Since 2010, the Federal Reserve Bank indicates that the wealthiest 10 percent of American have seen their income rise by 2%. The Bottom 20% have seen their income DECLINE by 4 percent and the average for all families DECLINED 5%. That tells me that the majority in the middle income brackets, decreased at a rate greater than the bottom 20%. In other words more of us are moving down in economic standing, not up. To make matters worse, the Federal Reserve Bank indicates that the top 3% actually had their incomes increase by 27.7% since 2010, meaning that the upper middle class people are falling back with the rest of us. Quite the opposite of what our parents had hope for us.
Wages have not rebounded as many people had to take pay cuts or find new a career at lesser pay, which places all kinds of issues at risk – retirement age, retirement goals, college for the kids, investments, home ownership, etc. All play a role in the economy of the country. People spend less on eating out, new clothes and other things – generally more frugal, which means less demand for goods and services, and therefore less employment. A vicious cycle that doesn’t help the economy. We have already started to see real estate cool off as wages have not rebounded and people figure it is time to defer or get out. Places like Miami and Las Vegas may remain warmer than say Cleveland or Detroit, but the Miami market has cooled in the past year.
Real losses in purchasing power goes back to the 1980s form the lower half of earners in the US. And we argue about the minimum wage – which is the very bottom of the pile. The failed concept of the Great Society was to try to get enough money in everyone’s pocket that the total purchasing power of the population would increase. Did not work out that way, but the concept of increasing purchasing power of all has appeal. Inflation goes up. Purchasing power goes down. The economy will stagnate if wages for the bottom 90% do not increase. That makes official less likely to raise water and sewer rates to pay for those needed infrastructure upgrades. Which will put more assets at risk of failure and stress operations budgets further.