September 19, 2011

Reflections: The Sad Contrast Between My Lucky Generation and Today's Unlucky Generations

In my September 15 post (below), I reflected on the good luck that favored my generation as we entered the work force at the start of the economic boom following World War II. The wartime expansion of our manufacturing industries ended the Great Depression of the 1930s, and their successful transition to peacetime made us, far and away, the world's No.1 economic powerhouse.

Given the lousy state of our economy today, the last month has seen a rash of op-ed pieces that have explored not only where we are today, but also our economy's long decline since the "Golden Age" ended in the late 1970s.

Evidence of the Decline
Warning: This is depressing!

First, some of the data from 2010:
  • Poverty surged last year to the highest level since 1993.
  • Last year, 46.2 million Americans lived below the poverty line -- $22,314 a year for a family of four--marking the fourth year in a row that poverty has increased.
  • The poverty rate for children last year -- 22 percent -- was the highest since 1993.
  • One of every six Americans were without health insurance coverage.
Looking at this, you might be tempted to say: Well, sure. We've had the worst recession since WWII.

Data showing the long-term decline:
Here is some of what's been going on for several decades now:
  • The income of the bottom 10 percent of earners has declined by 12.1 percent since 1999. For the top 10 percent, the decline was much less -- 1.5 percent. The only group to have significant income gains was the richest 1 percent.
  • Median household income last year was 7.1 percent  less in inflation-adjusted dollars than it was at its peak in 1997. This wasn't due just to the recession; it has declined every year since 1997.
  • Median earning of men ages 25 to 64 -- the prime work ages -- declined 28 percent from 1969 to 2009. For men who completed high school but didn't go on to college, the drop was 47 percent.
  • For those who completed college, it was only (!) 12 percent.
  • The share of working men with full-time jobs fell from 83 percent in 1960 to 66 percent in 2009.
  • And the mean annual earnings of working age men with full-time jobs has dropped by about $5,000 since the mid-1970s.
Predictions for the Future
It gets worse:

  • Unemployment is projected to remain unusually high for the foreseeable future, meaning that the nation is probably in for an extended period of rising poverty and declining income.
  • Women and baby boomers entering the work force after 1950 helped to supercharge the economic expansion through 2000. Now as the share of women with jobs in the workforce levels off somewhat and as the baby boomers head into retirement, the shrinking -- or at best slowly growing -- work force will weaken economic activity for at least the next few decades.
  • More retirees mean slower household formation, reduced consumer spending and downward pressure on stock prices as retirement cuts people's spending power. Household purchases in the quarter century from 1972 to 1997 grew at an average annual pace of 3.2 percent. Since then the average rate of growth has continued to slow down.
  • The work force, which expanded annually by an average 2 percent from 1950 to 1985 will grow by only 0.6 percent annually for the next 40 years.
  • An estimated 72 million people, or 19.3 percent of the population, will be 65 or older in 2030, compared with 40 million (13 percent) in 2010. A good part of the expansion during the Clinton years was attributable to the fact that the baby-boomer were in their peak years of earning and spending. The dot-com bubble also helped . Those factors combined with the slow-down in defense spending helped us achieve the budget surplus of over $230 billion in 2000.
So What's Been Going On
As our leadership as a manufacturing economy faded dramatically, many economists and political leaders assured us that the trend was OK because we would transition into service-industries economy just as successfully as we had transitioned from an agrarian economy to a manufacturing economy.
What happened?

Here's the answer -- which I agree with -- of one op-ed columnist, Harold Meyerson:
Today the economy that arose on manufacturing's ashes has turned to ashes itself. The Wall Street-Wal-Mart economy of the past several decades off-shored millions of factory jobs, which it offset by creating low-paying jobs in the service and retail sectors, extending credit to consumers so that they could keep consuming despite their stagnating incomes and fueling, until it collapsed, a boom in construction.
We are only now beginning to understand the toll this economy has taken on America's workers. And not just financially. We are seeing an unsettling erosion of American optimism and confidence as our traditional "can-do" spirit is being replaced with bitterness and anger.

So What Can We Do To Help, Particularly Those of Us in the Lucky Generation?
I've got some thoughts about what I might do, which I'll post shortly. But first I'd love to hear what others are doing. All comments, criticisms, suggestions are most welcome.
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