Economists feel pretty upbeat about the prospects for 2014 after roughly five years of tepid, if not pessimistic, forecasts. The U.S. economy grew at a pace of 4.1 percent during the third quarter of 2013, the largest expansion since 2011. Housing prices in the 20 largest cities rose 13.6 percent since October 2012, according to the S&P/Case-Shiller Home Price Index, and the national unemployment rate—while still too high—decreased from 7.3 percent to 7 percent in November. If we keep this up, 2014 may finally be the year of the long-awaited economic recovery.
Even if the U.S. economy returns to a healthier place with better top-line numbers, that still will not solve all of the quandaries to face Americans as they try to build wealth, land better-paying jobs, and get ahead financially. Here is a roundup of the economic issues to watch over the next 12 months for the middle class:
WILL ANYONE HELP THE LONG-TERM UNEMPLOYED? The unemployment rate dropped in November to 7 percent, but that didn't help the 4.1 million people who have been out of the work for more than six months. This group still accounts for roughly 37 percent of jobless Americans, and Washington policymakers can agree on few, if any, plans to reconnect them to the workforce. It will be hard to claim a winning economic recovery until a wider swath of people return to work. That's not just a moral argument—it's one that should concern all Americans. People with jobs earn more money; they pay higher taxes; they feel more comfortable spending money; and overall, their contributions lead to higher productivity.
WILL MIDDLE-CLASS WORKERS SHARE IN THE COUNTRY'S GROWING WEALTH? If you are lucky enough to live in the top tier of the U.S. economy, then life looks great right now. High-income Americans are no longer feeling shy about spending money on big-ticket items like cars. Really, really wealthy people like Bill Gates saw their billionaire wealth grow by a huge margin last year, according to a new index from Bloomberg News. Yet middle-class Americans are not sharing this spate of good news. The median income of U.S. households shrank from 2011 to 2012, according to census data; not everyone keeps enough cash in the stock market to benefit from its recent uptick. If the economic recovery happens in 2014, a key question will be if people in the middle and lower classes profit, too.
WILL A HIGHER MINIMUM WAGE LIFT PEOPLE OUT OF POVERTY? On Jan. 1, 13 states increased their minimum-wage thresholds higher than the federal government's $7.25 per hour. Liberals argue that increasing the minimum wage is a must-do for 2014 (and a major political push) because too many working families remain poor and because of the growing income gap between high- and low-income Americans. Conservatives don't want the federal government to become involved in these decisions, which they believe are best left to market forces. Raising the minimum wage state-by-state will give us a window (and data) to show whether higher hourly wages alone can lift Americans out of poverty.
WHAT WILL STATES' DIFFERENT ECONOMIC STRATEGIES MEAN FOR AMERICANS? The U.S. is rapidly turning into a country where states are engaging in wildly divergent experiments in economic and fiscal policy. Move to Maryland, as one example, and you'll pay higher taxes. You'll also receive greater government protections as a worker. Move to North Carolina, and your tax bill will shrink. You also won't receive the same level of social safety-net services if you lose your job. That's just a few policy areas where two states differ. As more time passes, lawmakers and policy wonks will acquire more data to gauge the success of these state-by-state economic experiments. In the coming years, expect it to provide the two parties with much fodder for their ongoing arguments about the best way deliver economic policy.
HOW INVOLVED WILL THE FEDERAL GOVERNMENT BE IN YOUR LIFE IN 2014? The final big question for 2014 is what role the federal government will continue to play in Americans' economic lives. How long will the Federal Reserve pump money into the economy month after month to try to boost the economic recovery? Will Congress pass an extension of federal emergency unemployment benefits, or find better ways to support the jobless? And, will policymakers make any moves to tackle some of the other pressing concerns of the middle class, like saving for retirement or the high cost of college?