Although my late mother never finished high school, she still was a wise person. One of her favorite sayings was, there’s two sides to every story. Of course when I tried to use this logic after I disobeyed one of her rules, she would reply – there are exceptions!
I’m frequently reminded of my Mom’s advice when I give presentations about the economy around the state. Attendees often challenge me on whether the economy is doing well or not. I look forward to these discussions because they allow me to elaborate and give more “sides” – good and bad – to the economic story.
In this column I look at seven current economic situations and give both sides – the good and the bad – of them. I’ll then let you decide if their current status is a net plus or net minus.
Standard of Living: Today’s average standard of living – measured by average household income adjusted by what dollars can buy – is 19 percent higher than in 1970, 16 percent better than in 1980, but two percent less compared to 2000.
However, there are big differences for households of different income levels. Since 2000, the standard of living of the richest 20 percent of households has increased slightly, but the standard of living of the poorest 20 percent is 11 percent lower.
Jobs: After the disastrous Great Recession – when the nation lost eight million jobs (330,000 in North Carolina) – jobs are now above pre-recessionary levels and the unemployment rate is close to its recent low level in 2007.
Yet there are three cautions. Almost 99 percent of jobs added since 2010 have gone to two or four-year college graduates. The majority of new jobs are located in large city (metropolitan) areas, with many small towns continuing to lose jobs. An estimated seven million individuals nationally, and over 200,000 in North Carolina who are able-bodied and of working age, have dropped out of the labor force – meaning they don’t have a job and have stopped looking for work.
Technology: Technology continues to develop and provide us with wonderful new ways to communicate, access entertainment, obtain information and shop.
However experts see two important challenges resulting from modern technology. One is that as technology continues to expand and become more capable at accomplishing tasks, it will replace humans in a significant number of jobs. Second, there is now some evidence suggesting technological easy access to social media and entertainment is interfering with student academics and worker productivity.
Inflation: All-item inflation – covering the prices of all products and services the average person buys – has been very tame, running between one percent and two percent annually in recent years. This is good news compared to the double-digit inflation rates experienced four decades ago.
Of course, average inflation doesn’t mean all prices are rising at this rate. Some are rising less and some are rising more. Two in the latter category are education prices – mainly for college tuition – and health care prices – particularly for insurance. Individuals for whom these spending categories are very important have a much higher personal inflation rate.
Women’s Pay: The pay of women working in the same occupations and with the same experience as men has moved much closer to men’s pay, with an average five percent shortfall today. A big reason for this is the higher educational levels of women. Indeed, women now account for the majority of new college graduates.
But being a women working in the paid labor force continues to be challenging. In most jobs, women often must cope with the loss of time at work without pay when having children and then raising them until school age. Time management for women can also be stressful, with the need to balance time demands from work, home and children.
Education: More young people are going to college today, with 70 percent of high school graduates entering either two or four-year colleges, up from 50 percent just 35 years ago.
Yet 40 percent of entering freshman don’t earn a degree within six years, and many of those never get a degree. Also, 40 percent of those who do graduate take a job outside their field of study. Many employers say they hire a college graduate not for what they learned, but because they assume a college graduate has more perseverance and innate skills than a high school graduate.
Stock Market: The stock market has tripled in value since 2009, increasing the wealth of stock owners by $17 trillion.
Unfortunately, only half of households own stocks – directly or through a mutual fund – and the income of stockholders is over twice that of the average worker.
President Truman once asked to have a one-handed economist advise him, because he was tired of being told “on the one hand, this; but on the other hand, that.” Yet most of economics has many sides. Your task is to decide which – if either – side dominates!
Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.