Amid stagnant wages, nagging underemployment and unemployment, many families continue to struggle with their finances. Some may even have wondered: “Will we ever make financial head way?”
On September 10, a Capitol Hill briefing was held to unveil a new policy brief that examined America’s shrinking middle class. Responding to Rising Inequality: Policy Interventions to Ensure Opportunity for All was developed and published by the Haas Institute for a Fair and Inclusive Society at the University of California at Berkeley.
According to the brief, “Income polarization is growing and the middle class is shrinking.”
The event, hosted by the Economic Policy Institute, featured several speakers, including john a. powell, Director of the Haas Institute and a Professor of Law, African American and Ethnic Studies, at U-C Berkeley. Rep. Barbara Lee (D-Calif.) delivered the session’s opening keynote address.
After pointing out that African-Americans hold six cents in wealth for every $1 held by Whites, Congresswoman Lee said the report underscore the need for a new national priority: working towards an inclusive economy.
“This report shows just how entrenched the barriers to economic opportunity have become over the last several decades,” said Lee. “For far too many years, the American Dream of a decent job and a better life for one’s children has become really a distant memory, pushed out of reach by failed policies and misguided priorities.”
Key findings from the report show that:
• Economic inequality pulls the rungs of the ladder of class advancement farther apart;
• Economic mobility is highly correlated with parental income; and
• Intergenerational economic mobility varies significantly by metropolitan region.
“The average annual income for the top one percent of households in 2012 was about $1.3 million, while median household income was $51,017,” the report stated. “The recession’s impact on unemployment for Black men was almost double that for White men and the impact for Black women was almost triple that for White women.”
Similar income inequities were also found in the recently-released Survey of Consumer Finance by the Federal Reserve. It found that financial stress is real, widespread and long-term.
From 2010 to 2013, according to the Fed, the only consumers who made significant and positive financial strides were the top ten percent of earners – those with a median income of $230,000. For both household heads under the age of 35 and over 75, stark drops in income occurred. Middle-aged, middle class consumers sandwiched between these two generations have yet to recover the lost wealth that occurred between 2007 and 2010.
The key issues facing consumers is whether they are building or losing wealth.
Former U.S. Labor Secretary Robert Reich, now a member of the Haas Institute Economic Disparities Research Cluster, has conducted research showing that if gains to the economy had been equally shared by all Americans, the typical consumer would be much better off financially by 60 percent. Instead, 95 percent of all national income gains went to the top 1 percent.
Additionally, much of the growth in wealth that has happened since the recovery began has been through investments rather than wages and salaries, particularly non-housing investments. The single largest investment that most families make – owning a home – peaked at 69.1 percent in 2004 and dropped to 65.2 percent in the Fed’s recent survey.
Summarizing the new findings, john a. powell, Haas Institute Director said, “Growing inequality has actually retarded economic growth. . . .If we continue down this road, it’s not just going to hurt Blacks, Latinos, Native Americans or poor Whites. It’s hurting the entire country; it’s undermining our democracy; undermining our economy and undermining American ideals.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.