But beginning in the 1970s, the United States engine started losing some of its steam. The plight of the middle class grew more tenuous, resulting in stagnant wages, less job security, the decline of health benefits and the safety net, and the cracking of Americans' nest eggs when their savings and homes deflated after the collapse of the stock and housing bubbles. Over the last three decades, the US economy has more than doubled in size, but most of the benefits from that growth have gone into the pockets of a fortunate few. Corporate profits are at their highest level in at least eighty-five years, while employee compensation is at its lowest level in sixty-five years. The Federal Reserve's Survey of Consumer Finances found that the top 10 percent of families own 75.3 percent of the nation's wealth, while the share of wealth held by the bottom 50 percent of families has fallen to just 1.1 percent. Income inequality is now as bad as it was in 1928, just before the Great Depression, with the top one-tenth of 1 percent of Americans--a mere 160,000 families--now owning nearly a quarter of the nation's wealth, a share that has doubled over the last few decades. Incredibly, the share of wealth held by the bottom 90 percent is no higher today than during our grandparents' time. It's as if the New Deal had never existed.
And future prospects do not look much brighter. Even as corporations have seen a 30 percent rise in profits since the Great Recession in 2008, wages as a share of national income fell to their lowest point since after World War II. Real median household income is now 8 percent lower than it was in 2007. Many of the jobs that were lost during the Great Recession of 2008 were what used to be considered "good jobs"--they offered decent pay, health care, retirement, and a comprehensive safety net, with a measure of job security. Now, nearly a fifth of the job growth since the recession ended has been in temporary jobs, and nearly half of the new jobs created in the so-called "recovery" pay only a bit more than minimum wage. Six years into the recovery, the economy had nearly 2 million fewer jobs in mid- and higher-wage industries than before the recession and 1.85 million more jobs in lower-wage industries. Three-fourths of Americans now live paycheck to paycheck, with little to no emergency savings to rely on if they lose their job. The fears of the middle class, which the Tea Party and politicians like Donald Trump have exploited masterfully, are not paranoia. Their standard of living is in fact eroding.
Yet as bad as the impacts of the Great Recession have been, it did not create the retirement crisis by itself. Rather, the causes are rooted in the larger fundamental economic shifts of the last thirty years. Deregulation, deindustrialization, automation, and hyper-financialization of the economy have all contributed to this mudslide over the cliff. Looking ahead, the shape of the future is coming increasingly into view, and it's clear that other long-term trends warn of additional risks for the middle and working classes.
A 2015 survey from the Freelancers Union and Upwork found that more than one in three Americans--54 million workers-- did freelance work in the past year. Other estimates predict that within ten years nearly half of the 145 million employed Americans--60-70 million workers--could well find themselves on shaky grounds, turned into so-called "independent workers," working part time and cobbling together multiple jobs as contractors, temps, gig-preneurs, and contingent workers. Even an increasing number of regularly employed, part-time workers are subjected to conditions like "just-in-time scheduling" in which employers dictate the daily work schedule with no employee input or even advance notice, putting these workers on permanent call (and making it impossible for them to plan their lives, hire babysitters, schedule doctor appointments, and more). Increasingly, all of these different categories of workers have little job security, reduced wages, and a deteriorating safety net-- including inadequate retirement resources. So-called "sharing economy" companies like Uber, Airbnb, TaskRabbit, Upwork, and Instacart are allegedly "liberating workers" to become "independent" and "their own CEOs," but in reality workers are being forced to take ever-smaller jobs ("gigs," "micro-gigs," and "nanogigs") and wages while the companies profit handsomely. Even many full-time, professional jobs and occupations are experiencing this precarious shift.
Indeed, in the gigs of the sharing economy, working for these app- and web-based companies, some contractors, rabbits, taskers, day laborers, and freelancers have multiple employers in a single day. The sharing economy's app- and web-based technologies have made it much easier to hire and fire freelancers and contractors, so why would any employer hire full-time workers anymore? We are at the initial stages of the impacts of these new "job brokerage" technologies and how they will affect the labor force over the next several decades. Set to replace the crumbling New Deal society is the darker world of a "freelance society" in which, in the words of one new economy visionary, "companies want a workforce they can switch on and off as needed"--just like a faucet or a television. Hardly a "sharing" economy, it's more correctly described as a "share the crumbs" economy.
Consequently, for Howard and Jean's children and grandchildren, the ground looks even shakier than it does for Howard and Jean. Their future is still infused with that age-old American hope and expectation of a generational inheritance, but economic opportunity and fairness are fading for the younger generations. The New Deal society is slowly disappearing, melting away like the polar ice caps. And that in turn will be greatly destabilizing to the broader macroeconomy. For at the end of the day, if not enough people have sufficient income in their pockets and bank accounts to buy up all the products and services that US companies produce, the economy could reach a dangerous disequilibrium. Seventy percent of the economy is driven by consumer spending, but what happens if consumers' capacity to buy starts shriveling up? We could well face the prospect of an "economic singularity," the tipping point at which our economy implodes from too little consumer demand because the wealth has been captured by a small number of powerful economic players who extract the best of our nation for their own private use. Everyone else will be left to scramble for the scraps via the share-the-crumbs economy.
Considering the nation's future, we can see that the American middle and working classes, as well as the poor, are occupying increasingly shaky ground. Only affluent Americans have emerged in better shape than before. But for more and more of their fellow Americans, the dream of a secure and stable life, including their retirement prospects, is becoming increasingly dim.
The Shape of the Retirement Crisis
When our current retirement system was conceived after World War II, during the years when Howard and Jean came of age, the foundation for old-age security was understood as a "three-legged stool." The three legs were (1) private, employer-based retirement, like pensions and (much later) 401(k)s; (2) Social Security; and (3) personal savings centered around homeownership. But as we will see, private-sector pensions now are rare, and the number of public-sector employees (and their pensions) has declined. With the housing market crash in 2008, combined with increasing volatility in the stock market and flat wages for all but the wealthiest people, private savings for most Americans hasn't kept up with the need. In the alluring narrative of the American Dream, homeownership has been not only a means for providing a secure domicile, but also a core element of household savings and retirement plans. The collapse of the housing market and the subsequent loss of approximately $8 trillion in housing-based wealth amounted to a direct hit on retirement security. Some of that has recovered, but the economic prospects of many Americans have not.
Thus, two of the three legs of a stable retirement have been gravely compromised. For far too many Americans, Social Securityis the only leg left. Three-fourths of Americans depend heavily on Social Security in their retirement years. Indeed, Social Security has been the most effective antipoverty program ever enacted in the United States. Almost half of elderly Americans today would be poor (incomes below the federal poverty line) without Social Security. The program lifts nearly 15 million elderly Americans out of poverty. For nearly two-thirds of elderly beneficiaries, Social Security provides the majority of their cash income. For more than one-third, it provides more than 90 percent of their income. For one-quarter of elderly beneficiaries, Social Security is the sole source of retirement income. Besides retirement security, Social Security also has contributed significantly to in come assistance for orphaned children and disabled workers. To those Americans covered under its safety blanket, Social Security has provided a guaranteed living allowance, month by month, when no other income was available. Where will these people turn if the politicians are successful in cutting back the last stable leg of retirement security?