Tuesday, April 22, 2008

Why We Are Bitter

Americans are bummed out--some might even call us bitter. When asked whether the country is on the right track, a record 81 percent of the public says it has veered off course, according to a recent New York Times survey. The Reuters/University of Michigan Index of Consumer Sentiment for April finds consumer confidence at the lowest level since 1982. The percentage of Americans who tell the Gallup daily tracking poll that economic conditions in the country are getting worse, at 85 percent in mid-April, is close to an all-time high.

The roots of our bitterness run much deeper than the housing slump or credit crisis. The roots lie in the circumstances of the nation's primary breadwinners--men. Men's earnings are not keeping pace with inflation. This problem started more than two decades ago, but until recently American families have been singing and dancing up the yellow brick road as they made their way to the Emerald City--the American Dream.

Among men working year-round, full-time, median earnings stood at $42,261 in 2006 (the latest data available). But here is the problem: The average man earns less today than he did in 1986, when his median earnings were $44,303 (in 2006 dollars). Between 1986 and 2006, then, the median earnings of the average man with a full-time job fell by more than $2,000, a 5 percent decline. Blue-collar workers are not the only ones who have felt the pinch, either. After years of steadily rising wages, the median earnings of college-educated men peaked in 2002. Their earnings have fallen 3 percent since then.

Until recently, Americans have been largely unaware of these worrisome trends because women's growing incomes hid the decline in men's earnings. Between 1986 and 2006, the median earnings of women who work full-time grew 14 percent, after adjusting for inflation. That earnings growth not only masked the decline in men's earnings, it also boosted household incomes to record highs. Women were proud of their jobs. Men were proud of their family's rising standard of living.

Now we have reached the end of the road. We are at the Emerald City, but something is not right. Women's median earnings peaked in 2002 and have fallen 4 percent since then. Just when we thought we had achieved the American Dream, the curtain has fallen away from the Wizard and revealed him to be nothing more than our own ever-harder work. Our standard of living has been rising all these years not because workers are earning more, but because households are sending more workers into the labor force. There is nobody left to earn an additional paycheck unless we put our children to work. Median household income peaked in 1999, but costs continue to rise. In a world where globalization and technological change are rewriting the rules, Americans have finally noticed that they are not in Kansas anymore.

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