The economic backbone of the U.S. — its middle class — has lost ground over the past decade, thanks to wage stagnation and a greater distribution of wealth going to top earners.
An analysis of data by The New York Times finds that after-tax middle-class incomes in Canada have pulled ahead of American middle-class earners. On top of that, the poor in some European countries actually earn more than the poor in America.
While the report confirms what many Americans feel every day when they check their bank accounts — that they’re barely treading water — the eye-opener is how far the U.S. consumer has fallen when compared with other countries. Median per capita income in the U.S. has barely budged since 2000, while Canadians have seen their median income jump 20 percent.
“It’s remarkable how poorly the middle class has done since the end of the 1990s boom,” Lawrence Mishel, the president of the Economic Policy Institute, told CBS MoneyWatch. “We have an economic regime that’s not working to raise wages for most workers.”
The income data was compiled by LIS, which maintains the Luxembourg Income Study Database, and then analyzed by LIS analysts and The New York Times. It was also reviewed by academic economists. Income includes after-tax cash income, interest, stock dividends and support from other sources, such as government benefits.
But the data ends at 2010, when median per capita income was $18,700 in the U.S., on par with Canada. Since then, pay for Canadians has risen faster than in the U.S., and so “is now most likely higher” than that earned by the U.S. middle-class, according to the report.
“The question is who is richer in the middle,” said Janet Gornick, the director of LIS and professor of political science and sociology at The Graduate Center of The City University of New York. “What people are realizing is you can have economic growth, as we do in the U.S., and rising inequality, so the growth is at the top and the middle is getting socked.”
The middle class in other countries are also losing ground, with the income share of the middle 60 percent in several countries declining from the mid-1980s until the mid-2000s, Gornick noted. But in the U.S., that decline has been markedly steeper. “The actual lagging of the U.S. compared with other countries has been creeping up for some time,” she said.
So, how did Canada surpass the U.S. middle class? For one, younger Americans are losing ground in educational attainment when compared with their peers in Canada and other countries, the study found.
But America’s growing income inequality is also posing a problem for the middle class. While it’s difficult to find recent comparisons across countries for CEO-to-worker pay ratios, the ratio in America is at least double that of other countries, Mishel noted. The disparity between the average U.S. worker’s income and CEO pay has also been growing wider, with CEOs pulling in a 331-to-1 ratio in 2013, up from a 46-to-1 ratio in 1983.
As for Canada, the country has bounded ahead of the U.S. partly because it didn’t suffer the same type of housing bust and economic slump that hit American consumers, The Atlantic notes.
America’s poor are also dragging behind the poor of other countries. People at the 20th percentile in Netherlands and Canada earned 15 percent more income than someone in the same percentile in the U.S., The New York Times found.
Raising the minimum wage would be one step toward helping Americans earn higher wages, Mishel noted. President Obama has proposed boosting the federal baseline wage to $10.10 an hour, up from its current $7.25, although opponents say an increase will lead to job cuts and higher costs.
But, Mishel said, boosting the minimum wage ” will raise the wages of bottom fifth of wage earners directly.”
Original article HERE.
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