Robert Reich: Inequality would have been even worse sooner without two incomes, longer hours, & debt

[HomerRamone]

http://www.vancouversun.com/business/2035/Stephen+Hume+Does+income+inequality+imperil+economy+society/8909006/story.html

Evidence of income inequality would have been a lot worse a lot sooner, he suggests, had not the middle class employed three financial coping strategies to maintain living standards:

First, women moved into the workforce in vast numbers so that virtually every household became a two-income family. Second, everyone began working longer hours — even before the recession, the average American family was working 500 hours a year more than it had in 1979. Third, householders drew down savings and borrowed against the equity in their homes to maintain their living standards until, on average, they owed 138 per cent of their after-tax income to the financial institutions that are mostly owned and operated by the wealthiest 20 per cent of the population. In Canada, there’s been recent concern over older citizens accessing home equity and a Bank of Montreal survey found last August that on average we now owe 165 per cent of after-tax income and that one in four of us lives paycheque to paycheque, with nothing to put aside for future emergencies after paying the bills. Of those who do have a rainy-day fund, two-thirds had to dip into it last year.

An independent Associated Press poll last summer reported that as the North American economy globalizes, wealth continues to concentrate among the richest while the ranks of the poor increase and fall deeper into poverty. It discovered four out of five Americans — just about everybody outside the wealthiest 20 per cent — has by now experienced joblessness, near poverty or reliance on welfare at some point in their lives.

At the end of August, more than 11 million Americans were still out of work and looking for a job — officially it’s 7.9 million jobless but that number conveniently (for politicians) doesn’t include the millions of discouraged unemployed who haven’t sought work in the last four weeks.

[SheilaT]

1. One wonders what would have happened had

people not bought into the notion that they need to own lots of things. Shiny, bright, expensive things. Bigger cars, bigger homes.

[Egalitarian Thug]

2. The hippies were right, again. n/t

[HomerRamone]

3. We're struggling for NECESSITIES now, not luxuries nt

[SheilaT]

4. I know there are people struggling, especially

since 2008, for necessities.

But during the period of time when, as Reich points out, so many women entered the workforce, creating the two-income family as the norm, in the middle class most people bought bigger houses, bigger and more expensive cars, lots of other toys. There was little sense of a need to save for the future or a rainy day, just the naive belief that there would always be more money.

There have been plenty of economic downturns over the years, but most people seemed always to forget about them as soon as they ended and just went about blithely taking on more debt.

Again, I'm not talking about those at the bottom, but those in the relatively large middle.

I have never forgotten that my father was two people away from being laid off from his factory job during the recession in 1957. My parents had many tense conversations about what they might do. He wasn't laid off, but money was always tight in no small part because there were six kids in the family. By this time my mother had gone back to work full time as a nurse. She earned more than Dad did, but there was very little left over at the end of the pay check.

I learned a powerful lesson about living within my means.

[Igel]

5. Not everybody is part of your "we".

Moreover, a lot of people have redefined "necessities" upward.

Some subgroups in the US have unemployment rates of 15% or higher. Others are at 3.2% or lower.

My income is pretty much the median household income for 2012. My wife's is above median. We're not struggling for necessities. She's got her PhD and decided to take a $30k/year pay cut a few years ago--not counting benefits--to change jobs. I'm ABD and happy enough doing what I'm doing. We're about out of debt, so plans are that we'll squirrel away money for our next car and then start paying down our mortgage.

I know people making more than us that think they're just scraping by on meagre wages and are frantic for more income to buy another car, bigger house, take longer vacations--all of which they think of as "necessities." I also know kids who are working for minimum wage after school to feed their siblings. And kids who are working minimum wage for "necessities" like their phones and unlimited texting.

[SheilaT]

8. Yes.

I did not mean to make it sound as if I thought everyone chased only after money and things. Thank you for what you said.

[Skittles]

7. I hear you

during the good times I often wondered, how can they afford all this stuff? Turns out they couldn't.

[Spitfire of ATJ]

6. I'm old enough to remember when only the wealthy had credit cards.