The Wall Street Journal reports the bottom has fallen out for American families: wages have taken the worst plunge ever since the Great Depression. Chances are good it will take years, if not decades, for wages to rebound to pre-financial crisis levels — grim news for the middle class, as Huffington Post reports:
Among people who are lucky enough to have work, living standards have been significantly downgraded. Almost a third of America’s working families are now considered low-income, earning less than twice the official poverty threshold, according to a recent report. The recession reversed a period of improvement.
This trend spells a grim future for the American worker, and for the American economy… As wages grow at an excruciatingly slow rate, it will be years before many workers see their former pay restored.
A market awash in excess labor allows employers to offer fewer benefits and lower wages for all jobs. And while being choosy might seem like a luxury for employers — because attracting talent at lower wage and benefit levels looks good on the books — the reality is that low overall wages equate to low overall consumer demand. People can’t buy when they don’t have money, so it does little good to hire people cheaply if no one is buying what your company is selling.
The wage pain isn’t spread evenly across the U.S. economy. While the manufacturing, housing and construction sectors have been hit hard, the financial sector is doing quite well, as evidenced by record bonuses on Wall Street. But multi-millionaires are pretty stingy when it comes to consumption; relative to low- and middle-income workers, the wealthy save a great deal more of their income. Lather, rinse, repeat: Low consumer demand.
Keep an eye out for our in-depth analysis of the Washington state economy late January, when we release “The State of Working Washington.” The report will cover statewide economic trends, job and unemployment data, and outline a policy prescription for restoring our economy and the middle class in Washington state.
Have you, or someone you know, recently taken a job that meant a pay cut? Post your story on EOI’s Facebook page.