Although Americans would like to think of themselves as living in the land of plenty, the fact remains that most citizens wouldn’t be able to stay afloat without their jobs – at least, not without government assistance. In fact, around 44 percent of Americans are considered poor in liquid assets, which means that they wouldn’t have enough money to make it through three months of unemployment. This is incredibly troubling and seems to negate the oft-told myth that if you can’t make it in America, you’re not doing it right.
What accounts for Americans’ inability to put money in their savings? Most obviously, the cost of living is on the rise even as median household income is slowly shrinking. In 1975, for example, the cost of housing, education, and healthcare made up 50 percent of American discretionary income. Now those things make up 75 percent of discretionary income. As the cost of living rose, the median household income did nothing but shrink. In 2000, the median household income was equal to $53,000, and in 2010, it had been reduced to $49,500.
Some very important costs of living have been subject to inflation, not the least of which are gas, healthcare, and education. Since 1973, the cost of fuel has risen by 20 percent, which is problematic, but nothing compared to the rising cost of healthcare, which has gone up by 50 percent over the same period. Education, however, poses the greatest inflation problem, costing 113 percent more today than it did 30 years ago. Without easy access to healthcare and education, it’s been difficult for many U.S. citizens to launch themselves onto a track of upward mobility.
Many analysts love to point out that the recession is receding, but what does that really mean for most Americans? It’s obvious from U.S. savings rates – which have remained unchanged over the last three years – that most have still not been able to save money.
The real problem at the root of this savings crisis seems to be America’s notorious income inequality. In the U.S., middle class earnings make up a mere 45 percent of total earnings, the lowest portion on record. Meanwhile, corporate CEOs are literally raking in cash, with each one bringing home around 273 times what the average U.S. citizen makes.
Source: Accounting School Guide