Future dark for many

Opinion: September 14, 2012 at 12:00a.m.

By Lewis W. DIUGUID

Kansas City Star

Lots of baby boomers face a bleak economic future as more approach retirement, and that won’t help President Barack Obama’s re-election chances.

A recent AARP report showed that those age 50 and up are carrying more mortgage debt than ever, and the increase in the rate of serious mortgage delinquency of older Americans from 2007 to 2011 has outpaced that of younger homeowners.

The report found that 3.5 million loans of people age 50 and up were underwater. In that age group, about 600,000 loans were in foreclosure, and 625,000 more loans were at least 90 days delinquent.

Also from 2007 to 2011, more than 1.5 million older Americans lost their homes because of the mortgage crisis. Unemployment among older workers is high, and they have a tougher time finding jobs.

Lower wages

They also have to live with lower wages, increasing property taxes and fixed incomes. But how did older people in this country — once one of the most financially secure because of nearly 80 years of Social Security, solid savings and interest earnings, pensions and about an 80 percent homeownership rate — become so vulnerable?

The AARP report pins part of the cause on the rising percentage of people carrying mortgage debt as they age. Historically low interest rates encouraged borrowing — until the housing market collapsed. Older Americans tapped their home equity to finance their retirement and other needs.

Living on credit was how Americans kept up financially as their earning power declined, said Rick Wolff in a report and documentary titled, “Capitalism Hits the Fan.”

Wolff, a professor emeritus of economics at the University of Massachusetts, Amherst, wrote that from 1820 to 1970s U.S. workers’ average productivity rose each decade, and so did their real wages. That changed in the 1970s when “real wages stopped rising as U.S. corporations moved operations abroad to pay lower wages and make higher profits, replaced workers with machines (especially computers) and hired ever more U.S. women and immigrants at lower wages than men received.

“Real wages in the later 1970s exceeded wages today,” Wolff wrote. However, American productivity kept rising. Wages stagnated at best, yet “employers’ profits exploded.”

Women

Workers’ consumption of goods and services increased, but on the backs of American women entering the labor force over the last 30 years while husbands took second jobs. The effects haven’t been good. Overworked, underpaid, overconsuming people have higher divorce rates, alienated children, alcoholism and drug dependence.

The AARP report says older workers suffer more health problems, anxiety, suicide attempts, hypertension, cutbacks on food and prescription purchases, depression and stress.

A Federal Reserve study this year showed that median families’ net worth fell from $126,400 in 2007 to $77,300 in 2010 because of lost jobs, pathetic interest on savings and plunging home equity. Baby boomers have shouldered a big chunk of the wealth loss.

Lewis W. Diuguid is a member of The Kansas City Star’s Editorial Board. Distributed by MCT Information Services.