The young, broke, and indebted American: 45 percent of 25 year olds carry student debt and the median net worth of those 35 and younger is one month of expenses.
It is clear looking at economic data that young Americans were not sent the memo regarding this economic recovery. People do realize that the “Great Recession†officially ended in the summer of 2009, right? We’re heading into year six of this recovery but many are simply seeing lower paying jobs, a deeper reliance on debt, and inflation hitting in important segments of our economy. For example, some of the top employment sectors in our country are in the form of food services and retail that tend to hire a disproportionately large amount of young workers. But with more people going to college and taking on record levels of debt, working retail is not going to cut it. Back in 2000 about 25% of 25 year olds carried some form of college debt. Today that percentage is up to 45%. That is a major jump and shows that for many, simply going to college requires some form of debt assistance. And that is why we now have over $1.2 trillion in outstanding student debt across the country. But young Americans are also seeing hits to their net worth. Let us look at the “recovery†for young Americans.
Low wage jobs and the increase in non-working America grow: Half of jobs added last month were in low wage fields and those not in the labor force jumped by 354,000.
If we look at the labor force in sheer numbers we find a couple growing themes. The number of low wage jobs continues to dominate employment growth. Of course this will only add additional burdens to an already cash strapped young American worker. Financial pundits would say any job is better than no job. Speaking of no jobs, the next theme is that of the massive number of Americans not in the labor force. This number continues to trump any job gains. For example all the current headlines are saying that the US added 295,000 jobs. A nice number but where is the headline saying that the nation also added another 354,000 Americans to the “not in the labor force†category overshadowing any net gains in jobs? The reason this isn’t reported is that those not in the labor force are somehow relegated to the national safe of unreported secrets. Nearly 93 million Americans are not in the labor force. The spin is that many are older Americans retiring but the data shows otherwise. Many older Americans are too broke to retire. Low wages and exiting the labor force seem to be the continuing trend.
The 35 year drought in real wages for American workers: American workers really haven’t had a raise since 1979.
Economic recoveries take on a variety of shape and sizes. With stock markets reaching new highs you would expect that some of the fruits of this boom would trickle down to American workers. But some of the booming trends are continuing on the path of low wage labor and certainly, of turning people into contract workers. Think of a business like Uber that turns regular people into taxi drivers if they wish to become one. For some, the pay is good but the benefits are non-existent. For the founders of Uber, an untapped world of wealth is the reward. This seems to be a big trend with technology. Outsourcing many good paying jobs that bring wealth to a few but displace millions of workers. Maybe this is simply unavoidable. When we look at the top 10 occupations in the US, we see all of them in the low wage service sector outside of nursing. It is hard to outsource janitorial services or someone making your food at a local restaurant. A recent EPI study found that in the overall scheme of things, the American worker really hasn’t had a real raise since 1979.
The long inflation con on the public: How the CPI severely underreports inflation and the slow erosion in the American standard of living.
The Consumer Price Index (CPI) is supposed to give us a good barometer of price changes in the economy. Unfortunately the CPI misses many big items like housing and college tuition. The latest report shows that the economy had a taste of deflation for the first time since the Great Recession hit. Of course this is going to provide more ammunition to the Federal Reserve to maintain negative interest rates that clearly are having an impact on the standard of living of Americans. Subprime lending is already booming again as banks chase after cash strapped Americans. You need to step back to understand the impact inflation is having on the economy overall. Blindly accepting that prices “need†to go up is easier than understanding how the Federal Reserve impacts the dollars in your wallet. The CPI is the official metric for price changes but if we look at it from a broader perspective, like looking at a forest from a plane versus looking at one tree on the ground, we realize the landscape is dramatically changing. Inflation is eroding the quality of life for most Americans.