Wisconsin, Ohio and the Divided Economy

OK. Here’s a pop quiz. Do you have now — or expect to have — enough money in a 401K (or similar) savings account for retirement? If you have a defined benefit pension, how secure is it? Do you have guaranteed medical benefits from your employer now and as you enter the golden years and beyond? If you’re working and lose your job, could you find one with equal pay and benefits?

I expect that many Americans — in all age groups — are giving some thought to those and similar questions. And the answers help shape perceptions about what is happening now in states throughout the country and Inside the Beltway as the federal government prepares for a possible shutdown.

And I know there are plenty of important issues on the table now in Wisconsin, Ohio, Indiana and other states about government spending, deficits, public employees and unions, and collective bargaining.

Oh, sorry. One other question. Does America now have essentially two economies?

What got me thinking about that was an editorial cartoon in the Akron Beacon Journal. I most likely won’t get this exactly right but the cartoon depicts two guys. One labeled a public employee is lamenting the fact that his pension might be cut. The other asks — what’s a pension?

Anyway, if you struggled with the answers to today’s pop quiz, here’s some background info.

Here’s from Robert Reich, “The Jobs Report and America’s Two Economies“:

We have two economies. The first is in recovery. The second remains in a continuous depression.

The first is a professional, college-educated, high-wage economy centered in New York and Washington, that’s living well off of global corporate profits. Corporations continue to make money by selling abroad from their foreign operations while cutting costs (especially labor) here at home. Wall Street is making money by taking the Fed’s free money and speculating with it. The richest 10 percent of Americans, holding 90 percent of all financial assets, are riding the wave. And their upscale spending has given high-end retailers and producers a bounce.

The second is most of the rest of America, and it’s still struggling with a mountain of debt, declining home prices, and job losses. In coming months most Americans will also be contending with sharply rising prices of food and fuel.

Our representatives in Washington see and hear mostly the first economy. The business press reports mainly on the first economy. Corporate and Wall Street economists are concerned largely with the first economy.

But the second economy will determine our politics in 2012 and beyond.

Here’s from a WSJ.com article, “Retiring Boomers Find 401(K) Plans Come Up Short“:

Facing shortfalls, many people are postponing retirement, moving to cheaper housing, buying less-expensive food, cutting back on travel, taking bigger risks with their investments and making other sacrifices they never imagined.

“Inevitably, we find that, for the average person, there is not enough there,” says financial adviser Paul Merritt of NTrust Wealth Management in Virginia Beach, Va., who has found himself advising many retirement-age people with too little savings. “The discussion turns out to be: What kind of part-time work do you want to do after you retire?”

He has clients contemplating part-time work into their 70s, he says.

Tax-deferred 401(k) retirement accounts came into wide use in the 1980s, making baby boomers trying to retire now among the first to rely heavily on them.

The problems are widespread, especially among middle-income earners. About 60% of households nearing retirement age have 401(k)-type accounts, according to government data, and those represent the majority of most people’s savings. The situation is less dire for those in a higher income bracket, who tend to save more outside their 401(k) accounts and who have more margin for error if their retirement returns fall below the recommended 85% figure.

And here’s about new jobs,  from The Huffington Post, “60% of New Jobs in 2010 Were in Low-Paying Industries“:

TrimTabs drills into the Labor Bureau’s data for new jobs added in last year, to reveal some unsetting details: “Of the 1.1 million private jobs gained in the last year, 650,000 or 60% are jobs that have absolutely no real wealth creation capacity, nor do they provide any real benefits.”

60% of new jobs went to Temporary Help, Leisure & Hospitality and Retail trade. Leisure and hospitality pays an average hourly wage of $13.14, while a retail salesperson brings in an average of $11.84 an hour, according to the BLS’ database. Temporary help services can be slightly more lucrative at the higher end (Registered Nurses earn $32.77 an hour), but packers and packagers only earn an average of $8.62 per hour.

As TrimTabs puts it:

These jobs are certainly better than no jobs. But for the economy to grow sustainably — without the crutches of $1+ trillion per year in federal deficit spending, zero percent dictated interest rates, and tens of billions per month in central bank debt monetization — American companies need to start generating more higher-paying jobs at home.

I know. It’s tough to spring a pop quiz on you at 4 a.m. So go ahead and review your answers. And take a minute or two to consider some additional reasons why people are standing out in the streets in the dead of winter in Madison, Columbus and elsewhere shouting at each other.


2 responses to “Wisconsin, Ohio and the Divided Economy

  1. Rob, I failed to know the answers to all the questions in your quiz. One would like to say, “who gives a hairy rats ass”? But, of course, we do have our children’s children to consider. So, do you possibly think that ‘ today’ will be considered “the good ole days” like the 50’s were? God help us all!!

    • I do worry about the future of this country. And I hope our children and grandchildren have the same opportunities we did.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s