened the inequity gulf between the wealthiest of Americans and everyone else.

Average incomes, when adjusted for inflation, increased 61% from 1980 to 2014. But roughly $7.00 out of every additional $10.00 went to those in the top tenth of the income scale. In 1980, someone in the top one percent earned the equivalent of $428,200 annually in 2014 dollars. That’s 27 times more than the $16,000 the average person in the bottom half earned.

By 2014, the average income of 117 million Americans was essentially the same; stuck at around $16,000. But those in the top one percent earned on average $1.30 million, or 81 times as much. To put that into perspective, that’s the same kind of wage gap you’d encounter in the world’s poorest countries (Democratic Republic of Congo and Burundi).

Not surprisingly, the number of Americans on food stamps continues to remain at untenable levels. According to the most recent data, 45.76 million Americans receive food stamps at a total cost of $73.9 billion. (Source: “Supplemental Nutrition Assistance Program Participation and Costs,” U.S. Food and Nutrition Service, last accessed December 5, 2016.)

While that number is down slightly over the last few years, it is still well above the 26.2 million who received food stamps before the financial crisis and so-called economic recovery in 2007, and the 28.2 million who did in 2008. The number of Americans who have received food stamps has not dipped below 40 million since 2010.

And again, not surprisingly, approximately 70% of Americans have less than $1,000 in their savings account. And just a third of those who make at least $75,000 annually live paycheck to paycheck at times. (Source: “Americans Still Struggle With Saving for a Rainy Day,” The Street, November 18, 2016.)

This is not to undermine those U.S. entrepreneurs who have taken risks and helped make America great, even before Donald Trump ran for president. It’s to point out that the U.S. economy is simply not doing as well as the mainstream media has been suggesting.

Remember, the United States is a country that generates more than 70% of its GDP growth on the backs of consumers. The greater the inequity, the more the economy will need to rely on the top one percenters to lift GDP. The bottom 99% can’t charge their purchases forever. They need real wage growth to help the economy get stronger.

It’s much easier for 75% of the population to support the entire country than one percent or even 10%. Until that happens, the U.S. economy cannot really have been said to have recovered.

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