The bad economic news seems to just keep on coming—the collapse of the housing bubble, the foreclosure crisis, skyrocketing prices on everything from food to gas and energy costs, widespread layoffs, the credit freeze, a looming recession—or even depression—and more have consumers scaling back, hunkering down and trying to cope.
The worst slump in worker pay since the Great Depression—the next stage of this economic crisis, some say—would have serious ramifications for the American public. Those just barely able to make ends meet would face even more of a struggle. “This slump won’t be anywhere near as bad as the one during the Depression, but it also won’t be like anything the country has experienced in a long time,” according to the New York Times.
Indeed, “median pay today is slightly lower than it was in 2000, and by 2010, could end up more than 5 percent lower than its old peak,” according to the New York Times.
In this economic climate, declining wages would be particularly damaging. If people could not make their mortgage payments, this would exacerbate the foreclosure problem. People failing to pay their credit card bills would likely cause banks to clutch the purse strings even tighter than they already are, thus prolonging the difficulty of getting credit. Skipping routine medical costs in the short term could lead to higher medical costs in the long term, as untreated conditions often result in emergency room visits. The more people who use the emergency room rather than preventative care, the larger the bill taxpayers must pay. Charitable donations would continue to decrease, hampering the ability of food banks and other services to provide for people, even as more people would require such assistance.
“Every recent recession has brought an effective pay cut of somewhere between 3 and 7 percent for the typical family. The drop typically happens over a period of about three years, lasting longer than the recession officially does, as pay fails to keep up with inflation,” according to the New York Times.
Declining wages for workers, a product of an economic crisis such as this, could become one of the culprits for worsening or prolonging it. Weekly wages were 0.3 percent lower in August 2008 than in March 2001 when adjusted for inflation, according to the Center for American Progress, a Washington-based think tank whose mission is to improve the lives of all Americans.
In 2007, the median American household earned $50,200, according to statistics from the Census Bureau. In comparison, the equivalent household earned $50,600 in 2000.
Further, stagnating and declining wages aren’t limited to a small segment of the nation’s employees. According to statistics from the Labor Department, about 80 percent of the American workforce, including factory workers and non-managers in service businesses, has seen wages contracting since October 2007. “Real weekly earnings are falling faster than hourly earnings. That’s because the length of the work week is being cut as the job market weakens,” according to the New York Times. Thus, it seems as though it will first hit those who are already being hit hardest.