Misleading averages

http://www.thefiscaltimes.com/2015/04/26/Americans-Low-Savings-Rate-Bad-Sign-Good-Economy?utm_campaign=548f5168cb03a93709042da0&utm_source=boomtrain&utm_medium=email&bt_alias=eyJ1c2VySWQiOiI2NzA1MTM2Zi1kYjdmLTQ3OGMtYjc5Mi1mZGZjMWQyZDMxNzcifQ%3D%3D

By Andrew L Yarrow, The Fiscal Times
April 26, 2015

We’re supposed to be enjoying an economic recovery since the Great Recession of 2008-2009 – yet many economists have questioned whether the last five years have been much of a “recovery.” Judging from the mood of the American people and their personal financial habits, it hardly feels like one.

Although the economy has been on the upswing, people haven’t been saving. While the overall savings rate ticked up between 2009 and 2012, it has fallen since then. Forty-four percent of Americans are either in debt, have no savings at all, or have only enough savings to tide them over for up to three months if they lose their jobs, according to an Assets and Opportunity report last year.

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Why can’t Americans, whose savings rates have fallen over the last 35 years and save far less of their incomes than most Europeans, Japanese, or Chinese, save even during a supposed recovery?

Despite headlines about relatively healthy GDP growth of about 2.2 percent and falling unemployment, the sad reality behind these positive economic statistics is that wages haven’t risen for most Americans since 2000. While headlines decry Europe’s sclerotic economy, where average wage growth has lagged behind America’s since the 1970s, averages deceive. If one subtracts the spectacular income gains of the top 1 percent in the United States, wage growth among the bottom 99 percent has been less than in France, a country plagued by and derided as a stagnant economy, according to the Organization for Economic Cooperation and Development.

At the same time that wages and personal savings have stagnated or fallen, fewer and fewer American workers are offered employer-provided pension plans that provide some economic security in retirement. That leaves Social Security, which 22 percent of married retirees and 47 percent of those who are single rely on for at least 90 percent of their income.

Although the stock market has rebounded spectacularly during the Obama years, the typical American household has seen its net worth fall by more than a third between 2003 and 2013, to about $56,000. And about 60 percent of U.S. workers have less than $25,000 in savings, a far cry from what they will need to retire – while the 16,000 wealthiest American families together have $6 trillion squirreled away.

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