While the business community has largely recovered from the perils of the Great Recession of 2008, as record profits and retained cash levels show, its seniors and workers who have the woe of the world hanging over them.
A University of Michigan analysis suggests the proportion of working Americans with pensions of any kind has steadily decreased since 2001, a sign that seniors have much to worry about as they enter retirement.
"We expected to see a decline in the percent of employed workers with defined benefit pensions," U-M economist Frank Stafford said. "Everyone knows they’re a thing of the past. But we also found that participation in defined contribution plans declined, going from 33 percent of employed men in 1999-2001 to 30 percent in 2007-2009. And that is the opposite of what we expected."
Titled "At the Corner of Main and Wall Street: Family Pension Responses to Liquidity Change and Perceived Returns," the paper co-authored with Thomas Bridges, a U-M graduate student in economics, analyzes data from a survey of a nationally representative sample of U.S. households conducted by the U-M Institute for Social Research since 1968.
The authors found that many families treat retirement accounts as sources of ready cash for current needs and discretionary spending rather than as sources of income in retirement. About 6 percent of young adults ages 25 to 44 reported cashing in some of their pension money. For those 59½ years of age—when early withdrawal penalties are removed—about 15 percent withdrew from their accounts, a proportion about equal to the rate of withdrawal those ages 65 and 66.
Study data shows workers withdrawing money for reasons ranging from out-of-pocket medical expenses to home repairs to the most common reason, mortgage loan distress. Falling behind on mortgages, among other reasons, is reason enough to tap retirement accounts.
Another report on the precarious nature of today's worker shows that the ranks of the "working poor" are growing even as the economy recovers through job creation. Nearly a third of working families earn less than twice the poverty threshold—for a family of four that amounts to $45,622—and have less of a struggle to pay for basic needs.
For America's workers, whose wages have remained relatively flat for decades as company profits have risen, working part-time brings few if any benefits. Almost a third of workers cannot take sick days when they get sick. While 80 percent of full-time workers do earn sick pay, only about 25 percent of part-timers get the same privilege.
The issue of inequality, from the Occupy Wall Street movement of 2011 to last year's race for president between two candidates who represented opposite ends of the wealth curve, is a real issue for the nation. Joseph Stiglitz, a recipient of the Nobel Memorial Prize in Economic Sciences (2001), has written that inequality in America has reached its highest level since before the Depression. It's "squelching our recovery," the Columbia University professor said in a recent post in the New York Times.
"Politicians talk about inequality and our 'sluggish' recovery as separate phenomena, but the two are inextricably linked," he said. "While the top 1 percent gets richer, today's middle-class Americans are making less, adjusted for inflation, than they were in 1996. They're too cash strapped to invest in education or new business, and their impoverishment means lower tax receipts for governments, which can't afford to spend on the infrastructure and research we need to foster growth."
He attributes the "hollowing out of the middle-class" to hurting lower income people because they'll never "live up to their potential." He said more than a fifth of America's children live in poverty, ranking the U.S.A. behind Bulgaria, Latvia and Greece.
Inequality has become "beleaguered malady," he wrote, adding that recovery is virtually impossible without policy course corrections. Without them, he said, the ideal of meritocracy that drew immigrants to America will be "crushed by an ever-widening chasm of income and wealth."
As reported previously here, a reading of the Federal Reserves in-depth study of thousands of working Americans finds their situation to be glum and glummer.
The Federal Reserve survey—Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances—revealed that the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010.
This puts Americans roughly on par with where they were in 1992. Over a span of three years, the report said, Americans watched progress that took almost a generation to accumulate evaporate
New data from Heldrich finds that four out of five Americans know relatives or family friends who were laid off during the last few years or were laid off themselves. "In the wake of the recent financial crisis, however, the layoffs were large but appeared more targeted, with people being very unlikely to cycle back into a job once displaced—hence the record lengths of unemployment duration for those who did lose their jobs," the report noted.
In Ohio, Tea Party movement Gov. John Kasich wants to subsidize across-the-board tax cuts that will disproportionately benefit the state's wealthiest at the expense of its working class through a proposal to lower the sales tax coupled with an expansion to cover services heretofore not included in who pays Ohio's 5.5 percent sales tax.
The American worker, which every politician work his salt says is the best in the world, has seen little advancement in wage rates, health and retirement benefits, even as corporations call for more exclusion of their profits from any taxation that in years past was reallocated to infrastructure, research and development and a fuller vision for working-age workers and workers who have lived to be old enough to not have to work for their next crust of bread deserve.
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