the story of 2 americas part 2 – the “have nots”

Ok.

Back to the story of the 2 Americas.  This is chapter two.

As a reminder. The Pew Research Center released survey results titled “Two Recessions, Two Americas.” The Pew pollsters asked people about their economic wellbeing during the recession. Interestingly Pew found that America fell into two distinct groups — one that had multiple financial setbacks since December 2007 (“Lost Ground”) and another that reported they had held their own (“Held Their Owns”).

Chapter one was on the “haves.” The 45% of Americans that clearly stated they were doing just fine (thank you very much) despite the recession. (PewResearch 2010)

Chapter 2 is about the other 55% of America. The group that Pew refers to as the “lost ground” group. (same research source)

Let’s call them the “have nots.”

Look. I fully understand that nobody was untouched by the recession that began in December 2007, but this 55% has been hit hard.

Very hard.

The have nots, this 55 percent, well, this is a tough one in the US because this has been coming for awhile in US (as well as most developed countries).

“This” is the increasing gap between the haves and the have nots.  The recession has simply exacerbated the situation.

Exponentially speeding up the size of the gap.

It’s a fact.

According to the statistics of the US government, over 32 million people (12.7 percent of total US population) live under the poverty line.

Just to make a point. This incidence of poverty is higher than in the 1970s and higher than in most other industrialized countries.

So. The “lost ground” 55 percent has not only lost ground but in losing ground has started the slide into a hole. A deep hole.

A poverty lined hole (a hole that has very slippery sides and no hand grips).

In other words. An incredibly difficult hole to climb back out of as the economy and their situation improves.

And (even worse) beyond the recession there several things that are going to keep them in the hole (versus say when we came out of the great depression).

Oh.

And it won’t be the increased gas prices (I wanted to take on the economic media darling first).  Because we do have transit.  Cars are a choice.  Gas simply creates a change in behavior and choice (no matter how much that may kill us).

So what’s gonna keep the majority of the current ‘have not’s in the hole?

Basic living will cost more.

The biggest culprit (keeping them in ‘have not’ land)?

Rising food prices.

It’s the basics that will hold them down. The basics are going to cost more.  Over the next 10 years food costs are expected to increase 4% annually outstripping the expected consumer growth (real GDP only 3%).

Seems small difference … but has big repercussions.

It may be surprising to many people but a great number of Americans suffer from poverty and hunger. An investigation by the US Department of Agriculture in March 2000 showed that 9.7 percent of American families did not have enough food. At least 10 percent of families in 18 states and Washington D.C. often suffered from hunger and malnutrition. In 1998, 37 million American families did not have enough food.

Ok.

Next (that will attack the basics of living).

Inflation.  It’s on the way.  Not extraordinary levels but enough combined with rising food costs to continue to chip away at the basic cost of living.

Will the inflation be crippling? Nope. But it’s like basic living is dying a death of a thousand small cuts.

Next?

Unemployment will remain higher than during the boom.

We will have to learn to accept the fact that while 10% unemployment (kind of like the Mendoza line of unemployment) will not be the norm, 6-8% could certainly be here to stay.

Anyway.

All of these things will not only maintain this big gap between the haves and have-nots but will exacerbate the situation.

The gap between the rich and poor has widened and the living standards of the labor force have gone from bad to worse. The ongoing issues of poverty (and poverty level living), hunger, medical services and homelessness continue to prove difficult to solve.

Some have and have-not gap factoids:

–        The gap between the rich and poor in the United States grew at the same pace as the economic growth. Statistics show that the richest 1 percent of the US citizens own 40 percent of the total property of the country, while 80 percent of US citizens own just 16 percent.

–        Since the 1990s, 40 percent of the increased wealth went into the pockets of the rich minority, while only 1 percent went to the poor majority.

–        From 1977 to 1999, the after-tax income of the richest 20 percent of American families increased by 43 percent, while that of the poorest 20 percent decreased 9 percent, allowing for inflation. The actual income of those living on the lowest salaries was even less than 30 years ago.

The bottom line is that the gap between the wealthiest Americans and the poorest is bigger than at any time since just before the 1920’s Depression. According to an analysis this year by Edward Wolff of NYU, the top 20 percent of wealthy individuals own about 85 percent of the wealth. And the bottom 40 percent own very near 0 percent.

Many in that bottom 40 percent not only have no assets … they have negative net wealth.

Just think about that 40% number for one second.

Now.  While the numbers are not exactly apples-to-apples all of what I have typed so far suggests that 55% of America clearly is falling into the “have not” group and almost 2/3rds of that 55% have NEGATIVE net wealth.

Nada.

Nothin’.

That’s a big fat less than zero (just to be clear).

Ok.

Let me continue the downer story for this 55%.

This group of households is scary to look at for a variety of reasons.

1. They are truly struggling financially now.
2. They are truly struggling emotionally now (let’s call this the “hope factor”)
3. They are truly increasingly struggling financially (they are on the financial slippery slope and slipping at an increasing speed which means reversal is increasingly difficult)
4. Their emotional future “hope factor” looks dismal thru their eyes.

Ok.

What is something that could help the have-nots get out of have-not land and get going toward the have land?

Education (because education and income is tightly intertwined).

Unfortunately the education situation in the United States is surprisingly bad. According to a report in USA Today (11/29/00) illiteracy is still a serious problem (despite the fact America is a highly developed country). Some factoids:

–        One in five high school graduates cannot read his or her diploma.

–        85 percent of unwed mothers are illiterate.

–        70 percent of Americans arrested are illiterate.

–        21 million Americans cannot read.

–        According to a child protection foundation, 71 percent of fourth graders are not at the education level they ought to be.

–        The dropout rate among college students has risen to 37 percent

–        College tuition has grown faster than the increase of middle class families’ income.

Statistics from the US Census Bureau show that the income of middle class families increased only 10 percent from 1989 to 1999, while the college tuition increased 51 percent during the same period.

The average college tuition in 1999 was 8,086 US dollars, accounting for 62 percent of the income of low-income families.

The average tuition fee of private colleges was 21,339 US dollars in 1999, up 34 percent over 1989 (while middle class family income only increased 10% over the same period), accounting for 162 percent of the income of poor families, but only making up for four percent of the income of rich families.

Here is the kicker conclusion to this point.

More than 30 million low-income families could not afford to send their children to community colleges (US Census Bureau).

(ouch)

The have-not affect (tighter family budgets) is also appearing in shopping behavior within this 55% of “lost ground. There has been a boom in budget-priced goods. Manufacturers are bundling items such as toilet paper and garbage bags in sizes that can sell for a dollar. And instead of going to Wal-Mart to find bargains, Americans are heading to dollar stores.

The budget mindset has gone to such levels that dollar stores are actually “stealing heavy shoppers” from Wal-Mart (according to one research firm … and I think it’s true). Visits to dollar stores increased 2.6% from June 2009 to June 2010 while during the same period visits to big box stores such as Wal-Mart declined 7%.

Look. 55% of any group changing their overall behavior (shopping or whatever) affects the economy and its components (stores, service providers, etc.)

Oh.

And this isn’t just poverty or lower income people. The 55% is made up of all income levels (below wealthy that, as noted in the first part of this write up, aren’t really changing any behavior). Keeping with the dollar store example. They are no longer just a shopping alternative for low income Americans. Some upper income people are also going to Family Dollar in search of bargains. And LOTS of middle income people are shopping at dollar stores.

In conclusion.

The term “have-not” is far reaching.  And deep reaching.  ‘Not having’ is going to have repercussions to this group of people to the extent it will affect future generations.

Hunger affects brain power.

Lack of education affects productivity and increases ignorance.

Ignorance leads to increased conflict.

The depth of the have-not is like dominos.

Once the first falls they start going.  Oh.  And the start going faster and faster because they are placed on a downward incline.

So.

That is my post on the have-nots.

Dismal, wasn’t it? (yes)

Let’s move on to my last chapter of this story.