Middle class Americans still suffering despite stock surges

It’s been five years since the Great Recession and stocks have nearly tripled from their lows in 2009, but for most of us the economic recovery remains elusive. Although the stock market continues its rise and is shattering records, there is a continuing divide between Wall Street and Main Street, leaving middle class Americans with weak financial gains.

So why is this happening? According to a recent report by CNN Money, the real culprit is the Federal Reserve stimulus measures. The Federal Reserve has been engaged in the process of buying securities, such as government bonds, from banks, with electronic cash that did not exist before. According to experts, “The new money swells the size of bank reserves in the economy by the quantity of assets purchased.” The goal of this process, referred to as quantitative easing, is “to stimulate the economy by encouraging banks to make more loans.”

But as noted by Kristina Hooper, U.S. investment strategist at Allianz Global Investors, “Monetary policy is a blunt instrument, not a surgical tool. It’s much better at inflating assets than creating jobs.” Unfortunately, it’s the Federal Reserve’s quantitative easing policy which has contributed to the Dow’s 10,000-point climb.

Middle class investors left market

 

The surge in the value of the stock market, however, may have very little impact on small, middle class investors who decided to leave the stock market after they lost much of their retirement savings in 2008 and 2009. In fact, according to a recent Gallup poll, fewer middle class Americans are invested in the stock market than they were ten years ago, leaving many to decry the recovery, arguing that although some investors have benefited, the benefits have been “unevenly distributed.”

Another issue which has left middle class Americans in a desperate position is the sluggish job market. Many companies have large reserves of cash, but they are refusing to hire and are operating with a lean work force. With severe cost cutting measures tens of thousands of middle class employees remain unemployed.

Experts note that although most of the jobs lost in the Great Recession have been recovered, many companies have not hired as many workers, but have simply required the employees who are on the job to work twice as hard performing more work for the same pay. The story is also worse for the workers who remained on the job. In fact, CNN Money reports, “the real average hourly earnings for all U.S. employees decreased 0.3% in April from March.”

Tax and health care regulations scare employers

 

Unfortunately, it’s not just questionable Fed policies and lack of jobs which have hurt middle class Americans. Companies also remain scared about the changes in the tax policies and healthcare laws. Experts suggest that companies dislike uncertainty. When they do not know how to navigate the questionable legal issues and polices of Washington, they are likely to pull back. One expert called it a “fog,” which he argued has descended on American businesses.

Finally, the income gap between middle class worker and executive has also widened. Despite wages remaining stagnant for the average worker, Pay data from Equilar shows “CEOs now make about 257 times the average worker, up from 181 times in 2009.”

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Beth

Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.