President Harry Truman once wished for a one-armed economist. The reason? Seemingly all his economic advisors consistently said “on the one hand X, but on the other hand Y.”
Wage stagnation is a current case-in-point. It has become almost axiomatic to say that the middle-class is shrinking. One economist begs to differ, claiming that this statement fails to account for such things as the actual purchasing power of a dollar. For example, an average employee in 1959 would have had to work 100.5 hours to purchase a washing machine, as opposed to just 23.3 hours in 2013. Or, a 1959 employee had to work 127.8 hours to purchase a television, as opposed to 20.7 hours today.
Professor Smith also argues that today’s workers enjoy many more noncash employee benefits than did their predecessors.
Spending and saving
The wage-stagnation point is certainly debatable. But the savings rate may shed some additional light on the subject. Whereas the savings rate was once as high as 7%, it has dropped to only 1% or 2% in recent years. So, there are a lot of underfunded retirement plans and bare savings accounts in today’s America.
The low savings rate means a couple of things for American families:
- Many people are almost entirely dependent on rising wages to keep pace with rising costs. If there is any significant discrepancy, some families must either forego paying some bills or borrow money via credit cards and payday loans.
- Without a sufficient amount of savings, many people are vulnerable to financial emergencies, such as medical bills or long-term unemployment.
If you are behind on your bills, Chapter 13 Bankruptcy can help you catch up and start to rebuild both your credit score and your savings account.
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