The United States seems on the path towards a clear economic recovery. Even if the feared sequester ends up erasing a significant amount of growth this year, the GDP will expand in 2013 at a robust 3 percent, according to most analysts. The labor market is slowly but consistently creeping up, the stock market is in historic highs, and even the housing market is recovering—one year ago, 24 percent of houses sold within 14 days after being put in the market; now, it is 33 percent.
In all those rosy statistics, however, there is one black spot—the average American. According to the Kiplinger Letter, a weekly newsletter for Small and Medium Enterprises (SMEs), “at least 28% of the workers have jobs that pay poverty-level wages.”
That is 5 points above 2002, when the US economy reached the escape velocity from the post dotcom recession, and it is growing. The last issue of the Kiplinger Letter states that most of the middle income jobs lost during the Great Recession have been replaced with low income positions in home health care, retail sales and manual labor.
The problem is worsened by the fact that the median wage in the United States has been, for the past decade, growing below the productivity rise, as this paper from the Economic Policy Institute reveals. Now productivity is, despite all the hyped expectations with the ‘information economy’, growing below 1 percent, if not falling, as the official numbers suggest. That means that real salaries will keep falling, which in turn will mean less savings and more private debt, erasing the de-leveraging gains of the last five years.
It also means that the recovery will not be sustainable in the medium term. As the Kiplinger Letter concludes, “an economy can’t grow if too many workers don’t have money to spend.”