The Arbor Outlook: Financial Crisis, Wage Stagnation, and Roger Miller

"Two hours of pushing broom... Buys an 8 by 12 four-bit room; I'm a man of means by no means..."
—from "King of the Road," as performed by Roger Miller

We are currently observing the 10th anniversary of the 2008 financial crisis. Meanwhile, politicians and pundits spend more time arguing about who deserves credit for the economy than they do actually trying to sustainably improve it or prepare for the next downturn. Regardless of who deserves credit, there’s no doubt the economy is in better condition than it has been in a long time. But in recent years I’ve increasingly come to think that we’re living in a two-tiered recovery.

On the one hand, those with significant investment assets, access to capital and financial expertise made the last decade a productive one. A sustained period of historically low interest rates helped revive an economy on life support and handsomely rewarded those who were lured back into capital markets. Those skilled in buying and selling businesses, public and private, have been able to borrow more cheaply than at any time in history to finance their ventures. But there were many more citizens without the means to benefit from the improving economy.

A statistic gleaned from the Federal Reserve speaks to this side of the two-tiered recovery story, one which most of the folks I deal with are intuitively familiar — the percentage of the average family’s income generated by wages has dropped 9 percent in the last 15 years, falling from 70 to 61 percent. What’s replaced those wages? Investment income.

But the problem with investment income is that you have to actually own investments to earn it. The folks who don’t own stocks or bonds or other types of financial assets therefore haven’t experienced the same recovery as those who do. The old adage “It takes money to make money” is becoming more accurate over time.

So while one part of the economy has done well in recent years, under the surface we see the economic position of the middle-class stagnating.

The average middle-class American family's net worth is $40,000 less than what it was at the economic peak before the Great Recession, according to the Fed. And real wage growth has been falling since 2015. Declining real wage growth means that people’s purchasing power is still growing, but at a slower and slower pace. Over the last year, a 2.7 percent wage growth was outpaced by a 2.9 percent cost of living increase, so folks’ wages are now buying them less gas and groceries than they did a year ago. That’s a big deal. Real wage growth is one of the best indicators for determining if the average family sees their situation as improving or declining.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.