The U.S. economy likely surpassed an important milestone last month: Americans are now experiencing the longest economic expansion in the nation’s history, assuming the data still being collected bears this out.
This is certainly good news and something to celebrate. But, as an economist who focuses on income inequality, I believe it’s important to look deeper into the data to see who really has gained from this record economy.
Economic growth represents two things – how much more the U.S. economy produces from one year to the next and how much more income Americans have relative to the previous year.
These are two sides of the same coin. When items get produced and sold, businesses and ultimately workers receive income. In theory, economic growth should represent a higher standard of living for Americans.
Unfortunately, economic growth during the current expansion has neither been deep nor broadly distributed among most Americans.
1. A shallow expansion
First, the shallow part.
The economy grew an average of just 2.3% a year since the expansion began in June 2009, at the end of the Great Recession. That’s almost half the 4.3% average growth rate of the 10 previous economic expansions since World War II.
2. CEOs vs. teachers
More troublesome is the fact that the record economic growth has not been broadly shared.
Economic growth figures summarize what is happening overall and on average. But averages can be deceptive. If Bill Gates walks into a soup kitchen, average incomes will suddenly far exceed US$1 million. But this figure poorly describes the economic condition of those eating there.
To gauge the breadth of our economic expansion, we need to look at how its economic gains have been distributed. Over the past decade, 60% of all income gains have gone to the top 1%, roughly those making more than $500,000 a year. Income gains for everyone else has been less than 5%, or under 1% per year.
The narrowness of the current economic expansion can be seen by focusing in on two occupations: secondary school teachers and CEOs at companies in the Standard & Poor’s 500.
Teachers make average salaries despite having significantly above average education levels. Since the current economic recovery began, inflation-adjusted salaries of secondary school teachers declined slightly to $64,340 in 2018, down about 0.3%.
In sharp contrast, median pay including non-salary compensation for the top CEOs in the U.S. jumped an inflation-adjusted 65% since 2009 to a record $12.4 million in 2018.
Flat wages and rising CEO pay help explain why the ratio of CEO pay to median wages at the largest 350 companies by sales has soared from 200 to 271 times average worker wages during the present economic recovery.
3. Where the wealth went
What is true of income is also true of wealth.
Wealth is distributed even more unequally than income and has grown worse during the current economic expansion. While all income groups have experienced gains since 2009, the biggest beneficiaries of the economic expansion by far have been the very richest families.
One main reason for this is that the rich have a large share of their wealth in financial assets, such as stock shares, which have nearly doubled in price since their peak before the Great Recession.
In contrast, middle-income households have most of their wealth tied up in their home.
While home prices have gone up a lot in big cities on the coasts, average home prices are up only 13% since their pre-Great Recession peak in 2006 – that’s less than the inflation rate over the same period. What’s more, many families are still living in homes with little or no equity.
Spreading the prosperity
Of course, financial metrics aren’t the only ones worth looking at to see who benefited from a growing economy.
Life expectancy and fertility rates have been falling in recent years, particularly among those at the bottom of the income and wealth distribution.
And more young adults are living with their parents and delaying marriage.
These are things that normally happen during economic recessions and depressions.
One positive trend during the current economic expansion has been the gains for workers in low-wage occupations. However, these gains have not occurred because of the economic expansion. Rather, they are the result of policy choices made by legislators in dozens of states such as California, Colorado and New Jersey and cities such as New York and Seattle that raised their minimum wages in the face of national inability to do so.
Ideally, everyone gains equally from an economic expansion, regardless of its length. And gains need to be broad and deep because expansions do not last forever.
Overall, a well-performing economy should be one where most families take two steps forward during expansions and one step back during recessions. But that’s not America’s reality today.
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This article is republished from The Conversation under a Creative Commons license. Read the original article.
Thanks President Obama.
Jay when more people finally realize what you know, that Obama and Clinton achieved levels of corruption, and facilitated outright theft of America’s wealth that most Republicans can only dream of accomplishing, THEN we will have a different country.
I regularly talk to intelligent and successful people every day who STILL believe that centrism, expanding ” Obamacare”, and trickle down economics are the answer to our problems. A tragic testament to the power of the propaganda delivered every day thru corporate media like MSNBC, CNN, and Fox.
Only thing i know for certain is that this cannot and will not go on forever.
Funny. I was dog whistling a little.
It’s in the history books that the vast majority of our current expansion happened under Obama’s watch after he inherited Republican deregulation-trickle down-deficit defense spending round number two which drove the economy into the ground during W’s shift at the wheel.
Just like Republican deregulation-trickle down-deficit defense spending round number three will do shortly, if you believe the yield curve is a telltale predictor of recession….as it always has been in the past.
Thus, it’s important to acknowledge that the bulk of the blame for our county’s ills can not be laid equally upon both parties.
This is true on a number of levels on a number of issues…not just the economy.
That’s not to say Democrats are innocent. That’s also an important point.
Nevertheless we see Conservatives stuck dragging around their record and the most unpopular president in history like a pair of cement shoes, and so like a drowning victim, they’re clinging to whomever may be around to keep them from sinking.
One way to do that is by trying to shift some of that excess weight to democrats in the form of False Equivalency.
Keep in mind that they’re paying consultants millions of dollars for this advice.
And so it is that this argument is starting to make the rounds. It’ll become more prevalent as the race tightens.
You know better. It’s intellectually dishonest, so let’s not let them do it. Although government as a whole has blemishes aplenty, let’s resist the urge to lump all politicians together, and instead remember and remind Conservatives that they and their policies alone own the lion’s share of the steaming pile.
Again…that’s not to say democrats are innocent, or that they don’t need their own makeover, but let’s not pretend they are just as “inept and dysfunctional” as Republicans…because those fantasies are not how we make educated choices at the ballot box.
And US min wage has been $7.25 an hour since 2009…. hmmmmmmmm
Most states pay more though. No states pay less. Wyoming pays the same, so that’s a 0% increase in wages for Wyoming.
However, Washington pays $12 an hour now and was paying $8.55 in 2009, which is a 40% increase in the last ten years, even if you adjust that $8.55 for inflation, it’s $10.01, which is still a 20% increase in wages. That’s a LOT more than the 5% this article says…. Are min wage earners the exception? Is everyone on a salary getting screwed? Are the wealthy and the poor benefiting and the middle class getting crunched? Maybe.
Interesting shit, but I feel people have more. They just do.
And this ‘correlation’ between putting off kids and marriage and an economic recession is unsubstantiated and should not have been mentioned. Young people these days don’t want to have kids, period. You could give them a million dollars and they’d buy material possessions, they would NOT be like ‘oh I want to get married and have kids now’… no way. Who wrote this article? Obviously someone who is out of touch with anyone under 30.
NAFTA, telecommunications act, exploding prison population / 3 strikes, Glass-Steagall repeal/Wall Street deregulation, bailing out the banks (TARP) while 6 million Americans lost their homes, inherited 2 wars ( Afghansistan and Iraq) and expanded them into 7. Used Nobel peace prize as a paper weight to hold down personal drone kill-list, elimination of Habeas Corpus, threatened to veto public option and instead signed into law a massive give-away to drug and insurance companies, loaded his entire cabinet with people from a Citibank letter of “nominee’s” and then went straight from the White House to Wall street lobbyist.
Which 2 presidents did all this BTW?
The only difference i see between the 2 parties as a whole is the Democrats are much better at putting a polite, well spoken face over their equally disgusting policies.
There are more decent people in the Dem party than the Repugs, but combined both are a tiny minority.
Not even a little bit of what you said in any way supports the moonbeams notion that democrats are as much to blame for Republicans for our country’s shortcomings.
As I’ve said before, if you don’t understand the real differences between the parties’ platforms then you really need to do some reading.
Likewise, if you think Obama was a continuation of Bush the Dumber’s travesty of an administration, that’s either intellectually dishonest willful ignorance or evidence of a desperate need for more information.
There is no equivalence between the parties.
Jay i think you’ve perfectly outlined the differences in our beliefs, you are focused on the parties ” policies” and all the things they claim they stand for. I look at what they have actually DONE.
I outlined some of the worst crimes committed against the American people in modern times, you dismissed them. Yet you claim my point of view is dishonest, Let go of the corporate media delusions filling your head and be honest with yourself for a change.
In terms of Washington DC , Federal politics , and the people they serve and cater to, we have a 1 party system with Few exceptions. Bernie, Tulsi, Ro Khanna being those few , and a few on the right who also vote against War , against Corporate welfare, endless tax-cuts for the wealthy,etc.
It us much easier to turn on the MSNBC or CNN and hypnotize yourself with the Trump or Bush bogeyman, but it’s a lie. As bad as they are/were, in terms of actual policy and what it’s done to this country, Obama and Clinton were just as bad or worse.
if you disagree then at least have the spine to post some supporting facts like i did ,instead of attacking my personally, a person you don’t know from Adam.