william_spriggs_copy.jpgThe U.S. Census Bureau recently issued its annual report on income and poverty in the United States. It revealed what has been obvious in the five years since the collapse of Lehman Brothers and the onset of the Great Recession: Something is really broken in our country.

Since 1980, we have seen a steady climb in the share of income going to top five percent of American households, except the downturns of 2001 and 2008. During those downturns, financial bubbles burst and the top lost income share. In both cases, the Federal Reserve System acted aggressively to save the financial sector and stave off further contagion in the sector of finance and speculation into the sector of goods production and employment-the real economy. The restoration of the financial sector restored the incomes of the top five percent and the recovery after 2001 and the current recovery restored the steady growth of inequality.

In 2001, the income share of the top five percent fell from a record high of 22.4 percent of all income to 21.4 percent of all income by 2003. In 2006, the share of income for the richest American households fell from 22.3 percent of all income to 21.2 percent in 2007.

Now it is firmly back at 22.3 percent of income. But, for the rest of us, there has been no recovery since 2001.

Middle fifth

The share of the nation’s income going to those in the middle fifth of the income distribution continues its slow and steady decline that started in the 1980s. Adjusting for inflation, the median income of families headed by members in their prime working age (45 to 54 years old) fell from $90,456 in 2000 to $78,236 in 2012. And, in the five years since the collapse of Lehman, is below its peak in 2006 of $86,198. For all families, median income has been falling each year since 2007. The best news of the report is that, from 2011 to 2102, the fall was a mere $7.

The story is not any brighter at the bottom of the income scale. The Great Recession pushed up poverty among American families from 9.8 percent in 2007 to 11.1 percent by 2009. The best news of the Census report is that the figure has remained stuck at 11.8 percent since 2010. The poverty rate for families with children remains stuck at 18.5 percent.


So, five years after the collapse of the financial sector and now its current recovery to record-setting Dow Jones stock averages, the lives of over half of America’s families and the plight of one in five of its children are markedly worse. Something is fundamentally broken in our system when the Washington and New York elite remained fixated on everything except the deteriorating plight of America’s families.

Clearly we are not in a recovery. Among the elite, at least the Federal Reserve Board of Governors appears sane, keeping to its stance of low-interest rates – its policy tool – to keep the economy growing with a clearly stated view it does not see a sustainable recovery in place, yet. Otherwise, our political and media class chatter more about the records the Dow Jones stock average is setting than the clear evidence America’s families are drowning.

There was some hopeful news recently. The U.S. Department of Labor finally announced new regulations that will protect the wages and working conditions of millions of workers who provide personal services to the elderly and disabled. Those workers were excluded from coverage by claims of their employers that they were in essence “elder sitters” excluded from minimum wage and overtime protection as are babysitters.

Domestic workers

The clarification by the Labor Department in its new rules that these workers are covered will automatically improve the working conditions of millions of women, their wages and incomes and, thus help their children who struggle in poverty. This fulfilled a fight by Congresswoman Shirley Chisholm, a founder of the Congressional Black Caucus convening its Annual Legislative Conference recently in Washington to protect the wages of domestic workers. The Fair Labor Standards Act excluded farm and domestic workers when it became law, as a clear effort to gain Southern Democratic votes, which also meant the exclusion of most African-American workers who, at the time, were in farm or domestic occupations.

California passed a new state minimum wage law boosting its minimum wage to $10 an hour. This gives California the highest minimum wage in the country, followed by Washington State. That wage level also restores the minimum wage to its value back in 1968.

The actions by California’s legislature and governor and the U.S. Department of Labor are tied directly to the real conditions and lives of everyday Americans. These are policies aimed at lifting the wages and earnings of families and putting the middle class back as the center focus of measuring economic progress.

Political will

America’s working families rate Congress at low levels because the fight to shut down needed government services more than the current sequestration is accomplishing puts the needs of the Republican party and the ideology of a large bloc of its fringe members ahead of debating restoring the economic health of America’s families. Time taken out to shut down the government and keep more children out of Head Start programs is time taken away from addressing the low level of the federal minimum wage and the working standards of millions more American workers.

Something is fundamentally broken when the political will of the people is shut out of economic policy in the democratic institutions of Congress, while the appointed Federal Reserve Board shows real concern about the health of the broad economy. In a market economy, it is one dollar one vote in determining what the nation will produce and who will get access to those goods. The Census data make clear that the top five percent are getting their 22 votes; the top 20 percent in fact get 51 votes. Clearly, the Republican-held House is looking at those 51 votes. But what the 80 percent of Americans who get the remaining 49 votes in the market place want is for their votes to be reflected in Congress and in the decision-making of America’s elites.

William E. Spriggs is chief economist with the AFL-CIO and is a professor in, and former chairman of, the Department of Economics at Howard University.  He is also former assistant secretary in the Office of Policy at the U.S. Department of Labor. You may follow him on Twitter: @WSpriggs.