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Tuesday Talk: Have household budgets recovered?

August 20, 2013 By Joe Sheeran, Communications Director

While key financial indicators continue signaling a slow, but steady economic recovery, national prosperity hasn’t translated into a more secure footing for many individual families. In Minnesota, the unemployment rate has eased back down to 5.2% from an 8.3% recession high but real median household income has declined over ten percent the last decade. Many of those new jobs are lower-playing with scaled back benefits, if any at all. The number of people who left the labor force is at a generational high.

Media stories generally blame the Great Recession for economic struggles, but widening economic inequity started long before October 2008’s market crash.

This morning between 8 and 9:30, Alex Christensen, a Minnesota 2020 Hindsight Community Fellow will join us to talk about the recovery’s reality.

How’s your family doing in today’s economy?

 

Post your comments or questions in the box below, scroll down to see the ongoing conversation, and use "refresh" to see new comments.

 

Thanks for a great discussion this morning. We invite you to continue the discussion throughout the day. Alex will check back in this afternoon.

Thanks for participating! Commenting on this conversation is now closed.

34 Comments:

  • Rachel says:

    August 20, 2013 at 6:41 am

    Good morning! Alex will be joining us at 8:00.

    Until then, tell us YOUR story. How have you seen economic recovery or the lack thereof in your own family and community?

  • Alex Christensen says:

    August 20, 2013 at 8:07 am

    Good morning, everybody! Welcome to Tuesday Talk.

    The recovery since the Great Recession has been slow and fickle. Unemployment in Minnesota is down to 5.2% - which is much lower than the nationwide rate of 7.4%. On top of that the state now has nearly the same number of jobs as before the recession.

    But is the economy really recovering? There’s a lot of evidence that shows it might not be. Many of the the jobs the state has added are relatively low wage. Median income has stagnated, leaving many workers with jobs, but without enough money to keep up.

    What has your experience been in recent years? What questions do you have about the economy?

  • Joe says:

    August 20, 2013 at 8:20 am

    For a good comparison to where we should be economically check out Lee Egerstrom’s article examining Minnesota’s economy of the lat 90s early 2000s. It highlight’s Jobs Now stats http://bit.ly/TAwboS.

  • Lee Egerstrom says:

    August 20, 2013 at 8:25 am

    Alex, you are pointing us towards a cruel reality. No all new jobs being created are created equal. Just a reminder from the late Sen. Paul Wellstone. When two former presidents were running for reelection, one from each major party, they cited total numbers of jobs created during their first term. Paul irritated both of them by saying, “Yes, I know a single mother who has three of those jobs.”

    • Alex Christensen says:

      August 20, 2013 at 8:32 am

      Thanks, Lee. Sen. Wellstone was always a vocal advocate for the working class and if he were still around today, I’m sure he’d be appalled at the state of inequality in the country. The opportunities for many Minnesotans are simply not there to climb up the income ladder. You know, unemployment is only 5.2%, but other measures of unemployment are much higher. Once you take into account people who are working in jobs they’re overqualified for or jobs that don’t give them as many hours as they’d like, unemployment is over 11%!

  • Jeff Van Wychen says:

    August 20, 2013 at 8:29 am

    In Minnesota, real median household income declined during the recession of 2001, as might be expected.  However, it continued to decline during the subsequent recovery.  I’ve always attributed this to the fact that the recovery after the 2001 recession was a “jobless recovery.”  Is the decline in median household income paralleled by a decline in real wages?

    • Mary Turck says:

      August 20, 2013 at 8:38 am

      Hourly rates, while a more frequently-reported measure, are only one measure of real wages. I’d argue that hourly rate x weekly hours would yield a better measure of real wages. That would take into account the increasingly part-time nature of jobs, especially entry-level and low-wage jobs.

      • Alex Christensen says:

        August 20, 2013 at 8:44 am

        Mary - great point. The per capita personal income picture isn’t looking so pretty either. This graph shows, basically, the average income of a Minnesotan adjusted for inflation.

    • Alex Christensen says:

      August 20, 2013 at 8:39 am

      Yes - it very much is. And keep in mind that wages are not only lower now in real terms - meaning what you can buy with your dollar - than in 2008, but they’ve been stagnating since the recession of 2001.

      For instance, Minnesota’s average wage grew by a whopping 0% from 2011 to 2012. Once inflation is factored in, then that’s actually a decline in wages!

      Even worse, the inflation-adjusted income in 2011 was only recovering to 2006 levels. Family costs haven’t stayed put since 2006, so that is putting a real squeeze on families.

  • Bernie Hesse says:

    August 20, 2013 at 8:34 am

    the “recovery” for many workers I know is understaffing, pay raises have been rather flat, and some real confusion around the affordable care act which has led to some short contract terms (one year instead of 3 year agreements) in the grocery industry for unionized workers.  our mission in retail for the workers is to start organizing more strategically and to make the case for lifting folks up in low wage jobs, hence the push for 9.50 an hour at the state house.

    • Alex Christensen says:

      August 20, 2013 at 8:51 am

      Bernie - I think you bring up some really important points. Wages are in large part staying low because there is a huge supply of workers who would rather earn that Low Wage than No Wage. Employees can’t ask for raises when there are dozens of workers waiting outside the door, just hoping to even get paid that low wage. It’s a sad state of the economy, and it really points towards the fact that we need stimulus to get us out of this low-wage, low-employment cycle.

      • Annalise McGrail says:

        August 20, 2013 at 8:55 am

        Alex, what sort of stimulus or policy action would best help up get out of this current cycle?

        • Alex Christensen says:

          August 20, 2013 at 9:03 am

          Annalise, there are tons of different ways to stimulate the economy, but it’s best to look at what’s worked in the past. There have been 2 iterations of the payroll tax holiday in recent years that have been very effective. This is the “put money in people’s pockets” approach, just like cutting checks straight to residents. Regular people will get a little larger paycheck and spend a little more at local businesses. With more sales, businesses will be able to hire more.

          Another option is for the state and federal government to more fully invest in everything! By paying for upgrades to buildings and roads, or hiring more educational workers, or really spending on anything that is good for the community, they’re putting more money into the economy. Interest rates for borrowing are really low, and this spending can be paid back with the additional tax revenue from having a healthy economy.

          • Jeff Van Wychen says:

            August 20, 2013 at 9:09 am

            Your observations on the payroll tax holiday raises another interesting question.  In recent decades, the state and local tax system has become more regressive (while the federal tax structure has become less progressive).  To what extent is reducing tax regressivity part of the solution to the income inequality conundrum?  That would increase the after-tax income of low- and middle-income households.

            If our goal is to reduce income inequality, to what extent should we focus on increasing minimum wages versus strengthening collective bargaining versus reducing tax regressivity?  Or do we need to focus on all three fronts?

            • Alex Christensen says:

              August 20, 2013 at 9:29 am

              Tax regressivity has a lot to do with the problem of inequality. A small marginal increase in the share paid by the top end will be a comparatively huge help for the lower end of the income scale. The tax system and the services it makes possible are probably the most effective way to keep inequality down. Collective bargaining and minimum wage only affect small portions of the working age population, but the tax system will affect everyone.

    • Alex Christensen says:

      August 20, 2013 at 8:57 am

      It’s also sad to see how some businesses are reacting to Obamacare and the employer mandate. I don’t know what the answer to this is, but I hope businesses realize the worth of providing health insurance.

  • Lee Egerstrom says:

    August 20, 2013 at 8:41 am

    Alex, I’ve got to ask: When we have minimum wage levels set well below “living wage” requirements to maintain family households, aren’t we setting undeclared public policy aimed at widening the nation’s inequality gap and locking in poverty by expanding the ranks of the working poor?

    • Alex Christensen says:

      August 20, 2013 at 8:48 am

      Lee, I’ve heard a very interesting argument lately about the realities of having such a low minimum wage: It means that more employees will have to use government assistance just to keep up, even though they’re working full time. By letting companies like Wal-Mart pay super low wages, while workers are getting assistance on the side, that is subsidizing Wal-Mart’s labor practices. The only reason they can pay so little is that the government kicks in a little extra for those underpaid workers! That sounds a little crazy, now doesn’t it?

      • David Austin Walsh says:

        August 20, 2013 at 8:56 am

        Not to mention that now-infamous McDonald’s budget plan for its minimum-wage workers, which makes some questionable assumptions about expenses (if I recall correctly, they don’t include heating) and also assumes that employees have a second job.

        Alex, I’m not too familiar with the Minnesota numbers, but could you break down the unemployment rate for college-educated vs. some college/non-college educated workers?

        • Alex Christensen says:

          August 20, 2013 at 9:15 am

          David - I have seen this national data on unemployment based on education, but I haven’t been able to find Minnesota numbers. I would assume they are pretty close, but maybe a little lower across the board.

          Unemployment among Bachelor’s Degree holders nationally just 4.5%, versus 8.3% for only high school graduates and 12.4% for high school dropouts. Those huge gaps are the basis for a lot of the spike in inequality in the last decade.

        • Alex Christensen says:

          August 20, 2013 at 9:17 am

          Another MN2020 fellow, Michael Peterson, found the Minnesota data: for high school dropouts, the unemployment rate is 15% - a whole 12% higher than those with at least a bachelor’s degree.

      • Bernie Hesse says:

        August 20, 2013 at 8:56 am

        some good stuff you guys are putting out. interesting comment on the subsidies to workers is we didn’t have one legislator during the hearings last session question our points on how big box retailers are being supplemented by such programs.  If you work at walmart or target- you probably can access MNcare, EIC, school lunch, section 8 and other safety net programs.

      • Lee Egerstrom says:

        August 20, 2013 at 9:00 am

        I think our friends at the Minnesota Housing Partnership have found evidence that supports what you say. In an Aug. 13 blog, MHP noted that Minnesota housing rents have increased by 6 percent since 2000 while renters’ incomes have fallen by 17 percent. This spills over on home ownership as well; 25 percent of home owners now pay more the government says they can afford for housing. Alex, on the course we are following, aren’t these conditions destined to become worse?

  • KJC says:

    August 20, 2013 at 9:13 am

    The damage done from 30 years of the experiment in “trickle down” economics… which the economics now prove just didn’t work for average Americans… is heartbreaking,and ongoing.  We must alter the basic policies that caused this… and in the face of “divide and conquer” politics.
    This is a problem a long-time in the making, with impact from all over the globe…making this is a macro-economic issue, Minnesota will not be able to “fix it” alone.  We could certainly be the groundswell of activity that is “at cause” in the Big Course Correction though!
    There are various approaches, my favorite?  “If you want to sell here, you will employ here.”  That doesn’t start a trade war with import duties, but does ensure some real economic patriotism from the Business Community (that loves to wrap themselves in that brand.)  It gets us in-it together again, with some real skin-in-the-game…a mutual stake in making sure things work for the Common Good. That has to be the real goal.  KJC

    • Alex Christensen says:

      August 20, 2013 at 9:21 am

      You’re right, something has to change. The world has some very good ideas when it comes to how to keep 1) inequality low and 2) economic growth high. Countries like Sweden and Denmark have managed to do both of these things - and they are the ones who never subscribed to trickle down and tax cuts for the wealthy. Minnesota obviously is just a part of a bigger American picture, but our steps towards those two goals can be a great example for the rest of the nation to follow.

    • Lee Egerstrom says:

      August 20, 2013 at 9:26 am

      I can’t resist making a comment in response to KJC and “trickle down” economics. In a moment of frustration 40 years ago, HHH told me the only evidence he could find that trickle down economics can work was when “you feed the horse enought oats, the horse will feed the sparrows!”

  • Annalise McGrail says:

    August 20, 2013 at 9:14 am

    Alex, in your recent hindsight blog you mention that the July job reports puts labor force participation rate at its lowest since 1982, at 70.5%. What do the prospects look like for those who have either exited the labor force or have waited to enter it? Do we have reason to worry that many of those who became discouraged and left the labor force may face too many challenges when attempting to return, such as competition with younger workers or a loss of skills?

    • Alex Christensen says:

      August 20, 2013 at 9:26 am

      Annalise - you’re right. Here’s a link to that blog. The labor force rates are pretty disturbing. The last time they were so low, women in the workplace was still a relatively new idea for most of America. Because of baby boomers, that number will probably never be as high as it was in the late 90s. Either way, people are dropping out of the labor force, and it is very difficult to get back in. For those unemployed more than 6 months, prospects are really poor. That’s where worker re-education and stimulus are going to help get the backlog of unemployed workers whittled down.

    • Peter Rachleff says:

      August 20, 2013 at 9:39 am

      Great discussion!  It’s frustrating that we don’t hear more of this on the floor of the state capitol or in the mass media.  But organizations like MN2020 and Jobs Now just have to keep educating the grassroots, who will then generate the analysis, the pressure, and the solutions.  A couple of points I’d like to add to the mix—Way back in 1988, while running for president, Jesse Jackson said: “During slavery, unemployment was not a problem.”  This is still the sharpest response to those policy-makers who argue that raising wages will reduce the number of jobs being created.  Where, then, is the floor?  Rev. Jackson knew and history shows us.  Another pithy comment from the past—Karl Marx wrote that the essence of capitalism is to “socialize cost and privatize profit.”  Look at small midwestern communities which have meat-packing plants which employ immigrants at low wages and pass the costs of health care and bi-lingual education on to public institutions and the tax-payers.  The immigrants are not the causers of the problems, the big employers are, and our system which allows them, frankly rewards them, for such behavior is the problem.  Which brings me to my third point—the structural problems which are being revealed by a “recovery” which does not “lift all boats.”  Neoliberalism—the shift in our (even, the global) political-economic system in the 1980s-1990s towards cutting the costs of production (labor, taxes, raw materials, energy, etc.), which attacked unions and regulatory government—was the primary cause of the Great Recession.  Since our government (yes, under the direction of the Democrats and Barack Obama) did not address structural reforms (banking, Wall Street, union organizing rules, etc.), we are now experiencing a “recovery” in which inequality GROWS.  Hey, the Occupy Wall Street kids (and older activists) knew this in their formulation of “We are the 99%.”  Final point—the great bumper sticker created by Ricardo Levins Morales and the Northland Poster Collective: “UNIONS: THE ANTI-THEFT DEVICE FOR WORKING PEOPLE.”  It is not surprising that the attack on unions, now in the public sector as well as the private sector, has left working people vulnerable to employer pressures to work harder and longer and earn less for it.  Reforms must begin with supporting the abilities and rights of workers to organize.

      • Bernie Hesse says:

        August 20, 2013 at 10:00 am

        Peter-you hit it. Socialize Cost and Privatize Profits-I will be using that one for quite awhile.  Yes the system we exist in has done quite well for the wealthy of late or the last 30 years.

  • Alex Christensen says:

    August 20, 2013 at 9:31 am

    Thanks everyone for the discussion! I’ll be signing off for now, but I’ll keep an eye on the page through the rest of the day. If you have any comments or experiences, feel free to keep sharing!

    • KJC says:

      August 20, 2013 at 11:21 am

      Australia has a minimum wage law.  It specifies?  The equivalent of just under $15 an hour for adults.  And many American companies sell, and are profitable, doing business there.  They have to do it, and so they make it work.  How do you think things would look here if the millions getting lots less than that wage right now (from some of those vary same companies,) got a real Living Wage like that?!  It would make a huge difference, (and things like food stamps would shrink, for the right reasons…so taxpayers should want this.) I am tired of hearing that it “can’t be done.”  There’s plenty of proof of it’s full economic viability beyond the “conservative entertainment complex” constantly playing “identity politics” with their divide-and-conquer tactics.  It’s time for Americans to shrug off that vitriol, and take a stand for this kind of Common Good, or we will .. as our Founding Fathers wryly observed .. surely “hang” separately.  KJC

  • Patti Taylor says:

    August 27, 2013 at 9:16 am

    AWFUL! My slow internet speed and disabled hands are not fast enough for your form to be submitted. I’ll have to write you a snail mail letter.

    • Rachel says:

      August 27, 2013 at 9:22 am

      Patti, There shouldn’t be any sort of time limit on submission, but perhaps try typing your comment in a Word document and copy/pasting in. Your comments are important to us!