Americans Still Not Saving Enough, Despite Gains in Jobs

By:
Chris Gaetano
Published Date:
Jun 20, 2018
EmptyWallet

Federal Reserve Chair Jerome Powell recently said that, given low unemployment, on-pace inflation targets and a "balanced" risk outlook, the economy makes a strong case for continued interest rate hikes. Despite these gains, however, a recent study found that almost a quarter of Americans have no savings at all, according to Bloomberg

The 1,006-person study, conducted by research firm SSRS, found that 23 percent of Americans had no money readily available in either a checking, savings or money market account. While this is actually an improvement over last year's 24 percent figure, it still indicates that many Americans have yet to translate ostensible economic improvements into financial security. Even if someone has savings, though, it still may not be sufficient: The report said that 22 percent of Americans have some savings but not enough to cover three months' worth of expenses, an increase from 20 percent last year. Meanwhile, 18 percent of Americans could cover three to five months of expenses, while 29 percent have enough in emergency savings to cover at least six months, down from 31 percent last year. 

Powell himself recently admitted he found it puzzling that economy-wide gains have translated into uneven wage gains for workers across America. While unemployment has dropped to near-historic lows, wages in their aggregate have remained largely stagnant, as the 2.6 percent increase from last year was largely eaten by the 2 percent rate of inflation. With so many companies saying they cannot find qualified workers, he said he would have expected pay rates to react more. He offered, as one possible explanation, that productivity hasn't risen as quickly, meaning there's not enough value being added for each additional job.

Another factor, perhaps, could be that many of the jobs created since the Great Recession have been in sectors that are generally low-paying. Employment projections from the Bureau of Labor Statistics, showing the 31 occupations with the most expected growth over the next few years, indicates that 12 of the fastest growing jobs have median wages between $20,000 to $29,000. Meanwhile, seven have wages between $30,000 to $39,000, two have wages between $40,000 and $49,000, and 10 have wages $50,000 or more. 

Another factor, as theorized by a recent academic paper, could be an increase in underemployment since the Great Recession, as involuntary part-time work (work performed by people who want a full-time job but have to settle for part-time), has risen in every advanced country and remains high. Researchers found that, between 2001 and 2017, there has been little change in the number of workers who want fewer hours, but a large increase in the number who want more hours.

This underemployment could be related to the rise of gig economy platforms like Uber, Fiver and Task Rabbit. Intuit reported last year that the gig economy makes up about 34 percent of the workforce, and expects that number to rise to 43 percent by 2020. A McKinsey study found that there are 23 million people relying on gig work as their primary source of income, not because they want to, but because they don't have other options; a further 26 million rely on gig work for supplementary income for the same reason (still, the study also found that more than twice as many do freelance because they want to). 

Research from the Federal Reserve Bank of San Francisco cited both factors in a study of its own on involuntary part-time workers. It reported that the number of people stuck in part-time jobs is 40 percent higher than expected, and that this is almost entirely because of which industries managed to thrive in the wake of the financial crisis. The San Francisco Fed said that some of the strongest recovery over the years has been in the leisure and hospitality sector and the education and health-services sector, both of which are known for high rates of part-time employment, as well as gig economy platforms, which are generally less stable and lower-paying than full-time work (usually by design). 

At the other end of things, private-sector bonuses not directly tied to performance now represent the largest share of overall pay and benefits cost, 2.8 percent, since 2008, the latest apogee of a trend that has been going on for the past four years. The Chicago Tribune said the average Wall Street bonus is now $184,220, which is 17 percent higher than last year and the closest it has come to the all-time record of $191,360. 

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