America's High Anxiety
Our nation's core bargain with the middle class is disintegrating. We are into the fifth year of a relatively robust expansion, but millions are worse off. Exposed to greater risks in job security, they feel abandoned, left to fund their own health and retirement programs out of static or falling real incomes.
Resentment and envy are not normal characteristics of our society; we usually don't care how much the other guy makes as long as we feel we're getting a fair shake. Today, however, the middle class is not. Most of our economic gains have gone to people at the very top of the income ladder. Median income for a household of people of working age, by contrast, has fallen five years in a row. What's more, in a rapidly changing economy, Americans are losing their jobs, and while they often find new ones, the average pay is 17 percent below what they were earning before.
Even college graduates have been hard hit, their wages having failed to keep pace with inflation over the past five years-and this at a time when the profits per share for the companies in the Standard & Poor's 500 index have been increasing at double-digit rates while corporate profits are at the highest level in two generations. Wages and salaries, meanwhile, account for the lowest share of our GDP since the government began recording the data, in 1947. As former Secretary of the Treasury Larry Summers put it: "If the anxious middle's concerns about fairness are this serious when the unemployment rate is 4.4 percent, there will be far greater concerns whenever the economy next turns down."
Risk. The economy is going great guns-thanks to globalization, continued technology advancements, and improved productivity-but the middle class and working families just don't feel they are getting ahead, despite the fact that they're working very hard. Indeed, many ordinary Americans say they are either falling behind or just barely keeping up.
Philosophers and politicians-from Plato to Disraeli to John Edwards-are fond of the "two nations" concept (slave/free; rich/poor; black/white). Today, we can add another: secure/anxious. Risk, even more than the level of incomes, is the main issue. As family incomes have become more stable, loss aversion has become increasingly important. By a margin of 2 to 1, Americans-traditionally, eager entrepreneurs-consider it more important to protect current sources of income than to take an opportunity to take a chance on something new and make more money.
Tens of millions of Americans live in fear that a major health problem can reduce them to bankruptcy. They realize their families are one health crisis away from family hardship, which is a key reason for the pervasive feeling of personal and permanent insecurity.
This particularly affects American families. Marriage has always been a vital economic and social institution. Yet married people with kids are twice as likely to file for bankruptcy as single adults or childless couples, and they're more likely to lose their homes than married couples without children or single adults. Why hasn't the two-earner family protected more Americans from the risk of financial disaster? Well, to most families, a second income is not a luxury but a necessity, as wages for men basically flattened out as women entered the workforce. The job market has become more uncertain, with roughly as large a share of workers involuntarily losing their jobs every three years as during the steep economic decline of the early 1980s. The cost of housing, education, healthcare, and child care, meanwhile, has gone through the roof.
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