The retirement plans of more and more Americans are about as connected to reality as Grimm’s Fairy Tales. Grim is exactly what it is going to be for these folks when, in their 70s, their 401(k)s have petered out, they have no pensions and no income except what they get from the tottering Social Security system.
Financial experts drone on about how today’s younger couples need to be tucking away an ample share of their paychecks into 401(k) plans in order to avert a destitute old age. It’s easy for them to scold. People in their world live at a socioeconomic level where manipulation of exotic financial products turns the manipulators into billionaires, like Rumpelstiltskin spinning straw into gold. Lower down the wealth scale where most Americans live, the tale is not so rosy.
Companies are getting along with fewer employees and asking them to work harder for stagnant pay. Young people with college degrees and deep student loan debt are stalled, looking for jobs that are not yet there. Young people without college degrees are seeking jobs that long ago went overseas and face a life mired in menial, minimum-wage jobs.
Good paying unionized employment with generous benefits is disappearing. Company pensions are as rare as California condors. Many middle-class couples with kids are barely making house payments and putting food on the table. Socking away more than a token amount into a savings plan is an unreachable goal.
To see where this all might be going, check out this month’s Atlantic magazine. An article by Ethan Devine describes what has happened since the Japanese economy took a steep dive in the early 1990s after Japan’s huge real estate bubble popped. Just one statistic tells much of the story: "In 1992," Devine wrote, "80 percent of young Japanese workers had regular jobs. By 2006, half were temps."
Half of an entire generation of young Japanese have never been able to land a full-time job. Many in this dire situation are entering their 40s with no prospect of permanent employment. Two decades ago, when the Japanese economy tanked, companies cut way back on hiring and worker training and they have not reversed that policy since.
The result is a stagnant economy in which younger Japanese without real jobs have not been able to get the skills that companies need, nor have they become the kind of affluent consumers that could kick-start the economy.
The United States is not there yet, but is trending in Japan’s direction. The U.S. has the additional challenge of millions of under-skilled and under-educated immigrants who cannot get beyond low paying agricultural or service jobs.
Add up the stark realities and the future does not look bright. And yet, if their rhetoric is any indication, America’s politicians still believe the hoariest fairy tale of all -- the one about the American Dream.
These days, the dream is coming true for fewer and fewer people; mostly those who start life with an economic advantage or with unusual intelligence and talent. The dream has become far more elusive for those with average means and average brains. They have been caught up in a globalized race to the bottom in which manufacturing jobs have gone to cheap laborers and robots and retraining programs have not kept up with the demand for higher skills.
Meanwhile, folks in Congress continue to act as if nothing has changed and just a little tinkering with taxes and regulations will fix everything.
There will be many alarm bells ahead as this plays out. Expect to hear a rising din as more and more Americans reach retirement age without a realistic way to support themselves for an additional 25 years. That’s when we might wake from our dream and finally have to face reality.