more than a week in advance? How does the woman working the front office set up a time to take her elderly mother in for checkups and physical therapy if her hours change every three days?
What about the food-service people and office cleaners I speak with in Massachusetts? Working two or three jobs is an economic necessity for them as they try to support their families, but with shifting hours in most places, it’s hard for them to piece together schedules that will let them show up when called. Some say they look for all-night cleaning jobs so they can have their days free to take second and third jobs. Childcare is a nightmare. No wonder that woman I met falls asleep the minute she gets to her mother’s house.
It’s a vicious double crunch: low wages and unpredictable schedules combine to make life an unending struggle for millions of Americans. It all works great for Walmart or the food-service company, but for people like Gina and her friend Nicole, it means they can barely scratch by. And it also means they are likely to keep on scratching by for the rest of their lives.
ANOTHER ONE-TWO PUNCH
I think a lot about the risks families face. Maybe anyone would do the same if she had watched her family go from driving around town in an almost-new station wagon to hearing her mother cry for days at a time as she faced the possibility that the family would be put out on the street. But what strikes me now is how much risk has changed. Long before I was born, people lost jobs and got sick and made bad decisions. My family lived through a very tough time when my daddy had a heart attack, but we recovered. The difference is that today’s families live much closer to the edge of a financial cliff—so close that millions of people can feel the bits of rock slipping under their feet long before big trouble strikes.
I’ve described this change before. I’ve written more than one book about it. I’ve talked about it. Sometimes I’ve even shouted about it. But the problem keeps getting worse.
Families today have been hit by a one-two punch. First, income. The best available apples-to-apples comparison of inflation-adjusted earnings shows what the typical fully employed man earned back in the 1970s and what that same fully employed man earns today. The picture isn’t pretty. As the GDP has doubled and almost doubled again, as corporations have piled up record profits, as the country has gotten wealthier, and as the number of billionaires has exploded, the average man working full-time today earns about what the average man earned back in 1970. Nearly half a century has gone by, and the guy right in the middle of the pack is making about what his granddad did.
The second punch that’s landed on families is expenses. If costs had stayed the same over the past few decades, families would be okay—or, at least, they would be in about the same position as they were thirty-five years ago. Not advancing but not falling behind, either. But that didn’t happen. Total costs are up, way up. True, families have cut back on some kinds of expenses. Today, the average family spends less on food (including eating out), less on clothing, less on appliances, and less on furniture than a comparable family did back in 1971. In other words, families have been pretty careful about their day-to-day spending, but it hasn’t saved them.
The problem is that the other expenses—the big, fixed expenses—have shot through the roof and blown apart the family budget. Adjusted for inflation, families today spend more on transportation, more on housing, and more on health insurance. And for all those families with small children and no one at home during the day, the cost of childcare has doubled, doubled again, and doubled once more. Families have pinched pennies on groceries and clothing, but these big, recurring expenses have blown them right over a financial cliff.
From 1970 to 2015, families cut some expenses and income went up a little, but big, fixed expenses skyrocketed.
This one-two punch—flat incomes and rising expenses—has hit the middle class squarely in the gut.
Beginning in the 1970s, many families responded to the growing financial pressure by sending everyone to work. Before then, it was usually just Dad. But as his paycheck flattened, everyone looked for ways to earn—Dad, Mom, and sometimes even the kids. And it helped. As more women took jobs, family incomes went up, and the family-income curve kept rising from the 1970s until the early 2000s. More family members drawing paychecks meant the family made more money overall.
But this new solution came with its own problems. First, many families don’t have two people who can go to work. A lot of couples can pull in two incomes, but plenty of them can’t. And America has lots of singles—single moms, single dads, singles on their own—and they are flat out of luck. Nicole would love to have someone else in her life who could help pay the rent and raise her baby, but that someone took off a long time ago—and she’s got to build some security right now.
And that’s one more double bind: Nicole and every other single person trying to make it face the same rising expenses that couples face. They struggle with more expensive health care, more expensive housing, more expensive education—the same costs that led other households to send both Dad and Mom to work—but they can’t send more than one person to work. Instead, they have only one paycheck to keep them afloat.
Even two-income families began to struggle. There were new costs for childcare, transportation, and work clothes. There was more eating out and less mending. That second paycheck wasn’t all gravy. On average, full-time care for kids under four now costs more than in-state college tuition.
With everyone in the workforce, new risks began creeping in at the edges. My stay-at-home mom hadn’t planned it that way, but when trouble hit, she was our family’s safety net. After Daddy had a heart attack, she went to work and brought home a paycheck. No, it wasn’t a big paycheck, but it was a new paycheck. Today all those single parents flying solo and couples with both partners already working don’t have someone new to send to work if there’s a crisis. So if the baby gets sick or Grandma falls and breaks her hip, someone has to stay home—and that will cost the family money. And if one of the wage earners becomes seriously ill or is laid off, there’s no additional partner to earn a new paycheck. The risks are high, and the safety net has disappeared.
Back in the early 1970s, when the typical family was earning just one income, they were able to put away about 11 percent of their take-home pay in savings. They also had only a sliver of credit card debt—less than 1 percent of their disposable income. But the income/expenses squeeze today means that families have cut their savings by two-thirds while their debt has multiplied a shocking fifteen times.
Now when something goes wrong, they have no savings to fall back on and they are already loaded with debt. (This was the story I told in The Two-Income Trap, a book I wrote in 2003 with my daughter, Amelia Tyagi.) Suddenly, when anything goes wrong, all those good, hardworking, solidly middle-class families are tumbling over a cliff.
Gina and Darren fell off that cliff. When both of them had good jobs, they bought a home and then poured every nickel, including their savings and retirement accounts, into keeping it. When Darren couldn’t get work or when Gina got sick, it hit their budget like a grenade. And they never had a way to pick up the
