For the past year many progressives have argued that with ever increasing income inequality the middle class is becoming an endangered species in America. As the graph to the left illustrates, over the past 30 years the income of the top 1% of income earners has gone up dramatically (approximately 300%) while the income of the bottom 95% has barely kept up with inflation. Now, a new study commissioned by a nonprofit group called Wider Opportunities for Women seems to confirm the worst fear of economists and liberals. The study shows that the American economy is no longer creating jobs which allow an average, married family to support just two children.
According to the study, which was just released yesterday, the economy is creating new jobs, but not the kind of jobs which would allow a family to meet even their basic economic needs. Just 18% of the new jobs creating by 2018 will allow a family to meet basic economic needs for a family of two with one income earner. Even assuming two income earners (both parents working), just 43% of the new jobs created by 2018 will allow families to achieve basic economic security.
At one point in history a basic family unit with two children and one income earner who could pay the bills was considered part of the "American dream." It now seems that this dream is truly becoming part of American history. Increasingly both parents must work just for a family to meet their basic needs in the current economy, and even then many families have to rely on a large amount of credit.
In coming up with their numbers the researchers used conservative estimates on what a family of four, or three, would need to meet their basic needs. The researchers said an average worker would need to pay $688 for housing (well below what many families pay for a mortgage or rent), $149 for utilities, and just $244 for food. The researchers did not allow for the hypothetical family to eat out, or go to the local movie theatre. No allowances were made for a yearly vacation. The researchers calculated that the average family would need to spend $495 each month on transportation, since in many areas of the United States public transportation is not available. Finally, $136 was allocated each month for health care expenses (even assuming the worker had employer provided benefits) and another $291 was allocated for household and personal items (clothing, furniture, deodorant, etc.).
Using these figures, the researchers found that a family with a single parent with two children would need to make just over $30,000 per year to get pay for their basic needs. A person working a 40-hour work week would need to earn $14.21 per-hour to make that income in a year. The minimum wage in America is less than half that pay rate. As the study showed, most new jobs being created pay much less than $14.21 per-hour. The problem is even worse for women who, on average, make less than men when working a similar job.
The study does not attempt to explain the causes for low wages in America. A number of factors are seen as driving low income growth for the majority of Americans. A high unemployment rate gives employers more leverage, and makes workers fearful of asking for a raise. Union membership rates have gone down dramatically over the past 30 years, and without the collective bargaining tool workers have less power to demand raises. Corporations have also shipped a number of jobs overseas rather than pay higher wages in America. Finally, a number of Americans are unable to afford the higher-level of education required for many of the higher paying jobs.
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