Wages & Incomes Down, Poverty & Debt Up
1. Profits are up, but the wages and the incomes of average Americans
* Inflation-adjusted hourly and weekly wages are still below
where they were at the start of the recovery in November 2001. Yet, productivity-the
growth of the economic pie-is up by 13.5%.
* Wage growth has been shortchanged because 35% of the growth
of total income in the corporate sector has been distributed as corporate
profits, far more than the 22% in previous periods.
* Consequently, median household income (inflation-adjusted)
has fallen five years in a row and was 4% lower in 2004 than in 1999, falling
from $46,129 to $44,389.
2. More and more people are deeper and deeper in debt.
* The indebtedness of U.S. households, after adjusting for
inflation, has risen 35.7% over the last four years.
* The level of debt as a percent of after-tax income is
the highest ever measured in our history. Mortgage and consumer debt is now
115% of after-tax income, twice the level of 30 years ago.
* The debt-service ratio (the percent of after-tax income
that goes to pay off debts) is at an all-time high of 13.6%.
* The personal savings rate is negative for the first time
3. Job creation has not kept up with population growth, and the employment
rate has fallen sharply.
* The United States has only 1.3% more jobs today (excluding
the effects of Hurricane Katrina) than in March 2001 (the start of the recession).
Private sector jobs are up only 0.8%. At this stage of previous business cycles,
jobs had grown by an average of 8.8% and never less than 6.0%.
* The unemployment rate is relatively low at 5%, but still
higher than the 4% in 2000. Plus, the percent of the population that has a
job has never recovered since the recession and is still 1.3% lower than in
March 2001. If the employment rate had returned to pre-recession levels, 3
million more people would be employed.
* More than 3 million manufacturing jobs have been lost
since January 2000.
4. Poverty is on the rise.
* The poverty rate rose from 11.7% in 2001 to 12.7% in 2004.
* The number of people living in poverty has increased by
5.4 million since 2000.
* More children are living in poverty: the child poverty
rate increased from 16.3% in 2001 to 17.8% in 2004.
5. Rising health care costs are eroding families' already declining
* Households are spending more on health care. Family health
costs rose 43-45% for married couples with children, single mothers, and young
singles from 2000 to 2003.
* Employers are cutting back on health insurance. Last year,
the percent of people with employer-provided health insurance fell for the
fourth year in a row. Nearly 3.7 million fewer people had employer-provided
insurance in 2004 than in 2000. Taking population growth into account, 11
million more people would have had employer-provided health insurance in 2004
if the coverage rate had remained at the 2000 level.
Lawrence Mishel is president of the Economic
Policy Institute and Ross Eisenbrey is EPI's