What Can They Buy?

The median family income in the United States for the year 2011 was $31,111.  This equates to an hourly wage of $15.00 per hour.  What this means is that 50% or one-half of American families earn $31,111 or less.  The real question this raises is, just what can they buy.  We are still experiencing the effects of the Great Recession where far too many people are still without jobs.  While companies have enjoyed record profits there is still insufficient demand to create the number of jobs needed to return to full employment.  Without full employment, wages will still remain low due to the competition for the few jobs that become available.  The impact on American manufacturing should be obvious, but the political right likes to ignore reality.  That reality is just what can a family of four purchase other than basic necessities of life.   This is important because the “job creators” only create jobs when they have customers for their products or services.  On an income of $31,111 per year, what will the family of four purchase that will result in enough demand to cause the “job creators” to hire more people necessary to increase production or to provide more services.  Unfortunately, the answer to that question is that a family of four earning $31,111 per year will not buy anything.  After paying for housing, food, medical expenses (or insurance), and taxes (while they will pay no federal income tax, one way or another they will pay at least 15% or $4600 in sales, property, and payroll taxes) this median family will have nothing left to spend on clothing, toys, cars, dining out, vacations, or anything else.  On an income of $31,111 only $25600 can be spent on all of the costs of living.  If housing can be found costing no more than $750.00 per month $16,600 or $1300 per month is left for food, utilities, phone, and everything else. Gas up the car once a week and what is left is now $1140 (assuming that the car is older and paid for).  Henry Ford was wise enough to realize that his success was dependent upon the ability of his employees to purchase the cars he (they) manufactured.  Unfortunately, those on the right who think American public sector and private sector workers are overpaid do not think that way.  The path out of recession is not falling wages and austerity.  The path out of recession is full employment and rising wages.  If the private sector is not creating well paying jobs it is up to the public sector to step in and do so.