Money is a good thing to have. At least that is the huge consensus opinion of most of us. That’s the way we look at it and why we work for it, even if we are like Mother Teresa who gave most of it away.
We need money so we can help ourselves, or at the very least use it to help others. Having money is necessary and seems to be the difference between merely existing and having a life that is way more than that, a life that is building something. So, let’s just say that money is really a good thing and that’s a given despite the old proverb about the love of it being the root of all evil. Having real money issues will make you feel very helpless.
Why You Always Know Where You Stand in the World of Money
These days, you will hear about “wealth inequality” here in the U.S. (and throughout the entire world) from the mainstream press and from the speeches of politicians. There is lots of referencing to our country’s social problems and political polarization that may be because of it. But what they don’t tell you is that the growing disparity between rich and poor in America is only a symptom of the problem and not its root cause.
At the same moment we look at our personal situation and also look at all of the money-related problems around the world, we also can see the tremendous wealth there too. Opulence and enormous wealth for some is a reality even if we ourselves don’t fall under that umbrella.
There’s Plenty of Money Out There, So Where’s My Share?
Today, the richest 10% of Americans own 75% of the nation’s wealth, a level we have not seen since way back in the 1930s. We are hearing all the time these days quotations like “our economy is better today than ever” and “the markets are breaking records” and all of that seems to be true. So what is wrong with this picture?
It isn’t that just a small number of Americans have done well. The real problem is how they’ve done so well. How is it that the tremendous gains in wealth for the few have come directly at the expense of most of the average working middle class folks? What happened?
Real anger is growing out there and is manifesting itself in the ongoing increase in things like racism in our society. What’s driving this anger? It may just stem from an old saying we all know so well! “The rich get richer and the poor get poorer.”
While the rich are getting richer, everyone else is losing ground. You can actually look it up. For most Americans, real wages have been stagnant or falling for decades. The middle class—the most politically and economically stable part of our society—is disappearing day by day. I’m not making anything up here. Just look around and you’ll see it all over the place.
The foundation of the middle class in America had a very a long history of consistently rising wages. For millions of Americans, life had always gotten a little better, year after year, as the value of their wages increased and our economy grew into the world’s largest. This has certainly been the case ever since the end of World War II back when I grew up and pretty much continued all through the 50’s, 60’s, 70’s and 80’s.
I can very simply remember that my family, although never wealthy, continued to increase its wealth as the years rolled on by. That’s why I was able to buy a car when I turned 16 and be the very first person in my family to go to college. Despite having to take a loan and pay it back, I actually could do it and was able to move forward soon after with paying it back, buying a house, and starting a family, too. This is the kind of thing that no longer easily happens and has created a really huge helpless and angry feeling among many of us. If you have carried huge college debt with you and still do, that alone can hinder, stop, or even ruin your life plans.
The Income Scorecard Right Now
Low income earners now make less in real terms than they did in the 1980’s! And middle income earners make just 6% more than they made back in 1980. That computes out to an increase of just 0.0017% a year!
Can you imagine your boss telling you for 38 straight years that you’re never getting more than a 0.0017% raise each year?
No wonder people are so angry and stressed. You may be working year after year, but instead of earning more over time, you’ve actually been earning less, in terms of what your real wages can actually buy when adjusted for inflation.
Despite the current boom in the U.S. economy and the growth of financial assets over almost the past 40 years (which boosted the wealth and incomes of the wealthiest Americans like never before), the average American is actually worse off than they were decades ago.
People Borrow More Than Ever Just So They Can Simply Keep Up
I bet you don’t even need to see the data. Just think about your friends and people you know, and how much more debt folks have to take on, just to keep their heads above water. The credit card debt alone is a monster!
It used to be that most Americans didn’t hold debt, outside of a mortgage on their first home. But after almost 40 years of declining real wages, Americans now have to go into serious amounts of debt for just about everything they buy. Americans now have more than $1.5 trillion in college debt, for example. And it’s not just college loans that have soared.
Americans also have nearly $1 trillion in credit card debt and more than $1 trillion in auto loan debt—all now at record highs. It’s gotten so bad, 75% of Americans now die with debt…with an average total of nearly $62,000!
Being in debt is an incredibly helpless and stressful way to live. You’re in a hole and there is simply no easy way out. So it’s no surprise that deaths by drugs for the economic bottom 60% of America’s population have doubled since the year 2000 and suicide rates have increased by one third as well over the same period. When you are helpless, you are on the edge of hopeless. If you or someone you know is in crisis, please go to SAVE or call 1-800-273-8255.
And speaking of debt, imagine what the U.S. government would say and feel if you were able to ask it any questions about its debt, now at an all-time record of $22 trillion, up over $3 trillion alone in the past two years! That’s a debt that’s so big that your great grandchildren may feel angry and helpless about ever paying it off! Unfortunately, the problem seems to be getting even worse.
The Why of Money Helplessness
My theory as to why our wealth and income disparity is growing in America is because wages are no longer connected and tied to productivity or to increases in productivity at our jobs.
You probably know I love baseball so here’s an example of how little productivity and pay relate these days. There are actually ballplayers making $30+ million a year for throwing or hitting a baseball; and they work just a few hours a day and mainly about 6 months a year! I figured out that one highly paid starting pitcher who will appear in a “Max” of 35 games this season and throw about 100 pitches on average per game actually will make $10,000 per pitch he throws this season alone!
He will actually make more money in one game on a single day ($1 million), than almost every person on earth does in a decade!
I know that it sounds like economic doublespeak talking about pay and productivity, but please stick with me here for a minute. When you understand it, you will be way ahead of 99% of the population, and it will also help you make a heck of a lot of better money decisions and avoid enormous losses. It’s really not that complicated.
I am not a Henry Ford fan. In fact, when the aliens come and explore the ruins of our civilization after the apocalypse, they may in fact blame Henry personally for the beginning of the end of civilization after studying why the end came. But, at least he shared some of the wealth he created despite abusing children, helping create dependency on fossil fuels, and polluting the earth!
Back in the early part of the 20th century, economic gains were always shared by both owners and workers and Henry Ford did do just that. He got rich making the automobile affordable with the assembly line, a huge increase in productivity. And these gains in productivity flowed directly to Ford’s employees. Ford made headlines across the nation and the world when he more than doubled his minimum pay, overnight back in 1914.
But that kind of thing just doesn’t happen anymore. Real wages have declined for most Americans, despite huge gains in productivity and it’s not that computers are destroying our jobs or that we’ve moved thousands of jobs overseas in the last several decades.
From 1973 to 2018, net productivity rose 75%, while the hourly pay essentially stagnated—increasing only 12.5% over those same 45 years. After adjusting for inflation, today’s average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03/hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.
This means although Americans were working more productively than ever, the fruits of their labors were primarily accrued to those at the top and to corporate profits. This has been especially true in recent years and has been even more compounded by the 2018 tax law changes the Trump administration implemented. Let’s face the reality: Corporations have realized huge profits since that law went into effect. Have you?
Why Not Just Print More Money?
The link between productivity and wages was permanently changed in the early 1970s when then-President Nixon forever broke the link between our dollar and gold. At least that’s one strong theory as to why. As a result, today our monetary system isn’t sound or reliable.
Our politicians monkey around with the money supply constantly. They increase the amount of money by huge amounts, in response to demands from powerful groups—especially the big banks. As a result, the things you need to live a regular life—such as gasoline, milk, housing, and medical care—constantly get more expensive.
Can you ever remember a time like now when you can actually see the prices of things going up and down on a daily basis? Take gasoline as a prime example. Monday it’s $2.19 a gallon, Tuesday it is $2.23, and by Friday it can be $2.33, all in just one week! The prices of most things go up, year after year, even when your wages don’t.
In other words, even though there’s been an enormous amount of wealth created by the economy (look around at all the huge new houses, condos, skyscrapers, cars, and electronics), life for the average American hasn’t really improved. Even more frightening, the world’s population has continued to grow and the number of those in poverty and financial struggles is greater now than at any time in world history! The average worker has actually gotten poorer in terms of what he can really buy. Again I repeat, that’s not because our economy hasn’t gotten better. It’s because of who has benefited from it!
The way to deal with your personal finances under the conditions we live in right now is to be totally responsible with your money. That means thoughtful planning of your everyday expenses and budgeting wisely. Reducing and eliminating your debt with a great plan and actions. Then revise that plan when necessary. Lastly, and maybe even most importantly, pay attention to the politics of the economy around you. You may only be a single voice but when you influence others, vote for changes, and make sure you are not being taken advantage of by employers, government, and any other entities that influence what you do, then you have at least a fighting chance. It’s one way to turn your anger into action!
What angers you about money and what are you doing about it?