According to polls and commentators assessing the situation of Americans, the US economy is still a long way from a healthy recovery. The reasons for the pessimism are all too familiar:
Today, these aspects are no longer aligned with the realities of the 21st century. In the US Economy, success now depends more on:
Consider economic mobility. There are two types.
- First, relative mobility reflects the position of children on the economic ladder compared to their parents’ position-whether they climb higher, stay on the same rung, or end up lower than their parents.
- Second, absolute mobility reflects whether most members of a generation are better off than most members of the previous generation.
The US is fortunate to have both types of economic mobility. According to a Pew study, roughly two-thirds of Americans are earning higher incomes than their parents did at a similar age. According to the study:
- 39 percent of affluents are Baby Boomers (aged 49-67), 20 percent are Millennials (18-31), and about one-third are Generation Xers (32-48).
- 7 in 10 affluents are married, and 41% have children under 18 living in their household.
- Compared to the general population, Hispanics (8 percent vs. 15 percent) and African Americans (7 percent vs. 12 percent) are under-represented in the affluent population, while Asians (7 percents vs. 5 percent) are over-represented.
- 1 in 10 affluents was born outside the US, and 17 percent speak a language other than English at home.
- Two-thirds of affluents are college graduates, compared to 37 percent of the general population.
Looking forward, the following developments could arise from these trends:
- Absolute mobility will continue to increase the number of Americans who are affluent. As we’ve seen, even in the absence of relative mobility, the American population in general is steadily increasing its wealth.
- In the medium term, recent gains in household wealth will continue. It was recently reported that the net worth of American households rose to a new all-time record high of $80.66 trillion in the fourth quarter of 2013.
- Living standards will continue to improve as innovative products and services provide Americans with an ever-growing consumer surplus. As the Digital Revolution unfolds and new technologies deliver even greater performance for even less money, the surplus will keep expanding.
- The advance of digital technology, the energy revolution, and globalization will converge to more than double per capita real GDP over the next two decades.
- The greatest potential threats to greater affluence in the years ahead are burdens of taxes and regulations on individuals and corporations.
All-in-all, there are very good reasons for US economic optimism. Indeed, since preparation for this article was started, there are some positive signs creeping through (such as improvements in employment figures).
If this, and subsequent, Governments can resist the temptation to over-tax individuals and companies, then we should remain positive about the outlook for the US economy in the coming years. This will be good news for all of us, as the saying goes; “when the US sneezes, the world catches a cold”… so when the US is well again, we should all look forward to improved health!
You may also be interested in an article The Continued Resurgence of American Manufacturing published in March 2014, which provides some specific reasons to be optimistic about the future of the American Manufacturing sector.