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In Obama's America, the Harder You Work, the Less You Make

Politics / US Politics Aug 06, 2013 - 12:49 PM GMT

By: Money_Morning

Politics

Garrett Baldwin writes: The harder we work, the less we make. That seems to be the mantra of the Obama recovery. That is, if we have a job.

In the last four years, real median household income has fallen during both the recession and the recovery. Amazing. It's like still standing in the muck after the ebb tide.


According to Sentier Research, the June median income in the United States sat at $52,098, or 3.9% lower than in June 2009, the month tagged as the start of the recovery.

The median income of Americans continues to decline (adjusted for inflation), increasing concerns about the long-term health of the middle class and consumer purchasing patterns.

Still, it's not just the last five years that has seen the middle class take a steep dive. The trend, adjusted for inflation, is much worse.

The current income level now represents an 8% drop beneath its post-dot-com peak of $56,648 in February 2002. For the record, the median income represents the very middle of a salary distribution, meaning if 101 individuals were standing in line according to their income, the 51st person would represent the median. This contrasts from the mean, which would represent the average of all income levels.

This precipitous decline is bothersome to economists, as the stagnation of American incomes has prevented the economy from getting its mojo back in recent years. Consumer spending represents approximately 70% of the economy, most of the spending driven by the middle class.

Despite recent commitments to "bolster the middle class" and to focus on "high-paying" jobs across the country, the Obama administration has failed its citizens, and catered heavily to corporate interests and centralized planning that have hammered workers across the country.

No longer can this be defined as a left or right issue, but rather one that is up-or-down.

Will the middle class rise in the America, like it did for six decades before the millennium, or will government incentives continue to provide financial opportunity for the few at the expense of the rest?

Today, we highlight three important causes of this salary stagnation, and, more important, what Americans can do about it.

Technological Innovation and Outsourcing

Technological displacement has played a vital role in the U.S. economy. Financiers' ability to outsource manufacturing jobs has had a significant impact. Also, the ability of companies to utilize new technologies and standard practices has made processes more efficient and cost-effective.

Nonetheless, robotics, advanced analytics, and lean manufacturing have certainly taken their toll on employment and corresponding pay. Today, technology has become so advanced in the manufacturing sector that the related jobs can be divided into two classes with significant gaps in salary: the higher-paying jobs in engineering and analytics that tell technology what to do... and the lower-paying jobs where technology tells the worker what to do.

As technology continues to wedge a stronger divide in the workforce and impacts salaries, Americans are best poised to learn new skills and trades related to these systems and focus intensely on math and science in order to improve their knowledge and corresponding pay.

Government Intervention in the Markets

Median income will continue to fall as government intervention in the marketplace gives companies more incentives to outsource jobs or shift workers from full-time to part-time. The recent implementation of the Affordable Care Act and the lackluster recovery have spawned millions of part-time jobs at the cost of reliable streams of income.

In 2013 alone, part-time jobs have accounted for 97% of all job growth, a significant and troubling tally that exhibits the incentives created by bad government policy.

Given that companies with more than 50 workers who cash a check for 30 hours of work are mandated to have healthcare coverage, more employers have shifted to a part-time model. Nonetheless, many part-time and low-income workers were unable to afford healthcare in the first place.

Now, as workers who are more educated are willing to accept part-time jobs, this will place a strain on lower-class workers and push them into even lower-skilled positions. As a result, the downward spiral of median income will continue unless government is willing to remove the barriers that make long-term underemployment a sound business practice for employers.

A Crisis of Confidence in the Financial Markets

Perhaps one of the most unnoticed causes of the median household income decline centers on American confidence in the markets. Since 2008, market shock has had a dramatic impact on the mindset of the American investor.

Middle-class Americans have drastically lost confidence in the financial markets. Even though the markets are roaring to all-time highs, only 50% of Americans own stocks, either individually or through funds.

The most pronounced decline in stock ownership lies among the middle class. In 2008, two out of every three middle class Americans owned stocks.

That figure sits at 50% today.

In addition, the distribution of market gains over the last four years has been heavily skewed toward the richest Americans. Currently, the top 1% of income earners own 38.2% of all stock, signaling that while median income falls, the gains of the markets lie in those with the money to benefit.

What to Do About It

Although the middle-class's uncertainty about the markets is warranted given its contempt for Wall Street and market manipulation with the Federal Reserve, there are opportunities.

You simply need to know where to look and develop an effective strategy.

That is why our Keith Fitz-Gerald created the 50-40-10 portfolio, an investing strategy that makes it possible to capture global gains and dividends from safe, international companies and protect your assets by using defensive tactics.

The median income trend will continue so long as government continues to create incentives for companies to do more with fewer workers, and as companies continue to chase processes and technologies that enable leaner, lesser-paid workforces.

As these companies do so, their profits will continue to soar, while Americans who don't invest will watch their income share grow smaller.

Here's some more insight on why companies aren't hiring now.

Source :http://moneymorning.com/2013/08/05/in-obamas-america-the-harder-you-work-the-less-you-make/

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