By David Dayen, a lapsed blogger, now a freelance writer based in Los Angeles, CA. Follow him on Twitter @ddayen
The Fed’s Survey of Consumer Finances came out yesterday, and it offered a pretty good answer for why the country won’t just snap out of it and admit that Recovery Summer is here. The survey covers 2010 to 2013 and it’s stocked with interesting data, but the main point is the continued breaking away of top income earners from the rest of their counterparts. McClatchy summarizes:
Americans’ average income of grew by 4 percent from 2010 to 2013, a misleading number since it was pulled up by the richest Americans who grew wealthier during the period, according to a Federal Reserve report released Thursday.
In its Survey of Consumer Finances, conducted every three years, the Fed found that while average income rose by 4 percent, the midpoint income for American families actually fell 5 percent “consistent with increasing income concentration during this period.”
Translation: The growing wealth of the richest Americans pulled up the average. It’s the same phenomenon as if you and Microsoft founder Bill Gates pooled your salaries, you too would be a billionaire.
Matthew C. Klein supplies the charts, and they’re quite striking. Median income has dropped 12.4 percent since 2004, a dramatic decline in fortunes:
Good news, the gains are not only accruing to the top 1 percent of the distribution. More like the top 3 percent:
Looks like the rest of the top 10 percent have flatlined, while the bottom 90 percent have a lower income share than they did in the late 1980s. Median net worth is down at early-1990s levels.
The full report is available here. Maybe the absolute worst thing it says is that the data seemed to reflect a “return to trend.” In other words, this increasing income concentration and declines in real incomes at the bottom of the scale is just the way we roll these days.
The public understands this far better than those inside the palace walls of Versailles. While Washington struggles to decipher why those ingrates in the middle class can’t feel the magic of the current economy, those living in it for their entire lives get the message.
Public opinion surveys consistently show pessimistic views of the economy for the broad mass of people. Growing numbers believe the Great Recession led to a permanent change in the economy, which is probably something less than true – with few exceptions, these wage and income trends have been consistent since the late 1970s. But the other questions in this Rutgers poll appear right on the mark. Almost eight in ten Americans knew somebody laid off between 2008-2012. For leading indicators like low unemployment, affordable higher education, and job and retirement security, the majority of Americans think they will never see positive progress for many years. Just 16 percent of respondents thought job and career opportunities would be better for the next generation, a figure nearly four times lower than from 1999.
And we can chalk this up to the wisdom of crowds, because the public happens to be right. It is harder to get a job out of college. It is harder to avoid the trap of underemployment. It is harder to prosper in the career you want. It is harder to save amid stagnant wages. It is harder to grow as an economy when the gains flow to the top. It is harder to secure enough reserves for a dignified retirement.
The reaction to this is either a resigned despair or the stirrings of social unrest, and just yesterday we saw quite a bit of the latter:
Hundreds of fast-food workers and labor allies demanding a $15-an-hour wage were arrested in sit-ins around the country on Thursday, as the protesters used civil disobedience to call attention to their cause.
Organizers said nearly 500 protesters were arrested in three dozen cities — including Chicago, Detroit, Las Vegas, New York and Little Rock, Ark. All told, the sit-ins took place in about 150 cities nationwide, the organizers said.
Greater wages, protections and benefits for workers never comes without a fight, particularly given the extreme advantages afforded to management in the current structure. Labor unrest often – usually – turns bloody before too much changes. The low-wage worker movement is among the more exciting developments to come from a fairly depressing time in our economic history.
It’s clear that unrest will be the only recourse, rather than waiting on the current political class to do anything about this pervasive sentiment that the best years are in the rear-view mirror.
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“It is clear that unrest will be the only recourse, rather than waiting on the current political class to do anything…”
Amen brother. Tis sad but true, as they used to say over at the juke joint; “Idle hands are the Devils workshop.”
Idle hands are soaking up economic and finance analysis to shake and shock the world. Moving along, idle hands are picking apart the superstructure of social controls in the media, academia and the wall street equity and bond markets. Idle hands are learning Modern Monetary Theory. Idle hands are getting to work moving back into political office. Idle hands will not be so idle during the next 3 or 4 economic crises. Idle hands will not waste a good crisis during the next round of chaos.
They can’t change things through the democratic process. Peaceful protesters end up arrested. Only one option left!
“Only one option left” smacks of TINA thinking. There are always multiple options. We don’t do ourselves any favors by saying things like “there’s only one option left.” What I think we need to do, one way or another, is to create a crisis for the elites. Only when the elites feel like they might be losing their grip can we get any real change. That has always been the point of mass protest movements.
But I agree that protest alone is not enough. We need to do more. I’ve got my ideas, which I share freely, but others have lots of ideas too. We’re gonna need ’em all if we’re going to make any headway. Diversity of means is the order of the day.
I figured that the “one option” we have left is to grow moringa trees in our yards and pretty much ignore what the elite crooks are doing. Starve the beast by repudiating consumerism, and then enjoy watching it collapse.
Boycotts and general strike.
Very tough to arrest people for staying home and not buying anything. They can arrest the organizers, though
A further, similar possibility is withholding payment of loans. There are legal consequences for that, but it depends on the numbers.
An astronomical amount of preparation has to happen before we can think in those kinds of terms. People are working so hard and buying whatever shit is fast and convenient because they’re already on the edge. First counter-economics, then direct action.
Agreed, Too many people here at Naked Capitalism have forgotten that the threat of violence underlies the power of the state and that it must sometimes be met face to face.
The State’s specialty is violence and the State wants you to respond in a manner in which it spends trillions of dollars to address. If you want to see how the mass media spins a populist uprising for the combined government/mafia/FIRE elites, you don’t have to go too far in the past.
Stop shopping at WalMart, though, and they get very very nervous. If you can’t afford to shop at WalMart, the place where slaves shop for things made by other slaves sold by slaves in squalid conditions, they start talking socialism in the WSJ. If you refuse to shop at all, the factions among the elite will have to compete with each other and hoo whee that’s where the excitement comes from.
Armed insurrection is no longer an option, never was a good option, and indicates the failure of belief in democracy itself. If you let them, they won’t let you participate in democratic processes.
Stop shopping? I want to know who’s had the money to shop in the last six years?
I haven’t bought anything besides groceries and medicine in six years.
I’m right on your heels.
Hundreds of fast-food workers and labor allies demanding a $15-an-hour wage were arrested in sit-ins around the country on Thursday, as the protesters used civil disobedience to call attention to their cause.
Well, at least the people involved have jawbs, including the arresters and arrestees. The question I have is, how much does a $15 per hour wage raise the price of a crapburger, 3 cents or 5 cents? Inquiring minds want to know.
Yesterday, I was in the great capitalist emporium, where a large percentage of it’s workers eat thanks to food stamps, and to use a Yvesimism, the “desperate looking women” cashiers were talking amongst themselves about this. They were worried that paying fast food workers the stratospheric pay of $15 per hour would price them out of eating there.
When I pointed out that their shelves were groaning with made in China goods that used to be made here, they went back to criticizing the fast food workers, for demanding a raise. Completely cowed and clueless, unable to even see a dot, never mind connecting a few.
On the contrary, I think the Fed Survey and Dave Dayen’s post demonstrate that most Americans connect the dots very well.
Even if they couldn’t hear you this time, if all of us do that, eventually they’ll understand.
Yes eventually they’ll understand. Remember unions had a role in educating people about that type of stuff. And there haven’t been unions for many people in forever if ever. So ideally one acknowledges their concerns that prices might go up (no guarantee they won’t – depends on how price elastic that market is I suppose – though I suspect there may not be that much leeway) and then points out what might not be immediately obvious to the brainwashed. That the wages of the the lowest wage workers increasing means that their boss can’t threaten them as much to: “do the impossible or else end up in fast food”. They’ll be like “ok well the work may suck, but at least I’ll earn a living wage then!”.
Our income fell 5% as the wealthy’s exploded, and it closely follows Obama entering office, and no change in the direction of that graph even by 2013. And no reason to think it the direction will change 2014-17.
Wow.
Guess that’s why I just say “Because Obama” so often to explain bad outcomes and our sucky economy.
Our sucky economy is because the financial industry imploded just before Obama took office and because he and Congress haven’t–or won’t–do what’s necessary to fix it. Meanwhile, the Fed continue to give billions to the banks and Wall Street at zero per cent interest. The dollar is now worth 12 cents and we’ve had at least 10% inflation every year–higher inflation, actually, right after the collapse, but the media ignored that and the government pretends it doesn’t exist.
“Our sucky economy is because the financial industry imploded just before Obama took office…..”
That was 6 years ago. The economy is sucky today, because of the austerity and pro-wealth anti-you and me policies Obama has followed the past 6 years.
To which might be added if Americans quit voting for either of the two “let them eat debt” parties and formed and voted for a citizens’ stake-holder party “suckiness” might disappear.
Why reinvent the wheel? The Green Party’s already there for you.
http://www.gp.org/index.php
Every time I tell someone “I vote Green” I hear whining from Democrats. When will the whiners jump on board? I vote Green or vote out the incumbent every time.
If you knew anything about the NJ Greens, you wouldn’t say that. I’ve taken to writing-in myself.
timbers: Ever hear of the 100% blocking action by House Republicans over the last 6 years?
Jim
The Democrats controlled the House from 2006-2010, when they lost it for non-performance.
They had lop-sided control of the House for the first two of those 6 years; Republicans had no power to obstruct at all. They did in the Senate, because of the filibuster; but the Dems, with control, had the power to change the rules. Apparently they’re perfectly happy with the filibuster as it is, and the Republicans acting as a fig leaf on their real agenda.
You do realize the Democrats have been systematically losing Congressional elections since 2010, don’t you? Something about their performance is unsatisfactory – to the voters, where it counts.
“Ever hear of the 100% blocking action by House Republicans over the last 6 years?”
No Wat Tyler I have not heard that maybe because that’s not true.
However I did hear Dems had historically large majorities for 2 years and an election mandate, yet ignored this and run out the clock doing very little except pass the Republican insurance mandate.
I hope you are aware of the 6 years Democrats controlled the Senate yet did not run the place and pass legislation by simple majority as is their constitutional right.
Not Six. Four at most because the Dems had congress for two. And those who say O used the fillibuster as an excuse in those 2 years. They seem to be right. Although I figure the whole topic is arcane enough to make most people’s eyes glaze over, which is why they get away to it,but it sure seems to me the basics of how reconciliation work would have allowed pretty much anything to be done via reconciliation when the Dems had the house.
Thank you Jrs.
Also there a lots of programs O supported that benefited banks and the wealthy and screwed us, and lots of executive actions he has not taken but could, to benefit citizens. For example he probably can stop tax inversions.
Finally, the Dems had the Senate for 6 yrs and have hidden behind the excuse of the filibuster to keep the conversation of what can pass on the right.
The Dems controlled Congress after 2006, hence for 4 years.
The Republicans have controlled the House only since 2010 – also 4 years.
Thanks Oregoncharles, but I am counting 6 years from 2008-14. Your math would put my math at 8 years.
Also, don’t forget how O intervened to make laws WORSE that passed, like killing drug price reforms as part of ACA even though 90+ senators had signed on to that reform, or his sequestration nightmare that his team proposed and wrote. Or his underwater re-fi plan that made matter worse.
Bottom line: Our sucky economy is due to allowing our manufacturing to be shipped overseas for 30 years. The rest is details.
Not that I’m about to defend Obama, but that isn’t quite what the chart of median incomes shows. It actually started to decline in 2004, during Bush’s presidency. That was a big deal, because the economy was still growing then. In ’07, it dropped off a cliff (the financial crisis and Great Recession) and it’s still falling.
So the essential accusation against Obama and the Dems is uselessness. They had complete control those first 2 years, and their actions were grossly inadequate – as you can see from the chart. It did go up, steeply, through the Clinton years, though, and I thought he was pretty bad (he’s the reason I’m a Green, not a Democrat). Of course, his policies set up the debacle; he’s lucky the effects were delayed.
“that isn’t quite what the chart of median incomes shows.”
You are right. Should have used the word “loosely” instead of “closely.”
a terrible headline for this story!
On the ‘plus side,’ things would be just the same if HR Clinton won in 2008, except that we’d probably be at war in Syria starting in 2013.
The left-of-center folks have to wake up and realize that they’re being played (have been played) by the Democratic Party since 1992.
“Throwing your vote away” by voting for the Green Party (or your local liberal who loses in the primary) is infinitely preferable to being actively lied to and manipulated by the Beltway Democrats who are essentially just pro-choice (hesitantly pro-gay) Reaganites.
“Throwing your vote away” by voting for the Green Party (or your local liberal who loses in the primary) is infinitely preferable…..”
IMO voting Obama/Hillary is throwing away your vote.
I work with a Foxbot who goes on about how the world isn’t safe and they are beheading Americans what an insult to America and the economy was better under Bush. She said to me “you probably voted for Obama?”
“No I voted Green, Obama is too right wing for me” I replied. That shut her up. Then I asked her who she thought downed the Malaysian plane? “Probably Putin” she said. I replied: “We did. The CIA and Malay agency thinks it was probably the side we support, and I doubt they would have done so w/o us knowing and approving.”
That altered her universe a tiny bit, she didn’t know how to respond.
Nice to know I’m not alone.
“Throwing your vote away” by voting for the Green Party (or your local liberal who loses in the primary) is infinitely preferable…..”
IMO voting Obama/Hillary is throwing away your vote.
I work with a Foxbot who goes on about how the world isn’t safe and they are beheading Americans what an insult to America and the economy was better under Bush. She said to me “you probably voted for Obama?”
“No I voted Green, Obama is too right wing for me” I replied. That shut her up. Then I asked her who she thought downed the Malaysian plane? “Probably Putin” she said. I replied: “We did. The CIA and Malay agency thinks it was probably the side we support, and I doubt they would have done so w/o us knowing and approving.”
That altered her universe a tiny bit, she didn’t know how to respond.
The charts in the Financial Times Alphaville link are just gut wrenching. Median income in the Midwest has fallen from 58K in 2001 to 44K in 2013–a 24% drop. Too bad we’re too busy building democracies in Libya, Ukraine, Syria, and Iraq to help this one at home. Plutocracy at home, “democracy” abroad.
Wonder how much ACA subsidies and give a ways such as to drug companies, etc, will contribute to income redistribution to the top? Will 2014 bring an acceleration?
Dave Dayen, thank you so much for this post and for all you bring to Naked Capitalism.
This just begins to explain the problem. If the secular stagnation theorists are right, growth will drop over the next 30-50 years. This is also the OECD prediction. http://www.latimes.com/opinion/op-ed/la-oe-alperovitz-economic-stagnation-20140905-story.html
There is no reason to think returns to capital will fall. Following Piketty, we can expect our current massive wealth inequality to skyrocket. After all, the rich have persuaded most people that taxing them is Communist and Against the Will of the Almighty.
The Republicans think that ‘s just fine. The Democrats are the party of baby steps on every issue from human rights to bank regulation to Climate Change. It’s a miserable prospect for the young.
After some reflection, I freely admit that my last sentence shows myself to be clueless. Those ladies have no say in what goes on the shelves, and the dots I wanted them to connect were not relevant to them.
They dots they did connect, and the way they were connected is enlightening. They sense that higher wages lead to higher prices, and knowing that their employer might fire them for even asking for a raise, realize that they will have even less to live on in the future.
My apologies to the cashiers. They have more economic knowledge, learned from hard experience, than Fed economists.
“They sense that higher wages lead to higher prices”
Hopefully they are also astute enough to know that higher wages could lead to an ever so minor downward adjustment in the ratio of the highest paid employee’s compensation to the lowest. And while slightly less likely, it could lead an infintesimally small dent in the wealth of a 1 percenter. Both of course are very theoretical propositions.
This will not end well if we do not look at the “why” this is happening.
i.e. How is it that incomes gains are so concentrated?
The answer is everywhere.
It’s the new US business model. Profits via fraud.
Gold price fixing …check
LIBOR fixing …check
ISDA fixing …check
Prime Rate fixing … on going
These 4 items encompass nearly all of finance and they have all been rigged for at least a decade.
Now is the time for President Barack Obama to resign and allow Vice-President Joe Biden to assume the Presidency. I do not believe that anyone can envision Joe Biden leading from behind. Joe takes the bull by the horns. I do believe that even Vladimir Putin will take Joe Biden much more seriously than he does Barack Obama.
President Obama has repeatedly shown that he prefers campaigning and fund raising to governing. He continues to demonstrate his lack of judgment, leadership skills, executive command, management ability, and just plain common sense. His economic and foreign policies are erratic, confused and in a state of disarray.
President Obama appears to only implement policy that is approved by his Chicago political inner core: the wealthiest families, finance, insurance, real estate, liberal foundations and the elite universities as dictated by “the other side of Barack’s brain,” Valerie Jarrett.
Another advantage of Joe Biden being President for the next two years is that it would make him the incumbent and thus reduce the 2016 impact of the Wall Street loving war hawk Hilary Clinton.
Surely you’re not referring to the senator from MBNA?
The decline in income also reflects a secular decline in the public’s trust of government, political parties, institutions, lobbies, companies, etc.
Ask yourself who trusts any of the above, and to what degree?
Employees who survived layoffs know that they could be next, and that any downdraft in the economy, or health setback, or any one of a number of other random events could be the trigger that sends them into bankruptcy and tears apart their family and lives. No wonder the younger generation wants to go into business for itself.
What do you recommend to restore some degree of trust?
How would that be earned by whoever purports to be worthy of leading our country?
Apparently, I don’t know how to use html :(