TOPICS > Economy

Many Americans Feel ‘Stuck in a Rut’ as Economy Improves, But Inequality Grows

March 24, 2011 at 6:29 PM EST
As part of his continuing coverage of Making Sen$e of economic news, Paul Solman examines the struggles to close the widening U.S. inequality gap, even as the economy improves.
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JIM LEHRER: We have two stories now about major changes in the portrait of American life. The first is on inequality, a widening gap that’s hard to close, even as the economy is improving.

NewsHour economics correspondent Paul Solman has the story, part of his ongoing reporting on Making Sense of financial news.

DENISE BARRANT: The top one percent is living well, and they don’t get it.

PAUL SOLMAN: Denise Barrant has, like millions of Americans, lost her job in middle management. A Republican who stumped for Massachusetts Sen. Scott Brown, she sees increasing inequality in America, her growing distance from those on top.

DENISE BARRANT: They don’t get what is happening to this country. And I feel like we’re creating a Third World country subculture within this country.

PAUL SOLMAN: The stock market’s up, corporate profits, too. Things are supposedly improving. But tell that to community organizer Cheri Andes.

CHERI ANDES: My husband and I together make what I would consider to be good money. And, yet, we’re really struggling. We have got $26,000 worth of debt. The latest of that debt is $5,000 that we put on a credit card to put braces on my middle son. And the interest that we’re paying on that is 29.25 percent.

PAUL SOLMAN: While the U.S. economy returned to its long-term growth rate last quarter, tens of millions of Americans feel left behind, immobilized, like security guard Bobby Hicks.

BOBBY HICKS: I am the most insecure security officer you will meet, because I’m worried. Right now, I live paycheck to paycheck. I want better for my daughter, all right? But, I mean, she realizes that, hey, daddy can’t get it for her.

PAUL SOLMAN: Finally, Cookie Sheers, single mother of three who works at a Boston nonprofit, earns $34,000 a year, fully 50 percent above the poverty line. So, she’s not officially poor. But, she says:

COOKIE SHEERS: As a parent, you want your children to succeed and do better than you have. And, yet, I find mine working to please me and — or to help me. And that’s just not the way I wanted it. That’s not the way anyone wants it for their family.

PAUL SOLMAN: So, the American dream, your kids will do better than you, neither you nor your kids think that that’s the case?

COOKIE SHEERS: No, we all feel stuck in a rut. You feel like you can’t move, you can’t grow, like you’re just at that edge of water where you can come up for air every few minutes, but never long enough to feel that you’ve accomplished something. You always have to go back down.

BOBBY HICKS: Like she says, I feel like, once I feel like I have reached that part where my nostrils can come out the top, life comes back and just steps right on my face and says: You know what? It’s not time for you to come up for air yet.

PAUL SOLMAN: The numbers support the stories. Economic inequality in America, widening steadily since 1980, grew during the financial crisis, with the top 5 percent of Americans owning 65 percent of national wealth by mid-2009, up from 62 percent two years before. The losers were the bottom 80 percent, whose share of wealth fell during the crisis. Nearly half had negative net worth by mid-2009.

DENISE BARRANT: I’m worse off.

PAUL SOLMAN: Like Denise Barrant, out of a job and in foreclosure, owing much more on her home than it’s now worth, a case study in downward mobility.

DENISE BARRANT: My parents owned a house. Their parents owned a house. I’m just trying to live the standard of living that I grew up with. But they have outsourced our jobs, or they have — they have just said, you know, we don’t need you. And the top people are still making a lot of money and then congratulating themselves at how efficient they have been.

PAUL SOLMAN: Meanwhile, her negative net worth just keeps getting more negative, due to debt.

DENISE BARRANT: Just being able to provide for yourself and your family, you have to live on credit. And so, if you have less of an income, they charge you more interest, which means the money you borrow actually costs you more. The fees for your accounts are more, because you don’t have the minimum balances that they require. Everything costs more.

PAUL SOLMAN: Cheri Andes assembled these members of the Greater Boston Interfaith Organization. She felt their pain and her own.

CHERI ANDES: My parents had high school degrees, worked working-class jobs, owned a home. I’m first college-educated in my family, and we struggle every month. We’re barely staying afloat.

We’re trying to refinance our home right now. And our debt-to-income ratio is so high, and the value of our home has dropped so much, that it’s not clear we’re going to be able to get the refi.

PAUL SOLMAN: Are you living better than your parents did?

CHERI ANDES: No. We’re definitely not living better than my parents lived. And I don’t understand that.

PAUL SOLMAN: Widening inequality is one problem, with the top 10 percent of American families, those at $109,000 a year or more, now earning half of all American income.

But at least historically, there was always the very real hope of moving up, at least across generations.

ROBERT PUTNAM, Harvard University: That isn’t true anymore.

PAUL SOLMAN: Robert Putnam helped run Harvard’s Inequality Project.

ROBERT PUTNAM: So, one of our competitive advantages as a — as a society, which used to be that we were very mobile, and we were constantly getting new infusions of talent and so on at the top, and — and that people down near the bottom had a hope that, if they didn’t do well, their kids could do well in past in America.

That a poor kid could grow up in a tenement, go off to city college, do well, and himself end up in the next generation pretty well-off. That’s what’s becoming less likely in America. And I think that undermines a crucial part of the American myth or the American dream or the American social contract.

PAUL SOLMAN: Adds economist Sam Bowles:

SAMUEL BOWLES, Santa Fe Institute: America is distinct in the extent to which inequality is inherited from generation to generation. The kids of rich parents have a strong tendency to be rich, and the kids of poor parents are very, very likely to be poor. That’s one of the things which I think Americans find most shocking. That’s a huge discrepancy from what we think of as the land of opportunity.

COOKIE SHEERS: It is. It’s frustrating. What do you tell your child? How do you promote to your child that they can be successful, when you yourself don’t feel successful?

PAUL SOLMAN: The stumbling block, says Cookie Sheers, is that key ingredient of upward mobility, a college degree.

COOKIE SHEERS: Twenty-five years ago, I was thinking about going to college, trying to better myself, so that I could advance in employment. And here it is, 25 years later, I still am thinking about going to college and advancing myself in employment.

I have made several attempts, but each time, I have had to back down, strictly because of finances, that they’re hard to accumulate to simply buy one book.

BOBBY HICKS: My daughter, she is 9 years old now. What is the cost of a basic college education going to be for her in 10 years, if things are going as they’re going?

PAUL SOLMAN: But, says Denise Barrant:

DENISE BARRANT: In our family, everybody is college-educated. Most of us have master’s. Myself, I’m unemployed. My brother is unemployed. People used to think it was a guarantee. It is not. To invest $200,000-plus in an education, with no guarantee that you have a job, is scary.

PAUL SOLMAN: As for Bobby Hicks’ job, it’s inequality, he says, that makes it possible.

BOBBY HICKS: In the security industry, you know, there is a demand for jobs, because the rich want to protect their assets.

PAUL SOLMAN: But those jobs are low-pay and low-prestige, despite the high stakes.

BOBBY HICKS: A pressure release valve for the domestic water in the building broke. And there was water flooding, and this was on the sixth floor. If their servers got wet, it would have wiped out the entire East Coast for this one particular company — and Bob, $9 an hour, to the rescue. Make the call, count on you, all right? But, if I screwed up, you’re gone.

PAUL SOLMAN: Sam Bowles calls this guard labor.

SAMUEL BOWLES: For every three workers in America that’s producing something, there is one worker who’s just keeping the lid on. These are the private security personnel. These are the police officers. These are the prison guards. These are the armed forces. These are the people whose job it is just basically to maintain the society’s property rights and its — its social organization.

PAUL SOLMAN: Bobby Hicks has lived the change.

BOBBY HICKS: It felt like it went from here to here.

PAUL SOLMAN: What’s up there?

BOBBY HICKS: This is where life is right now, all right, and this is where I am.

PAUL SOLMAN: So, the top of the income distribution has grown by leaps and bounds…

BOBBY HICKS: Yes.

PAUL SOLMAN: … as you say, and you’re stuck in the same place?

BOBBY HICKS: And I’m — I’m still right down here, yes, absolutely.

PAUL SOLMAN: Cookie, are you better off than you were, say, 15 years ago?

COOKIE SHEERS: I — I haven’t changed from then to now. There are days that I walk to work because I couldn’t afford $1.25 to get on the bus. There are days that I sacrifice a meal because I want to make sure my children eat. So, no, it has not changed at all. And it only gets worse.

PAUL SOLMAN: Gets worse for these and many other Americans, while it gets better for the relatively few at the top.