DECEMBER 2016 / NO. 1
TAGS: GREAT DEPRESSION, MIDDLE CLASS, UNEMPLOYMENT, UNDEREMPLOYMENT, GOVERNMENTS, EUROPE, POLITICIANS, AMERICAN

The invisible American

“We haven’t seen this since the Great Depression”, CEO of Gallup US on “The Invisible American”
In the fall of 2016, newspapers such as The New York Times and Financial Times published articles on the recovery of the economy. Is this really the case? It seems we cannot rely on these articles in these otherwise highly-regarded newspapers. From 2001 to 2016 the percentage of the upper-middle and middle class in the US fell from 63% to 51%. This means that some 25 million American economic lives crashed. What is missing is that these 25 million people are invisible in the widely-reported official US unemployment rate of 4.9%. Middle class jobs with average salary levels of US$ 65,000 disappeared in our changing, disrupted and globalized world, and were replaced by full-time jobs with much lower hourly wages, equivalent to an average annual salary of US$ 30,000. The 25 million Americans remain counted as ‘fully-employed’ with drastically reduced pay and benefits. They fell out of the middle class and are invisible in the current statistics.
Most disastrous is the emotional toll on millions of Americans: the sudden loss of household income causing a crash of self-esteem, and dignity, leading to an atmosphere of desperation that has not been seen since the Great Depression, according to Gallup. In addition to the traditional unemployment rates, we now face a new phenomenon: underemployment.
Four serious metrics need to be turned around to prevent the loss of the middle class:
  1. The percentage of the total US adult population with a full-time job has been hovering around 48% since 2010
  2. From 1995 to 2015 the number of publicly-listed companies in the US fell from 7,300 to 3,700, leading to massive losses of middle-class jobs
  3. New business start-ups are at historic low, however 65% of all new jobs are created by those small businesses, not by the large ones
  4. From 1980 to 2010 the US consistently averaged a surplus of 120,000 more business births than deaths each year. But this has not been happening for the last 6-8 years. This is a dramatic change!

What is the strategic impact to us in Europe?

The situation in the US is not unique! The same situation has unfolded in most European countries since the beginning of the crisis in 2008. However, our governments, the EU and our politicians, continue to rely on traditional metrics including unemployment, inflation, interest rates, growth rates, and budget debt. This explains why the economic situation in most European countries is stable. Politicians do not understand that the crucial cause of stagnation in Europe is underemployment: we do not expect this situation to improve during the coming 6-8 years.
“Governments of most EU countries kill the middle class with income inequality, causing a huge impact on the prosperity of 70-80% of the total population in the EU from 2016-2025. The cause is underemployment”
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