THE REAL ECONOMY - AMERICAN HOUSEHOLD DEBT TOPS $14 TRILLION AND REACHES NEW RECORD

Report: California’s Middle-Class Wages Rise by 1 Percent in 40 Years

NEIL MUNRO

Middle-class wages in progressive California have risen by 1 percent in the last 40 years, says a study by the establishment California Budget and Policy Center.

“Earnings for California’s workers at the low end and middle of the wage scale have generally declined or stagnated for decades,” says the report, titled “California’s Workers Are Increasingly Locked Out of the State’s Prosperity.” The report continued:

In 2018, the median hourly earnings for workers ages 25 to 64 was $21.79, just 1% higher than in 1979, after adjusting for inflation ($21.50, in 2018 dollars) (Figure 1). Inflation-adjusted hourly earnings for low-wage workers, those at the 10th percentile, increased only slightly more, by 4%, from $10.71 in 1979 to $11.12 in 2018.

The report admits that the state’s progressive economy is delivering more to investors and less to wage-earners. “Since 2001, the share of state private-sector [annual new income] that has gone to worker compensation has fallen by 5.6 percentage points — from 52.9% to 47.3%.”

In 2016, California’s Gross Domestic Product was $2.6 trillion, so the 5.6 percent drop shifted $146 billion away from wages. That is roughly $3,625 per person in 2016.

The report notes that wages finally exceeded 1979 levels around 2017, and it splits the credit between the Democrats’ minimum-wage boosts and President Donald Trump’s go-go economy.

The 40 years of flat wages are partly hidden by a wave of new products and services. They include almost-free entertainment and information on the Internet, cheap imported coffee in supermarkets, and reliable, low-pollution autos in garages.

But the impact of California’s flat wages is made worse by California’s rising housing costs, the report says, even though it also ignores the rent-spiking impact of the establishment’s pro-immigration policies:

 In just the last decade alone, the increase in the typical household’s rent far outpaced the rise in the typical full-time worker’s annual earnings, suggesting that working families and individuals are finding it increasingly difficult to make ends meet. In fact, the basic cost of living in many parts of the state is more than many single individuals or families can expect to earn, even if all adults are working full-time.

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Specifically, inflation-adjusted median household rent rose by 16% between 2006 and 2017, while inflation-adjusted median annual earnings for individuals working at least 35 hours per week and 50 weeks per year rose by just 2%, according to a Budget Center analysis of US Census Bureau, American Community Survey data.

U.S. household debt tops $14 trillion and reaches new record

Reuters•February 11, 2020

FILE PHOTO: U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul

(Reuters) - American households added $193 billion of debt in the fourth quarter, driven by a surge in mortgage loans, and overall debt levels rose to a new record at $14.15 trillion, the Federal Reserve Bank of New York said on Tuesday.

Mortgage balances rose by $120 billion in the fourth quarter to $9.56 trillion, the New York Fed said in its quarterly report on household debt. Mortgage originations - pushed up by an increase in refinancing - also rose to $752 billion in the fourth quarter, reaching the highest volume since the fourth quarter of 2005, the report found.

Non-housing debt, including auto loans, credit cards and student loans, rose by $79 billion.

"Mortgage originations, including refinances, increased significantly in the final quarter of 2019, with auto loan originations also remaining at the brisk pace seen throughout the year," Wilbert Van Der Klaauw, senior vice president at the New York Fed, said in a statement. "The data also show that transitions into delinquency among credit card borrowers have steadily risen since 2016, notably among younger borrowers."

Some 2.36% of loans became more than 90 days delinquent in the fourth quarter, driven down by a low rate of delinquencies for mortgage loans. New foreclosures remained low by historical standards, with 71,000 notations added to credit reports between October and December.

However, delinquencies rose for credit cards and student loans - with young borrowers seeing the biggest increase. Researchers said the rising delinquencies among borrowers in their 20s and 30s could be related to high levels of student loan debt, which could make it difficult for consumers to afford their bills.