The Really Rich Get Much Richer, While The Middle Class Falls Behind
While families work harder, their wages continue to decline.
Middle-class families are working harder and earning less today than they were at the start of the Bush Administration.
According to the Wall Street Journal, “Since the end of the recession of 2001, a lot of the growth in GDP per person – that is, productivity – has gone to profits, not wages.”[13]
Median household income, adjusted for inflation, has declined $1,273 from $47,599 in 2000 to $46,326 in 2005.[14]
Meanwhile, employment compensation has lagged behind productivity gains.
While the productivity of the American worker rose by 17.5 percent between the first quarter of 2001 and the fourth quarter of 2006, real compensation per hour increased by only 8.7 percent.[17]
In the first quarter of 2007, productivity in the non-farm business sector further improved by 1.7 percent, while real weekly earnings increased by only 1.2 percent.[18]
Therefore, Americans have worked harder – and more productively – for their families, but are not receiving the proportionally increased rewards for their hard work.
Earnings for workers with college degrees declining.
The LA Times has reported that: “Wage stagnation, long the bane of blue-collar workers, is now hitting people with bachelor’s degrees for the first time in 30 years.
Earnings for workers with four-year degrees fell 5.2 percent from 2000 to 2004 when adjusted for inflation, according to White House economists…
Not since the 1970s have workers with bachelor’s degrees seen a prolonged slump in earnings during a time of economic growth…trends for people with master’s and other advanced degrees…have found that their inflation-adjusted wages were essentially flat between 2000 and 2004.”[19]
Worst job creation record since Hoover Administration.
A growing economy should be good news for those seeking jobs. But over the last 6 years, his Administration has the worst overall job creation record since Herbert Hoover more than 70 years ago.[20]
Overall non-farm payroll employment has increased by just 5.2 million since President Bush took office in January 2001 compared with 22.7 million during the Clinton presidency. Overall employment growth has averaged just 70,000 per month under President Bush – much lower than the approximately 150,000 jobs needed each month to keep up with population growth. It was not uncommon to see monthly job gains of 300,000 and even 400,000 during economic expansions under previous Administrations. [21]
Private sector job creation has been especially poor during the Bush presidency, with an average annual job growth rate of only 0.5 percent per year since 2001.[22]
Just 3.8 million private sector jobs have been created during the Bush presidency, compared with over 20 million private sector jobs during the Clinton presidency.[23]
The manufacturing sector, often the source of jobs with good pay and benefits, has lost three million jobs since the start of the Bush Administration.[24]
Nearly half of the jobs created since 2001 were part-time and freelance positions without benefits.[25]
Unemployment has increased 7.1 percent and long-term joblessness has nearly doubled.
The national unemployment rate stands at 4.5 percent,[26] which is 7.1 percent higher than the 4.2 percent rate when President Bush took office.
Unfortunately, once unemployed, America’s workers also are staying unemployed longer. In 2006, over one in six of the unemployed had been out of work for more than 26 weeks.[27]
The number of long-term unemployed has increased by 61 percent since President Bush took office.[28]
Bush’s deficit-financed tax cuts have widened the income gap between millionaires and middle-class workers.
In testimony before the Congress, Federal Reserve Chairman Ben Bernanke warned against rising income inequality: “[T]o the extent that incomes and wealth are spreading apart, I think that is not a good trend.”[29]
The Wall Street Journal has attributed the widening income gap to President Bush’s tax policies: “[I]t appears that the highest-salaried workers – executives, managers and professionals – are widening their lead on the typical worker…The Bush tax cuts appear to have widened the income gap, according to many analyses.”[32]
In fact, President Bush’s capital gains and dividends tax cuts will cost $197 billion over ten years, with most of the benefits going to multimillionaires.
In an analysis by the Tax Policy Center, economists found that the immediate effect of the Bush tax cuts has been “skewed in favor of those with high incomes,” benefiting the most wealthy households the most.[33]
In 2006, for example, “families making more than $1 million a year saw their after-tax income increase by 6 percent because of the tax cuts, while families making $40,000 to $75,000 saw after-tax income rise by about 2.5 percent.”[34]
More American families and children face severe financial problems.
The average annual increase in the poverty rate during President Bush’s first term is second only to that during George H.W. Bush’s administration and contrasts sharply with the declines in the Clinton and Kennedy-Johnson Administrations.[35]
The poverty rate has increased 12 percent to 12.6 percent since 2000.[36]
Nearly thirty-seven million Americans were living in poverty in 2005,[37] an increase of 5.4 million over the 2000 level, the year before President Bush took office.[38]
Poverty has hit America’s children particularly hard. with almost one out of every six American children living in poverty.[39]
The number of children living in poverty has increased 6.5 percent during the Bush Administration.[40]
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References:
[13] Greg Ip, “Wages Fail to Keep Pace With Productivity Increases, Aggravating Income Inequality,” Wall Street Journal at A2 (March 27, 2006).
[14] U.S. Department of Labor, U.S. Census Bureau, Income, Poverty and Health Insurance Coverage in the United States: 2005, Figure 1 (August 2006), available at http://www.census.gov/prod/2006pubs/p60-231.pdf.
[15] U.S. Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey: Historical Data for the Tables of the Usual Weekly Earnings of Wage and Salary Workers, available at http://www.bls.gov/webapps/legacy/cpswktab1.htm.
[16] U.S. Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey: Historical Data for the Tables of the Usual Weekly Earnings of Wage and Salary Workers, available at http://www.bls.gov/webapps/legacy/cpswktab1.htm.
[17] U.S. Department of Labor, Bureau of Labor Statistics, Productivity Data, available at ftp://ftp.bls.gov/pub/news.release/History/prod2.03062007.news and ftp://ftp.bls.gov/pub/news.release/History/prod2.06052001.news.
[18] U.S. Department of Labor, Bureau of Labor Statistics, Productivity and Costs: First Quarter 2007, preliminary, available at http://www.bls.gov/news.release/pdf/prod2.pdf and U.S. Department of Labor, Bureau of Labor Statistics, Weekly and hourly earnings data from the Current Population Survey, available at http://www.bls.gov/webapps/legacy/cpswktab1.htm.
[19] Molly Hennessy-Fiske, “That Raise Might Take 4 Years to Earn as Well: Those with bachelor's degrees are finding their incomes stagnate despite a growing economy,” Los Angeles Times at A1 (July 24, 2006).
[20] U.S. Department of Labor, Bureau of Labor Statistics, Employment Situation Summary, available at http://www.bls.gov/news.release/empsit.toc.htm.
[21] See e.g., Speech of Gary H. Stern, President, Federal Reserve Bank of Minneapolis, Perspectives on the Economy (March 29, 2007), available at http://www.minneapolisfed.org/news/pres/Stern03-29-07.cfm.
[22] U.S. Department of Labor, Bureau of Labor Statistics, Industry at a Glance, Labor Force Statistics from the Current Population Survey, available at http://www.bls.gov/webapps/legacy/cpsatab5.htm (visited April 26, 2007).
[23] Id.
[24] U.S. Department of Labor, Bureau of Labor Statistics, Industry at a Glance, available at http://www.bls.gov/iag/manufacturing.htm.
[25] Molly Hennessy-Fiske, “That Raise Might Take 4 Years to Earn as Well: Those with bachelor's degrees are finding their incomes stagnate despite a growing economy,” Los Angeles Times at A1 (July 24, 2006).
[26] U.S. Department of Labor, Bureau of Labor Statistics, Employment Situation Summary (May 4, 2007), available at http://www.bls.gov/news.release/empsit.nr0.htm.
[27] U.S. Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, Table A-9, http://www.bls.gov/webapps/legacy/cpsatab7.htm
[28] Id.
[29] Testimony of Ben Bernanke before the Senate Committee on Banking, Housing, and Urban Affairs, (July 19, 2006), available at http://www.federalreserve.gov/boarddocs/hh/2006/july/testimony.htm
[32] Greg Ip, “Wages Fail to Keep Pace With Productivity Increases, Aggravating Income Inequality,” Wall Street Journal at A.2 (March 27, 2006).
[33] Greg Leiserson and Jeffrey Rohaly, “The Distribution of the 2001-2006 Tax Cuts: Updated Projections, November 2006,” The Tax Policy Center (November 15, 2006), available at http://www.urban.org/UploadedPDF/411378_tax_cuts.pdf.
[34] Michael Abramowitz and Lori Montgomery, “Bush Addresses Income Inequality,” The Washington Post at A04 (February 1, 2007), citing “The Distribution of the 2001-2006 Tax Cuts: Updated Projections,” supra.
[35] Joint Economic Committee analysis of data maintained by the Bureau of the Census and U.S. Department of Commerce from 1959-1995.
[36] U.S. Census Bureau, CPS 2005 Annual Social and Economic Supplement, POV01 (August 29, 2006), available at http://pubdb3.census.gov/macro/032006/pov/new01_100_01.htm.
[37] Id.
[38] U.S. Census Bureau, CPS 2000 Annual Social and Economic Supplement, POV01 (December 11, 2001), available at http://pubdb3.census.gov/macro/032000/pov/new01_001.htm
[39] U.S. Census Bureau, CPS 2005 Annual Social and Economic Supplement, POV02 (August 29, 2006), available at http://pubdb3.census.gov/macro/032006/pov/new02_100_01.htm
[40] U.S. Census Bureau, CPS 2000 Annual Social and Economic Supplement, POV02 (December 11, 2001), available at http://pubdb3.census.gov/macro/032001/pov/new01_003.htm.
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