Edward N. Wolff, A Century of Wealth in America (Cambridge, Massachusetts, & London, England: Belknap/ Harvard University Press, 2017):
The thesis of this book could be summarized as the rise and fall of the middle class. Median wealth (in real terms) more than doubled between 1962 and 2007 but then dropped by 45 percent from 2007 to 2013, mainly due to the plunge in housing prices and the high leverage of the middle class. This collapse in median wealth is a principal factor leading to the general malaise of the middle class.
What factors were driving Americans' financial insecurity? The ultimate culprit was wage stagnation, occurring now for over forty years (average real wages peaked in 1973). This translated into income stagnation and a failing share of worker compensation in national income. For a while (until about 1990 or so) families compensated for stagnant wages with the increased participation of wives in the labor force. [My translation: In order to maintain a 1973 one-spouse-working-level lifestyle required both spouses working in 1990.] Once this opportunity was exhausted, real income incomes also stagnated. [My translation: After 1990 a two-income family was worse off, income-wise, than a pre-1990 one-spouse-working family.] Indeed, according to census data, median family income in 2013 was less than it was in1997. As a result, over the last twenty years, families have been forced to borrow ignored to maintain their usual consumption. This process was a idea by a generous expansion of credit, particularly through the home mortgage market. Largely abetted by a huge Chinese trade surplus and their consequent purchase of U.S. Treasury bonds, U.S. banks and other financial institutions were awash in cash. Enabled by lax mortgage regulation and rising home prices, financial institutions allowed generous refinancing of existing mortgages, expanded home equity credit lines, and issued a host of new types of mortgages including subprime, with no or little down payment, and even zero-documentation loans.
The result was a huge build-up in household debt, particularly among he middle class (the debt-income ratio more than doubled between 1983 and 2007). This was followed by a catastrophic collapse of the wealth of middle income and lower-income households. Median net worth plummeted by 44 percent between 2007 ad 2013 for middle-income families, 61 percent for lower middle-income household by, and by 70 percent for low-income families, The collapse of wealth was one of the principal factors leading to rising economic security. Both the fraying of the private safety net, as well as the public safety net, may have led to middle class malaise. The recent rise in mortality rates reported among working class whites, particularly from suicide and especially among those with a high school degree or less, might not be unrelated to their growing economic insecurity.Id. at 679-680. By the way, read the above from the perspective of a well-trained, perceptive, policy-oriented lawyer. If you do, then you should see poverty law, family law, international trade law, banking and financial institutional law and regulation, consumer law, real estate law, securities law, health law, gender and women's law, labor and employment law, and on and on, lurking in the detail and, also, in the malaise. Talk about needing to see beyond the trees to see the forest.
