With less stable retirement savings on hand, consumers again have less spending money to pour into the economy.
Stagnant wages are also playing into this situation. A study last year by the Royal Bank of Canada found that pay for new hires was lagging behind that of workers who didn’t lose their job during the recession. With more workers than there are jobs, there’s less incentive for companies to pay higher salaries. This also restricts the amount of money people – even those who are working – have in their pockets.
“A source of growth is consumption,” said Paul Osterman, a professor at the MIT Sloan School of Management. “As wages stagnate, and unemployment worsens, it feeds on itself.”
In other words, low wages and temporary and nonexistent jobs make it difficult for consumers to spend. Without their spending, fewer jobs can be created, and the stagnation of the economy becomes entrenched.
That's brought many low-wage workers in logistics and fast food out in the streets, as they protest that they can't live on their current wages. But with many others willing to take their jobs, it may be difficult for them to change their conditions at work.
"Wages cant get any lower – they could be at their jobs for 10, 15, 20 years, and still be making the same amount," said Jonathan Westin, the campaign director of New York Communities for Change, which helped organize the fast food protests. "Right now, there's no path to break into the middle class."
Recent government data show that consumer spending is finally starting to accelerate again, growing 0.2% in January. But that’s nearly four years after the recession officially ended. And the personal savings rate was 2.4% in January, the lowest monthly level since late 2007. It raises the question – if jobs were more stable, would savings be higher, and would consumer spending have started growing sooner? If the workplace was a more stable place, would the economy still be struggling?