by Helium01

Created on: October 13, 2010

Despite numerous recent claims by federal government officials that the recent recession is over, there is still a large section of the American population that disagrees with this assertion.

“Main Street” is still suffering

While the stream of rhetoric aimed at “Main Street versus Wall Street” has died down considerably when compared to 2009, the reality is that “Wall Street” has, in fact, benefited from governmental bailouts and other measures undertaken by the government to stimulate the economy, while “Main Street” continues to suffer, mostly due to persistent unemployment.

Wrong reactions in the face of the Recession

One phenomenon that perpetuates this difference in ability to recover is the corporations’ reaction to the recession in 2008 and 2009. Specifically, corporations laid off a large number of workers, then required the remaining workers to pick up the slack.

This permitted companies to pay executives, and others at the top of the compensation scheme, at the same rates. Subsequently, once companies stabilized, they hesitated to re-hire and continue to remain slow to begin taking in new hires.

The consequences of companies’ wrong measures

As a result, the unemployed workforce remains over-skilled yet out of work. Consumer credit companies, such as banks and their subsidiaries, also took advantage of the economic crunch to raise interest rates on credit card accounts-even when there was no default on the part of the borrower.

This permitted banks to continue to make money while those who were already struggling saw credit card bills skyrocket, with no additional payment going toward reducing capital. This tactic will keep “Main Street” consumer in debt for a longer period of time, with higher payoffs to banks.

How companies should curb unemployment

Corporations are also raising capital at low costs to the corporation, but stockpiling it in cash reserves as opposed to investing in human capital or even factories or equipment. An investment in human capital - i.e., hiring people, would result in easing unemployment.

Similarly, building new factories or purchasing new equipment would indirectly result in higher employment figures.

Companies are still adamant to “return the favor”

However, a year after begging the government for assistance, corporations are refusing to contribute to the government’s efforts to fix the economy and reduce the unemployment rates.

In addition, the stock market bounced back to a considerable degree in the past year and a half, resulting in gains to those who could afford to stay in the market even in the downturn.

This recovery is evident in the performance of mutual funds and other investments that derive their value from stocks. The disparity between “Wall Street” and “Main Street” played a part here as well, as most people who suffered from layoffs were not able to invest in the stock market during the recession.

Evidently, companies should step in and fill the gap between “Wall Street” and “Main Street” other than complaining of how hard hit they were as the Recession spared no one.

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