Monday, October 16, 2006

How the Other Half Lives

I was recently stunned to read Roger Lowenstein's column in Smart Money magazine, even if my conclusions were somewhat different from the author's.

precisely 21 percent of Americans have direct investments in listed stocks. And among those who do, the median portfolio value is $15,000... [Mutual funds] are owned by an even slimmer population - 15 percent. And among those who do own them, the median holding is $40,000.

That stunned me, but I reassured myself that the average Joe and Jane probably has money socked away in retirement accounts, and a house - one of the elements of an American Dream. Well, maybe not ... more from Lowenstein:

[Half of all families] have an indirect ownership in stocks and mutual funds via retirement accounts such as 401(k)s and IRAs. But the median value of such accounts is only $35, fact, half of all families have total financial assets of less than $23,000.

That is incredible, when you think that the median family probably earns more than $35,000. How do they imagine they can retire on less than one year's earnings?

SHAME ON THE REPUBLICANS for not pushing financial education. An ownership society only works when you have informed participants - it is clear we do not, and the coming acopolypse will have to be funded by (horror!) taxpayers and tax increases!

SHAME ON THE DEMOCRATS for not seeking to push this issue either. If they really cared about the average Joe rather than electoral politics, they will stop ranting about outsourcing and start focusing on what really matters!

Among those who drop out of high school, median income is $19,000; for those who graduate $36,000. Among college graduates, the median is a respectable but hardly lavish $73,000. However, seven of 10 Americans are not college graduates. Why so few people go to college, given the rewards, is a mystery economists are yet to solve.

SHAME ON THE DEMOCRATS for not recognizing that the way to a better future for workers is not to try and hold blue collar jobs in the US; it is to improve educational opportunities to transition American workers to college and beyond.

SHAME ON THE REPUBLICANS for not investing adequately in our future. Since our economy is tied to the wages of our workers, there is a simple market to boost wages - encourage market participants to move up the skill ladder. However, as we have seen, participants aren't rational, which is why we need the government to educate and inform, and help people move along the path ... there are things a market doesn't efficiently do by itself!

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