Why We’re $93 Billion Short of a Real Economic Recovery
Despite all the signs that the economy is seeing drastic improvement over the past several years, many people still aren’t feeling the benefits. True, the recovery has been sluggish, with president Obama’s policies often becoming the target of vitriol from many in the media and political leadership. While the president does deserve fair criticism for what hasn’t worked, there are plenty of indicators pointing to problems with the system at large — not just the current administration’s policies — that are keeping many people from prosperity.
One those indicators has been uncovered by way of the United States Conference of Mayors, a nonpartisan group comprised of the head officials for cities across America with populations of more than 30,000, of which there are over 1,400. The group released the results of a study that took a look into the widening income gap and inequality, and found that though the country has regained the jobs that were lost during the recession, those jobs pay 23 percent less on average than they did prior to the recession.
It was found that the average annual wage in industries that lost jobs during the recession was $61,637, but the average for new jobs gained through the second-quarter of 2014 was a little more than $47,000. That accounts for more than $93 billion in lost wages, the lion’s share of which has been transferred to the top percent.
Sacramento mayor Kevin Johnson, part of the group’s leadership circle, says that the findings are troubling, and that the issue simply can’t be ignored by political leaders. “While the economy is picking up steam, income inequality and wage gaps are an alarming trend that must be addressed,” he said.
“The nation’s mayors have an obligation to do what we can to address issues of inequality in this country while Washington languishes in dysfunction.”
The study’s results were released at the same time as the first meeting of the Opportunity Task Force, another part of the USCM. Led by mayors of some of the nation’s largest cities, the task force’s primary duties are to develop strategies for promoting economic mobility and addressing inequality issues.
“This Task Force, led by New York City Mayor Bill de Blasio, will recommend both national and local policies that will help to give everyone opportunity. We cannot put our heads in the sand on these issues,” Kevin Johnson said.
It would appear that some action is needed and that these issues do need to be addressed in some way, as the numbers aren’t pretty. The study also revealed the rift between poor and rich households is growing, with no signs of reversal. Of the 357 metro areas that were examined, 73 percent of them had higher concentrations of lower-income households — or those that earn less than $35,000 per yer — than higher-income households, which pull in more than $75,000. Not only that, but the average household income actually declined by 3 percent between 2005 and 2012.
“The inequality crisis facing our cities is a threat to our fundamental American values. Reducing income inequality and ensuring opportunity for all is nothing less than the challenge of our times. As mayors, we are on the front lines and we must act now,” said de Blasio.
Jim Diffley, director of U.S. Regional Economics at IHS and the author of the report in question, also expressed concern about the direction of the economic situation in America. “Unless policies are developed to mitigate these trends, income inequality will only grow larger in the future,” Diffley said.
Despite what is happening at the federal level, it appears that there is serious concern — and perhaps most importantly — recognition of the fact that growing income inequality is a major problem in the U.S. While many have been quick to dismiss the idea as a serious issue when brought up in the Congress and Senate, the fact is that at some point, giant rifts in income levels are going to lead to consequences in one form or another.
The worst case scenario is that we see sweeping unrest and acts of violence occur as people become more and more desperate. There are real possibilities that people who are unable to pay their mortgages, credit card debt, or student loans become thoroughly entrapped by the system, and find other outlets to express their frustrations. We’ve seen glimpses of this kind of action through the Occupy Wall Street protests and others, but if the issue becomes more widespread, partisan politics and coercive media coverage won’t be enough to curb public resentment toward those at the top.
But this can all be stymied by simply sharing economic gains. It’s painfully obvious that wages have stagnated while productivity has skyrocketed over the past few decades, meaning that people are working harder and longer, essentially for nothing in return. This latest study lends even more fuel to the fire that is leaving so many frustrated.
With jobs returning to the labor force having lost nearly a quarter of their compensatory power, it leads to economic strife. This is why more and more people have turned to work that is oftentimes below their qualifications, as bringing in some money is better than nothing at all.
Again, this appears to be a systemic problem, brought on by decades of policy changes favoring the rich. The country’s attitude shift toward polar opposite political viewpoints — with a flat-out refusal to compromise with the other side – has made it difficult to pass any meaningful legislation to raise the minimum wage, strengthen unions, or work towards a sustainable, affordable healthcare system. The extreme polarization that the population is undergoing will only go further to keep legislators and entrepreneurs from finding solutions to those issues.
But there are solutions — whether they be found through the market or through legislative means. An open dialogue just needs to be started to set the wheels in motion. Mayors across the country seem willing to tackle the issue, and that’s a start.