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Saturday, May 28, 2011

More On The Two Tier Economy

Here is another way to understand the two tier economy. Rank and file workers account for 80% of nongovernmental jobs. Their pay rose steadily from the 1990's until 2008. Today, average hourly hourly wage for production and non-supervisory employees is $8.76, down from $8.93 in 2008. Now that $.17 doesn't sound like much, but it works out to be $353.60 a year.

Now take that amount and add it to the rapidly increasing costs for food and gasoline, and you can begin to understand the financial difficulty of trying to live at the bottom of the second tier.

And to put that in perspective, $8.76 works out to be $18,229.80 a year (before taxes).

Now why should anyone else care? About 70% of the Gross Domestic Product (the pie we all share) is generated by consumer spending. The GDP has to grow 2%-3% a year just to absorb all the new people entering the work force, and it is not growing much at all now.

So we have 15 million Americans without jobs at all, and another 15 million working short hours or working at jobs significantly below the qualifications, and now add in those with jobs who have taken a pay cut, and you can understand why the economy is not growing.

And when the economy does not grow, our part of the two tier economy loses. The richie riches take care of themselves.

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