WORLD> America
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WORLD> America
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American dream turns to nightmare
(China Daily)
Updated: 2008-07-22 09:02 For six years, Tom Stechmiller's 2 percent annual pay raises didn't keep up with increases in the cost of living. Now, with prices rising faster and the economy slowing, his wages have been frozen. "I'm terrified", said the 47-year-old father of two, an embalmer for Service Corp International from the Chicago suburb of Berwyn, Illinois. "This isn't the American dream." The current US economic expansion is the first in 60 years that may end before many Americans have recovered from the last slowdown. Annual family incomes adjusted for inflation have grown just 0.8 percent since the end of 2001 even as the economy expanded an average 2.7 percent a year, leaving households little cushion to absorb higher food and fuel prices.
"The average family hasn't made up for lost ground," said James Glassman, senior economist at JPMorgan Chase & Co in New York. "We're discovering people aren't protected from inflation like they used to be." Median US family income, adjusted for inflation, was $58,407 in 2006, according to the most recent Census Bureau data, down from $59,398 in 2000. Heightened global competition, combined with the waning power of organized labor, kept a lid on compensation during the latest expansion. "The world has seen, over the past 20 years, an increase in the supply of labor," said Robert Solow, a winner of the Nobel Prize in economics who's now at the Massachusetts Institute of Technology. "When you have a big increase like that, the wages of the person in the middle are likely to be held down." Now, as prices pick up, the deterioration in income growth means households are likely to cut spending, restraining the economy. Economists don't anticipate annualized growth to breach 2 percent until the third quarter of 2009, according to a monthly Bloomberg News survey. The Labor Department reported on July 16 that consumer prices jumped 5 percent in the year to June, the most in 17 years. Misery Index That pushed the so-called Misery Index, which adds inflation to the unemployment rate, to 10.5, a level unseen since 1993, the year Democrat Bill Clinton was inaugurated as president after campaigning on promises to revive the economy. The lack of wage growth during George W. Bush's presidency means Democrats are likely to make gains in this year's election, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. "People vote their pocketbooks," he said. "They're likely to take out their problems on the incumbent party. It's going to be pretty hard" for Republican presidential candidate John McCain "to escape Bush's mantle on the economic front". The last time households significantly gained on inflation was 1998, when median income grew by 3.4 percent. Agencies |
