This guest post by Karl Rusnak at Economy in Crisis shows just how tough things have gotten for the middle class as measured in money. As dollars get more scarce, post-money economies incorporating local scrip, barter and even gifting look more likely. But to get there we’ll have to build a bridge from today’s economy where loss of money means loss of prosperity and security.
It is no secret that the years between 2007 and 2010 were financially tough for many Americans, but a new report has shown just how damaging that period really was. The Federal Reserve Board’s Survey of Consumer Finances for 2010 shows that the median household net worth fell to levels not seen since 1992, while average net worth and median family income also fell. While some of these losses can be attributed to the fall in home values during the financial crisis, it is clear that there are larger negative forces at work. These Americans who lost so much of their net worth are now attempting to claw their way back to their previous financial positions, but the opportunity to do so is not what it once was.
The Fed’s survey shows that median household net worth fell from $126,400 in 2007 to $77,300 in 2010. The middle class took much of the hit, with those in the 60th to 80th percentiles losing 40.4 percent of their net worth, while those in the 20th to 40th percentiles lost 35.4 percent. Meanwhile, the top 10 percent of earners actually saw a small gain in their median net worth, although average net worth still decreased in this group. The difference between these groups may be in part because home values make up a smaller percentage of net worth for top earners, but also because the kind of jobs middle class individuals have always thrived on have been disappearing in recent years.
While the fall in net worth may be troubling, the decline in income may be worse. Median incomes fell from $49,600 in 2007 to $45,800 in 2010, a drop of 7.7 percent. It seems safe to say that most Americans were not taking pay cuts at their current jobs, but rather were losing their jobs and being forced to work for whatever wage was available. This disturbing trend has diverse causes, but the shift of good jobs like those in manufacturing to overseas facilities has certainly played a role. These jobs usually paid a good wage, contributing to a higher average income for the country, and often had good benefits like a stable pension program, contributing to a higher net worth. In place of these jobs we now have service sector jobs that are a poor replacement in terms of added value.
Americans are now years behind in attaining the financial security they have worked so hard to attain. They may work hard to gain it back, but our economy is structured in such a way that hard work is not rewarded. Corporations can quickly cast aside loyal employees for a quick profit. This needs to change or Americans will never be able to better their own situations.
Re-posted from Economy in Crisis.
— Karl Rusnak, Transition Voice