US economic insecurities on verge of boiling over
Even when experts were declaring the United States economy healthy, many Americans voiced a vague, but persistent dissatisfaction.
True, jobs were relatively plentiful over the past few years. It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people something did not feel right, even if they could not quite explain why. Now the economic tide is receding, and the undertow that was there all along is getting stronger. Take away the easy credit and consumers are left with pay cheques that have not nearly kept pace with their needs and spending habits.
The frustration of $3 a gallon petrol (Dh11) and $4 a gallon milk, the worries about health care costs that have risen four times the rate of pay have become much more real.
The retirement security that is only as good as the increasingly volatile stock market seems much less certain. Declining confidence of Americans in their economy is triggered by a storm of very recent pressures, including plunging home prices, tightening credit and heavy debt. But it is compounded by anxiety that was there all along, the result of a long, slow drip of worries and vulnerabilities.
“The economy is currently in recession or arguably close to recession and that’s certainly weighing on the collective psyche,” says Mark Zandi, chief economist of forecaster Moody’s Economy.com. “But… I do think there is an increasing level of angst that is more fundamental and is not going to go away even when the economy improves.”
Much of that anxiety is the uncomfortable, but expected jolt of the economic roller coaster. During a downturn, people become less confident about keeping their jobs or being able to find new ones, meeting household expenses and about the prospects for the future. But there may be more to it than just cyclical ups and downs.
What does the economic future hold? Many feel increasingly unable to answer that question with assurance, and they appraise it with a sense that they are less in control of the outcome.
In Westminster, Colorado, George Apodaca hears that uncertainty from the maintenance workers, drivers and others enrolled in the home budgeting class he teaches. Most have steady jobs, but are just getting by. They talk about challenges like the rising cost of getting to work or medical bills, not as new problems but as a continuing struggle.
“People in my class, they don’t know what a recession means or what a boom means,” says the counsellor for Colorado Housing Enterprises. “They’re worried about buying the groceries, buying the petrol.”
A year ago – months before economic alarms went off – nearly two of three Americans polled by The Rockefeller Foundation said they felt somewhat or a lot less economically secure then they did a decade ago. Half said they expected their children to face an economy even more shaky.
Other public polls have registered similar unease in the past few years, showing large numbers of Americans dissatisfied with the economy, and worried about retirement security, health care costs, and a declining standard of living. The surprising thing about many of these readings is not that they have recently skyrocketed. It is that in recent years they have registered consistently high levels of worry without ever seeming to ease.
“This has just been a period of great disconnect between what the aggregate economic statistics show and what leading politicians talk about and what ordinary Americans are feeling,” said Jacob Hacker, a Yale University professor and author of The Great Risk Shift, which charts increased economic insecurity. “I think people are saying, where did the gains go? Where did the boom go? And now that it’s gone, what are we going to do?”
Those uncertainties have been submerged for the past few years. The war in Iraq and the threat of terrorism dominated, drawing attention away from day-to-day economic concerns. With employers adding workers, people’s appraisal of the economy focused less on jobs, the long-standing measure of financial security. Many people gauged their well-being in wealth – looking at the stock market and the rise of real estate prices, said Susan Sterne, president of Economic Analysis Associates, a firm that specialises in analysing the US economy.
During those years Americans borrowed freely against the value of their homes. But now there is nothing left to shield them from the insecurities rooted in the old measures of economic prosperity.
Except for the late 1990s, pay has been stagnant for more than a generation, barely keeping pace with inflation. In 1973, the median male worker earned $16.88 an hour, adjusted for inflation. In 2007, the worker earned $16.85.
For many families, the stagnation has been moderated by the addition of a second pay cheque as more women went to work, and their pay rose over the same period. But the largest gains went to workers at the top of the pay scale. Now, economic worries are rising fastest in households with smaller pay cheques, and that chasm is widening rapidly.
“Over the past decades, whether inflation was much higher or lower, or incomes grew faster or more slowly, there has never been such a wide divergence in the experiences” separating richer households from poorer ones, said Richard Curtin, director of the University of Michigan’s consumer survey.
That insecurity shows in small, but telling ways. Shoppers at drug store chain Walgreens Inc are increasingly bypassing name-brand cough syrups and pain relievers and choosing cheaper store brands. Wal-Mart Stores noticed that many people who received its gift cards for the holidays used them in January to buy necessities instead of extras.
The pullback by consumers contrasts with years of spending that long seemed to contradict mounting worries. Worker optimism, which soared in the late 1990s, never fully rebounded after the last recession. Although jobs again were plentiful, it became clear that opportunities in the new economy came with few of the old assurances.
Rennie Sawade majored in computer science. He was rewarded with a job at Oracle Corp, but lost it in late 2005 when the company shifted his department’s work to India. Sawade, who lives outside Seattle, has been unable to find a full-time replacement, instead jumping from contract job to contract job. The contractor offers a 401(k) retirement plan, but contributions are entirely up to workers. When his wife was diagnosed with thyroid cancer last year he missed the equivalent of two weeks work – and pay – to take care of her. The job has health insurance but still left the family with a bill for $2,000.
Cutbacks and changes by employers also have pushed heavy responsibilities on to workers, many of whom find themselves unprepared. In the past decade, scores of companies have frozen or eliminated benefit plans providing a guaranteed pension. Over the years worry also grew about the cost of health care, with good reason. Since 2001, the cost of health insurance has gone up 78 per cent – about $1,500 more per year for the average family, according to the Kaiser Family Foundation.
Over the same period, wages rose about 19 per cent, and inflation 17 per cent. About four in 10 people polled by the group say they are worried about paying more for health care or insurance. About six in 10 working Americans polled by the Pew Research Center say they do not earn enough to lead the life they want. (AP)
78% - The increase in cost of health insurance since 2001
19% - is the rise in wages and 17 per cent in inflation over the past seven years
4 - out of 10 people say they are worried about paying more for health care
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