black wealth gap, healthcare costs rise, National, News, soaring costs, stagnant wages -

As Costs Soar and Wages Flatline, Analysis Shows a Dramatic Change in How Americans Spend Their Money

black wealth gap, healthcare costs rise, National, News, soaring costs, stagnant wages -

As Costs Soar and Wages Flatline, Analysis Shows a Dramatic Change in How Americans Spend Their Money

strike-CST-042513-07.JPGAs household income has stagnated in recent years while the costs of such items as healthcare and cellphone service has soared, middle-class Americans have dramatically changed the way they spend money, drastically cutting back on items such as clothes, eating out at restaurants and even childcare, according to an analysis by the Wall Street Journal.

Though the Journal, which analyzed data from the Bureau of Labor Statistics, didn’t break down the analysis by race, it’s quite clear that the trends discussed in the Journal story are hitting Black families especially hard, since the unemployments rates are highest in the Black community and the average Black household income and household wealth are much lower than whites.

The Journal analysis goes far in explaining why most Americans are feeling like the nation is headed in the wrong direction, according to recent polls—even though most economists claim the most important economic indicators, such as job growth, are all trending upward. If costs of household basics like healthcare, rent, food, cellphone service and Internet service have all soared in recent years but salaries have flatlined for decades, the nation is suffering through an extended period where people have much less money to spend on personal recreation and pleasure.

That’s why politicians have such low job approval ratings and likely why the turnout for the midterm elections was the lowest in a generation.

One of the biggest areas of soaring costs has been healthcare. Between 2007 and 2013, before Obamacare went into effect, healthcare spending rose 24 percent, which took a big chunk out of most families’ discretionary income, resulting in a big drop in spending on items like clothing and movies, live shows and amusement parks, according to the Journal.

The newspaper was able to compile the analysis by drawing data from 14,000 households that either kept diaries on their spending for two weeks or agreed to quarterly interviews. It looked at households earning between about $18,000 and $95,000 a year, before taxes.

While overall spending for that population group rose by about 2.3 percent over the six-year period from 2007, inflation went up 12 percent and the group’s income rose less than half a percent.

The Journal said the data helps explain “why so many retailers are turning in persistently lackluster results, and why the household-products business has shown virtually no growth for years.”

While consumer spending continues to make up just over two-thirds of the U.S. economy, where the money is spent has changed considerably. Less money is now spent on furniture, entertainment, clothing and even child care, the Journal analysis found.

Another area where spending has soared in recent years is cellphone service, which has risen nearly 50 percent since 2007—which is incidentally the year the iPhone came out and most consumers started getting pricey data plans.

While spending on housing rose just 2.4 percent, that masked big declines in spending on home purchases and mortgage interest, which was a result of more people moving from homeownership to paying rent—as demonstrated by the 26 percent increase in spending on rent as families lost their homes and rising demand for apartments helped push up monthly rents.

Spending in restaurants fell slightly, but there was a 12.5 percent increase in food eaten at home. The Journal analysis said spending on event admission and fees has fallen 16.5 percent, while spending on such items as boats, motor-homes, cameras and party rentals has plunged 31 percent.

While spending on household textiles, including bath and bed linens, has fallen 26.5 percent, even spending on care for children and the elderly has fallen 25 percent.

Aileen Reve, a day-care center worker on New York’s Long Island, explained that she has seen parents cutting back on hours by telecommuting or juggling their job schedules.

“They work a couple of days at home,” and keep an eye on the children while they do, she told the paper.

 


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