The Lost Decade

I'll let the USAToday start this one off:

For the first time since at least World War II, middle-class families finished the first decade of the 21st century poorer and with lower incomes than they had 10 years earlier...

...Median household income dropped nearly $3,500 for a three-person middle-class household, to $69,487 a year, after adjusting for inflation, the Pew study said. The median household's net worth dropped 28% to $93,150. Incomes have dropped since 2000, while wealth rose modestly early in the decade before gains were wiped out by the recession that began in 2007 and the financial crisis sparked in 2008, said Paul Taylor, a Pew executive vice president.

"That the middle class always enjoys a rising standard of living is part of America's sense of itself, and it has always been true — until now," Taylor said in an interview, describing the 2000s as a "lost decade" for the middle class. "It's been 11 years since the peak in household incomes, and that covers the early part of the decade as well."

But there is more to the story. As James Lindsay shows, "In 2011, the U.S. economy generated 131.9 million jobs, that’s not only below the peak number of 138 million jobs reached just before the 2008-2009 financial crisis, it’s below the 132.5 million jobs that the economy generated in 2000."

Why is this happening? Well, the weakness of the American economy is not just an American problem. It's a global problem. Consider the fact that the last three jobless recoveries have taken longer than all the others we've gone through, and by a huge margin. Indeed, the average of all other job recoveries was around six months, and this one is currently at sixty.

Manufacturing has gone abroad, and most of our job growth has come in the non-tradable sector. In other words, we don't make anything people want (because it's not good and/or too expensive), and the American worker asks for too much money in return for her labor.

If I have a future prediction of a reckoning, it is this: the American worker, by virtue of the United States' success at turning the world into a global work force where other countries provide labor at cheaper prices, will have to accept lower wages than she is used to today. For Americans to compete internationally, we must ask for less in return for our labor. If this is true, a decline in middle-class income is likely to continue going forward.

That about sums it up. The only thing I have to add is that this article, and the current state of affairs, gives me a feeling with the same name of our current economic climate: depression.