Sonny Clark
Diamond Member
- Banned
- #1
America's poor are still heavily in debt
America's poor are still heavily in debt
It's that time of year when Americans are encouraged to spend big on others and on themselves.
But here's the catch: a lot of America still is massively in debt, especially in the lower rungs of the income ladder. Wealthy families have been able to pay off a lot of their debt in recent years, but poorer families have not.
The situation is so bad that Morgan Stanley (MS) says the middle class is "eroding." Too many people have high debt burdens.
It's a trap they just can't get out of. Wages aren't growing for those at the bottom, making it hard to pay off debt.
Two Americas: high-end and low-end
Inequality has become a big issue on the presidential campaign trail. But Morgan Stanley also sees it playing out in the business world. The middle income consumer is disappearing. Retailers must respond by catering to the high and low end.
"Faced with stagnant wages, high debt and rising costs, the middle class is eroded," writes Morgan Stanley Research in a new report "Mind the Inequality Gap."
In Europe, the amount of debt people have increases as their income rises. The poor don't carry a huge debt load, the researchers found.
It's the exact opposite in the U.S. The lower middle class and poor came into the Great Recession with a lot of debt and they haven't been able to pay it down since.
About 1 in 5 American families who make $41,200 or less have what's considered a hefty debt burden -- defined as more than 40% debt-to-income load.
The national statistics mask the ongoing struggle of the poor and middle class. Even if they wanted to be more responsible, it's difficult to pay down debt when incomes aren't rising.
As the Federal Reserve noted in its latest survey of consumer finances: "Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys."
America's poor are still heavily in debt
It's that time of year when Americans are encouraged to spend big on others and on themselves.
But here's the catch: a lot of America still is massively in debt, especially in the lower rungs of the income ladder. Wealthy families have been able to pay off a lot of their debt in recent years, but poorer families have not.
The situation is so bad that Morgan Stanley (MS) says the middle class is "eroding." Too many people have high debt burdens.
It's a trap they just can't get out of. Wages aren't growing for those at the bottom, making it hard to pay off debt.
Two Americas: high-end and low-end
Inequality has become a big issue on the presidential campaign trail. But Morgan Stanley also sees it playing out in the business world. The middle income consumer is disappearing. Retailers must respond by catering to the high and low end.
"Faced with stagnant wages, high debt and rising costs, the middle class is eroded," writes Morgan Stanley Research in a new report "Mind the Inequality Gap."
In Europe, the amount of debt people have increases as their income rises. The poor don't carry a huge debt load, the researchers found.
It's the exact opposite in the U.S. The lower middle class and poor came into the Great Recession with a lot of debt and they haven't been able to pay it down since.
About 1 in 5 American families who make $41,200 or less have what's considered a hefty debt burden -- defined as more than 40% debt-to-income load.
The national statistics mask the ongoing struggle of the poor and middle class. Even if they wanted to be more responsible, it's difficult to pay down debt when incomes aren't rising.
As the Federal Reserve noted in its latest survey of consumer finances: "Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys."
