USA: the Statistics That Shock

Capitalism cannot provide a decent living to everyone, but as long as it guarantees significant layers of the population a reasonable standard of living it can maintain a degree of social stability. Recent figures on the situation in the USA show that “middle America” is beginning to feel the pinch, a phenomenon which indicates that social turmoil will soon be on the agenda.

I was so shocked by the statistics and studies that have been recently released on the incomes and wealth of the ordinary Americans that I had to tell you about them.

I'm not talking about the slave labour wages that new immigrants in America get for working ‘illegally' to clean, tidy and maintain the homes of the super-rich in their ‘gated communities' across the nicest parts of the real estate; or the below poverty wages that the likes of the mega supermarket chain of Wal-Mart pays its checkout and warehouse staff. Have you seen the recent film documentary, Wal-Mart, the high cost of low price? There isn't one aspect that this film doesn't show Wal-Mart as vicious and oppressive in: employee welfare, customer welfare, the environment, even racism and sexism.

No, I'm not talking about the poorest sections of the community but the average household where there are one or two ‘good' jobs and apparently good lifestyle. I'm talking about middle America, the so-called middle class in white-collar professional and service sector jobs.

The median wage is that wage or salary which is the most common. It is not the average salary. That is the wage that divided all the incomes of the super rich by those of the poor. That average is not what most people in the US earn. The median income is. And according to the latest statistical survey of Americans, in a period since 1998 when the US economy has expanded by 25%, the median wage, that earned by middle fifth of Americans, has fallen by 3.8% and in fact, since 1973 has stagnated.

At the beginning of May, the US economy was in its fifth year of economic growth, stock markets were nearly back to the levels last seen in the great hi-tech boom of 2000 and profit margins were at record levels after five consecutive quarters of double-digit growth.

But the ‘prosperity' has not ‘trickled down to the ranks of middle America, let alone the industrial working-class and poor and dispossessed. At the same time, stagnating incomes for middle America have been accompanied by soaring inequality. Again, according to the new study, since 1973 annual income growth for the top 1% of Americans was 3.4% and for the top 0.1% it was 5.2% each year. But for the 90% below them, it grew just 0.3% a year since 1973! So much for the American dream!

So if the economy has been growing well, where has all product of the work of the Americans gone? Just consider this. Chief executives of the big companies used to earn 26 times more each year than their average employees. Now they earn a staggering 300 times as much!

You should go and see another documentary film just out called Enron: the smartest guys in the room where the disgusting hubris and sleaze is exposed of much-feted executives earning millions of dollars, faking their results and when found out leaving the company to collapse with thousands of middle Americans losing their livelihoods and their pensions.

The American Dream

The sad irony is that most Americans still believe in the American dream, namely that if "you are poor and work hard, you have chance of becoming rich". According to a recent poll, 80% of Americans believe that, up from 60% in the 1980s.

But the chances of the average American achieving the status and wealth of the super-rich through hard work, education, etc., is not much better than the chances of winning the national lottery. There is another report out that concludes that children from low-income families in America have only a 1% chance of reaching the top 5% of income earners while children of the rich have a 22% chance. The chances of children of middle income Americans getting into the top 5% was just 1.8%, hardly better than the poorest.

Of course, it's even worse for African-Americans, whose children born in the bottom 25% of income households have twice as much chance of staying there as white children of the same income group.

And don't' think this is just America. The same forces of capitalism that keep the rich richer and the poor poorer apply to the rest of the capitalist world. The US is not the worst for the chances of escaping from the bottom. The worst country for that is Britain! Only the UK has a lower rate of income mobility than the US. Good luck in the lottery!

Just as worrying is the risk that an average American household could be thrown into poverty. The volatility of household income rose throughout the 1990s. The share of households that saw their incomes decline by more than $20,000 rose from 13% in 1990 to 17% now.

And it's a myth that hard work will get you to the top. People who work longer hours at work to get on got no further up the income scale than those that did not. And yet in another survey, 61% of Americans thought it would make a difference, 58% of Australians did, but only 33% of Brits and the most sceptical were the French (23%).

Capitalism is not only unfair, it is unjust and unstable. Yet another devastating survey found that long-term unemployment in the US has risen to its highest level in more than 20 years. The average length of unemployment was now 18 weeks. The current ‘boom' has the highest share of people out of job for five weeks or more and when people do get a job, it was more likely to be for less money than the old job.

Those in work and owning their own home (about 70% of Americans) had to dedicate nearly 11% of their incomes after taxes to paying their mortgage. There is now a one in sixty chance that people will default on their payments (much lower than making it to the top).

It now takes the average American two-earner family 32 weeks to pay for taxes, health care, housing, education and transportation. That's up from 28 weeks in 1979. After paying for all these items of basic living, the average family had less left to pay for food, clothing, utilities, saving for retirement, leisure etc., than they had in 1980. In that real sense, middle America is worse off than they were 25 years ago.

Middle America is working harder to make ends meet. And they are borrowing more - household debt is now 120% of family disposable income. Not only do Americans save less, they receive less support from their employers to do so. Employer-sponsored pension plans have declined and there has been a big shift from final salary, defined benefit plans that pay out a guaranteed pension to defined contribution plans that pay out only on the returns from the money put in.

In this ‘rich' society, 45% of all Americans do not have a pension plan! And of those that do, now only 20% had a guaranteed pension. It's the same story in health insurance - a big issue in a country without a national health service. The share of people without any health cover has risen to 16%, while employers offering any scheme fell to 60%. There are now 45m Americans with no way of getting better if they get ill.

And, just in case there's any delusion that only Americans suffer from this sort of inequality and injustice, the UK's Inland Revenue released its latest analysis of income inequality in Britain. The IR reported that the level of inequality measured by what is called the Gini coefficient (the amount of income going to the top 10% over the rest) remains near historic highs despite over nine years of a Labour government.

Furthermore it is not just inequality of income that is shocking in Britain. Inequalities of wealth (what people own) are even greater. According to the UK's Inland Revenue, the richest 5% of the population owned 40% of all the personal wealth in 2003. That's higher than it was 30 years ago and is unchanged from when the Labour government took office in 1997. Most shocking of all is that the bottom 50% of the population own only 7% of the nation's wealth.

Rich are Richer and Poor are Poorer Under Blair

Moreover, what middle England owns are their homes. If you strip out the value of the house that you have to live in, then the wealthiest 5% of Britons own 58% of financial wealth. That compares with 49% when Labour came to office. So under Labour, the rich have got richer. The bottom 50% of the population own only 1% of all financial wealth compared with 6% when Labour came in! So the poor have got even poorer!

As my study of the profit cycle in the US shows, since 1982, the profitability of US capitalism has risen significantly. That was partly achieved by squeezing the wages and employment of the mass of American workers, while making them work even harder. Thus the rate of surplus value appropriated from the workforce rose while investment in new equipment was kept to a minimum. The profit rate rose.

And yet throughout the last 25 years, the average American household is no better off than they were at the beginning of the 1980s. Meanwhile the rich have become super rich. Those who are dedicated to football prepare for the World Cup and will soon turn on their television screens to watch football matches played by millionaires and commentated on by millionaires interviewing other millionaires.

These celebrities may be visible and rich, but they are still pygmies compared to the hidden rich who don't appear on TV singing songs, doing soaps, making movies or kicking footballs. The super, super rich remain in the boardrooms of the big multinationals and glide past quietly out of sight in their private jets, yachts and limousines.

What these recent studies show is that the chances of joining them are basically zero for nearly all of us. So if you can't join them, then let's beat ‘em, or the system that keeps them!

May 2006

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