Life was good for Janine Smith. She had a great job and a nice home in the suburbs.
Then, Ms. Smith, 45, of Oakwood, Ohio, lost her position as a bank loan officer in the mortgage meltdown. Her husband, who works in construction, hasn’t had a steady job since.
Now she’s disillusioned.
“I don’t believe in the American dream,” said Ms. Smith, who has a new job, in sales, but is earning half what she did five years ago. The couple is struggling to pay the bills and hang on to their Cleveland-area home.
“I’ll never be better off than my parents.”
For many Americans, the recession began well before 2007, and it’s far from over. It’s become a lost decade of fading opportunity for workers, longer and more frequent bouts of joblessness and declining family incomes.
Obscured by the housing bubble and cheap credit, the well-being of working Americans was already threatened by powerful structural forces when the Great Recession hit. Technology supplanted routine work of all kinds, leaving millions with skills that employers no longer need. Offshoring of work to China and India destroyed millions of labour-intensive factory jobs. Low interest rates artificially pumped up wealth and consumption, but didn’t steer enough investment into the roots of the economy.
Now, more than eight million jobs are gone, and the country is looking at the stark prospect of several more years of unusually high unemployment. Roughly half of the 14 million unemployed Americans have now been out of work for more than six months.
And for the first time on record, family incomes are actually falling. New figures this week from the U.S. Census Bureau show that the median income for working-age households fell 10 per cent between 2000 and 2010, even as women worked more hours.
“We are denying this generation, and certainly the next generation, the essence of what we’ve called the American Dream,” lamented Thomas Kochan, a professor at the Massachusetts Institute of Technology's Sloan School of Management and co-director of the Institute for Work and Employment Research.
“Every generation should do a little bit better than the previous one in terms of living standards, if they work hard, play by the rules and get a good education. That’s just not happening.”
Corporate profits and productivity have soared, but not incomes. The impact has been devastating for middle-class families, particularly young families, Prof. Kochan said.
Now, the consequences of a jobless recovery and falling wages are ricocheting throughout the economy. Less income and fewer jobs mean a lot less purchasing power, which in turn drags on the economy.
Experts say the seeds of this lost decade were planted long before the recession. Wages fell out of step with rapidly rising productivity and soaring corporate profits in the 1980s, and the gap has been growing wider ever since. The average real wage for working men is now lower than it was in 1973.
The low interest-rate-fuelled housing boom of the early 2000s masked the problem for a while. Families leveraged soaring house prices to buy a piece of the American dream, until the roof fell in. The housing crash and the mortgage meltdown wiped out trillions of dollars worth of wealth and millions of construction jobs.
But the labour market was already sick in late 2007, when the U.S. recession got started. Scott Winship, an economic fellow at the Brookings Institution in Washington, said the job market never fully recovered from the relatively mild recession that followed the Sept. 11, 2001, terrorist attacks.
