Family Incomes Slipped In 1st Part Of Decade ("Rich getting richer" alert)

WASHINGTON - After the booming 1990s when incomes and stock prices were soaring, this decade has been less of a thrill ride for most American families.

Average incomes after adjusting for inflation actually fell from 2001 to 2004, and the growth in net worth was the weakest in a decade, the Federal Reserve reported Thursday.

Many families were struggling in the aftermath of the 2001 recession and the bursting of the stock market bubble in 2000, the Fed's latest Survey of Consumer Finances showed. The comprehensive look at household balance sheets comes every three years.

Average family incomes, after adjusting for inflation, fell to $70,700 in 2004, a drop of 2.3 percent when compared with 2001.

That was the weakest showing since a decline of 11.3 percent from 1989 to 1992, a period that also covered a recession.

The average incomes had soared by 17.3 percent in the 1998-2001 period and 12.3 percent from 1995 to 1998 as the country enjoyed the longest economic expansion in history.

The median family income, the point where half the families made more and half made less, rose a tiny 1.6 percent to $43,200 in 2004 compared with 2001.

Economists said the weakness in the most recent period was understandable given the loss of 2.7 million jobs from early 2001 through August 2003, when the country was struggling with sizable layoffs caused by the recession, the terrorist attacks and corporate accounting scandals.

The weak income and the stock market decline in the early part of the decade, which wiped out $7 trillion of paper wealth, had an adverse impact on family balance sheets.

Net worth, the difference between assets and liabilities such as loans, rose by 6.3 percent in the 2001-04 period to an average of $448,200. That gain was far below the huge increases of 25.6 percent from 1995 to 1998 and 28.7 percent from 1998 to 2001, increases that were fueled by soaring stock prices.

The 2001-04 performance was the worst since net worth actually declined by 9.9 percent in the 1989-92 period.

The report showed that the slowdown in the accumulation of net worth would have been even more sizable except for the fact that homeowners have enjoyed big gains in the value of their homes in recent years.

The gap between the very wealthy and other income groups widened during the period.

The top 10 percent of households saw their net worth rise by 6.1 percent to an average of $3.11 million while the bottom 10 percent suffered a decline from a net worth in which their assets equaled their liabilities in 2001 to owing $1,400 more than their total assets in 2004.

"This is the continuing story of the rich getting richer," said David Wyss, chief economist at Standard & Poor's in New York. "Clearly, the gains in wealth are going to the top end."

Democrats used the new report to blast President Bush's economic policies, contending it would be wrong to make permanent his tax cuts, which primarily benefit the wealthy.

"These statistics show why, even though GDP is rising, most people do not feel better off," said Sen. Charles Schumer, D-N.Y.

The Fed survey found that the percentage of Americans who owned stocks, either directly or through a mutual fund, fell by 3.3 percentage points to 48.6 percent in 2004, down from 51.9 percent in 2001.

Analysts said this was an indication that investors burned by plunging stock prices in the decade's early years have been leery about getting back into the market.

The share of Americans' financial assets invested in stocks dipped to 17.6 percent in 2004, down from 21.7 percent in 2001.

Reflecting the housing boom, the share of assets made up by home ownership rose to 50.3 percent in 2004, compared with 46.9 percent in 2001.

The Fed survey found that debts as a percent of total assets rose to 15 percent in 2004, up from 12.1 percent in 2001. Mortgages to finance home purchases were by far the biggest share of total debt at 75.2 percent in 2004, unchanged from the 2001 level.

There was concern that families might start to feel even more squeezed as the cost of financing their debts increases along with rising interest rates.

Although surging home values have supported consumer spending in recent years, analysts worry about the economic impact if, as expected, the home price surge begins to slow this year.

"This report shows a race between factors boosting net worth, such as home ownership, and factors pushing the other way, such as weak wage growth," said Jared Bernstein, senior economist at the liberal Economic Policy Institute, a Washington think tank.

people tend to put a lot of themselves into their work, not to mention basing a lot of their financial decisions on the assumption that their job is "theirs."

It is normal. The work is a natural healthy part of human life. People cannot be separated from what they are doing, their labor is not a mere commodity, it is part of what means to be human.

Trying to marketize workers or their labor is as wrong as slavery or serfdom.

Today even for the freemarketeers it is obvious that slavery and serfdom are wrong. But it is because these institutions are in the past and far away, they have problem with seeing what they face now.

Work remains a good thing, not only because it is useful and enjoyable, but also because it expresses and increases the worker's dignity. Through work we not only transform the world, we are transformed ourselves, becoming "more a human being."
[...]
History teaches us that organizations of this type [unions] are an indispensable element in social life, especially in industrialized societies. Catholic social teaching does not see unions as reflecting only a "class"' structure, and even less as engaged in a "class" struggle. They are indeed engaged in the struggle for social justice, but this is a struggle for the common good, and not against others. Its aim is social justice and not the elimination of opponents.
[...]
Human work is the key to the solution ... of the whole "social question." To consider work is of decisive importance when trying to make life "more human."
[...]
Yet the workers' rights cannot be doomed to be the mere result of economic systems aimed at maximum profits. The thing that must shape the whole economy is respect for the workers' rights within each country and all through the world's economy.
[...]
Created in God's image, we were given the mandate to transform the earth. By their work people share in God's creating activity....Awareness that our work is a sharing in God's work ought to permeate even the most ordinary daily activities. By our labor we are unfolding the Creator's work and contributing to the realization of God's plan on earth. The Christian message does not stop us from building the world or make us neglect our fellow human beings. On the contrary it binds us more firmly to do just that.
[...]
But above all we must remember the priority of labor over capital: labor is the cause of production; capital, or the means of production, is its mere instrument or tool.
[...]
Workers not only want fair pay, they also want to share in the responsibility and creativity of the very work process. They want to feel that they are working for themselves -- an awareness that is smothered in a bureaucratic system where they only feel themselves to be "cogs" in a huge machine moved from above.
[...]
Workers not only want fair pay, they also want to share in the responsibility and creativity of the very work process. They want to feel that they are working for themselves -- an awareness that is smothered in a bureaucratic system where they only feel themselves to be "cogs" in a huge machine moved from above.
[...]
The most profound motive for our work is this knowing that we share in creation. Learning the meaning of creation in our daily lives will help us to live holier lives. It will fill the world with the spirit of Christ, the spirit of justice, charity, and peace.
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The justice of a social and economic system is finally measured by the way in which a person's work is rewarded. According to the principle of the common use of goods, it is through the remuneration for work that in any system most people have access to these goods, both the goods of nature and those manufactured. A just wage is a concrete measure -and in a sense the key one- of the justice of a system.
[...]
Through work people must earn their daily bread and contribute to the continual advance of science and technology and, above all, to elevating unceasingly the cultural and moral level of the society within which he lives in community with those who belong to the same family.

And work means any activity by human beings, whether manual or intellectual, whatever its nature or circumstances; it means any human activity that can and must be recognized as work, in the midst of all the many activities of which people are capable and to which they are predisposed by their very nature, by virtue of humanity itself. (Introduction)
[...]
The purpose of unions is not simply to defend the existing wages and prerogatives of the fraction of workers who belong to them, but also to enable workers to make positive and creative contributions to the firm, the community, and the larger society in an organized and cooperative way.
[...]
The church's constant teaching on the right to private property and ownership of the means of production differs radically from the collectivism proclaimed by Marxism, but also from the capitalism practiced by liberalism [free market ideology] and the political systems inspired by it.
[...]
Yet the workers' rights cannot be doomed to be the mere result of economic systems aimed at maximum profits. The thing that must shape the whole economy is respect for the workers' rights within each country and all through the world's economy.
[...]
We must pay more attention to the one who works than to what the worker does. The self-realization of the human person is the measure of what is right and wrong.
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Work is in the first place "for the worker" and not the worker "for work." Work itself can have greater or lesser objective value, but all work should be judged by the measure of dignity given to the person who carries it out.
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We must consequently continue to study the situation of the worker. There is a need for solidarity movements among and with the workers. The church is firmly committed to this cause, in fidelity to Christ, and to be truly the "church of the poor."
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The means of production cannot become a separate property, called capital, as opposed to labor. They cannot be owned against labor or to exploit labor. They cannot be owned just for the sake of owning them. The only title to their ownership - whether private, public, or collective- is that they serve labor. This means that under suitable conditions the socialization of certain means of production could be acceptable.
[...]
Work is a duty, because our Creator demanded it and because it maintains and develops our humanity. We must work out of regard for others, especially our own families, but also because of the society we belong to and in fact because of the whole of humanity.
[...]
We inherit the work of the generations before us, and we share in the building of the future of all those who will come after us. All this should be kept in mind when considering the rights that come with work or the duty to work.

(Laborem Exercens - On Human Work
Pope John Paul II, 1981
transl Joseph Donders)

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