Economy

US unemployment up, wages down

Reports show that average household income is stagnant, unemployment and declining wages go hand in hand

Government unemployment figures do not include people forced to take part-time positions because no full-time ones were available.
Frederic J. Brown/AFP/Getty Images

The number of Americans filing for unemployment benefits rose by 13,000 last week to a total of 336,000, the Labor Department said Thursday. The announcement came amid reports that average household income has remained stagnant for the past decade and that unemployment and declining wages go hand in hand.

The report also showed that austerity measures, or sequestration, would only push the country further into economic decline.

In March 2009, during the height of the recession in the U.S., applications for unemployment benefits numbered 670,000 and the number of unemployed topped 13.2 million. Today there are 11.5 million Americans officially unemployed.

"Based on our data, almost every group is worse off now than it was four years ago," said Gordon Green, co-author of the Sentier Research report, released Wednesday.

Median annual household income dropped from $55,480 to $54,478 from December 2007 to June 2009. Even after the recovery, income levels continued to decline, reaching a low of $50,722 in August 2011, the report said. Today’s average income, $52,098, isn’t just lower than it was in 2007 -- it’s lower than it was in 2000.

Green called the past decade an "unprecedented period of economic stagnation."

A separate report released Wednesday by the Economic Policy Institute (EPI) said the vast majority of American workers have seen more than a decade of wage stagnation.

From 2000 to 2012, income levels remained flat or declined for the bottom 60 percent of wage distribution, with the poorest Americans seeing the sharpest drops in income.

During the first two years of the country’s economic recovery, the net worth of households in the upper 7 percent of America’s wealth distribution rose by about 28 percent, according to a Pew poll. The net worth of the lower 93 percent dropped 4 percent in the same period.

But macroeconomist Dean Baker said it’s "less a case of the rich getting richer -- at least not at the expense of everyone else."

"The vast majority of middle-class wealth was in homes, and when real estate prices soared during the housing bubble and then plummeted … they lost a lot," said Baker, co-director of the Center for Economic and Policy Research in Washington.

Meanwhile, Baker added, the wealthiest tend to keep their wealth in stocks, and "stock prices are up. But if you adjust for inflation, their wealth is below the levels of 2000."

Unemployment factor

The Sentier Research and EPI reports showed that high unemployment levels contributed to the United States' wealth stagnation.

Earlier this month, the Bureau of Labor Statistics announced that the unemployment rate was declining and put it at 7.4 percent for July.

But its figures do not include marginally attached workers -- people who are not actively looking for work, but have looked in the past year, or discouraged workers who can give a job-market-related reason for not finding a position. Nor do the figures account for those employed part time because they can’t find a full-time position.

The actual unemployment rate, adjusted to include marginally attached workers, doubles to 14 percent.

High unemployment, according to the EPI report, hurts income growth across the board, but the impact is more severe for poorer Americans. As unemployment soared after the recession, the vast majority of American workers experienced wage stagnation, the EPI report added.

The report, titled "A Decade of Flat Wages," said that continued high unemployment spells decreasing income in coming years because, with so few jobs available, employers don’t have to offer competitive wages.

The U.S. government, additionally, has adopted a policy of sequestration, similar to Europe’s austerity programs, in an effort to reduce debt and help expand the economy.

“I really don’t understand the argument for austerity,” Baker said. “Austerity slows growth and increases unemployment. The interesting thing is that Japan (which has higher debt than the United States) is going the other way and is seeing good growth. Unemployment there now is at 3.8 percent.”

For wages to increase, Baker said, unemployment rates must be lowered through an expansionary fiscal policy like those of Franklin D. Roosevelt’s New Deal and by restoring services that were cut during the recession.

“It’s incredible that we’re sitting here with such high rates of unemployment while we could be modernizing infrastructure, retrofitting old homes to be more energy-efficient -- these things would be almost costless,” Baker said.

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