Falling income from working

Date posted: June 30, 2014

New statistics just released show that the proportion of households’ financial resources from working is at a thirty-year low, host Mary Walden says. She asks her husband, NC State economist Mike Walden, “What kind of resources have taken up the slack?”

Mike Walden: “And the statistic that really hit the headline said that in 1980, sixty percent of the financial resources that households have access to came from their wages and salaries from working. Today that rate is down to fifty percent. And so the question is, number one, what caused that?  And number two, what has taken up the slack?  Let me take the second one first. What’s taken up the slack is really two things: one pensions, social security, and unemployment benefits. They have all gone up relative to the size of the economy. And secondly, transfer programs. Things like food stamps and Medicaid, they’ve also gone up. Now the reasons I think are two-fold. One, the aging of the population. It should make sense to people that as we have aged and more people have moved into retirement, more of financial resources for households are going to come from programs that are specifically set up for retirees, like pensions and social security. On the other hand we do have a situation the job market today, although getting better, is still not necessarily perfect where a lot of people are out of work. They’re not getting their typical rates of pay, and so that’s where programs like food stamps and Medicaid and unemployment benefits have kicked in. So, really a combination of factors have really caused this big shift that we’ve seen over the last thirty years.

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