Workers Can’t Afford to Thrive

Before the SARS Covid-19 Scourge there were lot of lousy jobs out there. Mostly service and retail jobs. Now lots of delivery jobs out there. These jobs do not pay enough for the middle class to thrive even with a $15/hour minimum wage. Both parents have to work or people have multiple jobs to pay bills.

Brookings Institute research “found that 53 million Americans between the ages of 18 to 64—accounting for 44% of all workers—qualify as “low-wage.” Their median hourly wages are $10.22, and median annual earnings are about $18,000.” 26% of low-wage workers (14 million people) are the only earners in their families, getting by on median annual earnings of about $20,000.

Lots of our neighbors, family and friends are laid off, furloughed or out of work. The current U6 unemployment rate including discouraged and part time workers looking for full time in April 2020 is 22.80%. 36.5 million workers have filed for unemployment. More people have lost one of several jobs and well under the poverty line.

The Manhattan Institute created a Cost of Thriving Index for the Middle Class. Rather than complicated inflation adjustments, it measured the cost of renting 40th percentile 3 bedroom home, car ownership, annual family medical insurance, and one semester of public college. These expenses are divided by median middle class weekly salaries.  This determines how many weeks of work to cover expenses.

Results: In 1985, the average male worked 30 weeks to cover expenses. In 2018 salaries declined compared to expenses requiring 53 weeks. Women had it worse. In 1985 took 45 weeks to cover expenses. In 2018 required 66 weeks of work. Neither situation works for a single parent.

Is there any wonder people do not feel better off? Neither political party has been successful improving the life of workers. Both parties have failed the electorate.

Add in a significantly reduced global economy post Covid-19, we are looking at people needing help in large numbers. The federal, state and local governments are seeing drastically reduced tax revenues which will add to the issue.

Some Republicans in DC are suggesting to reduce SNAP aka “food stamps” benefits in a pandemic. Are they GIVING the election to Joe Biden? Registered Republican here NOT voting for anyone supporting this horrible idea of starving vulnerable people.

Do not have a magic wand to make this go away. We are going to have to make tough choices and look for changes to help everyone thrive.

References below:
Why the ‘great’ jobs market was always an illusion
https://www.marketwatch.com/story/why-the-great-jobs-market-was-always-an-illusion-2020-05-14?mod=home-page

Why the average male can no longer cover basic expenses for his family
https://www.foxbusiness.com/economy/average-male-earnings-basic-expenses

The Cost-of-Thriving Index: Reevaluating the Prosperity of the American Family
https://www.manhattan-institute.org/reevaluating-prosperity-of-american-family
report
https://media4.manhattan-institute.org/sites/default/files/the-cost-of-thriving-index-OC.pdf

Labor Day Thoughts

The late Sen. John McCain never forgot the soldier or average person in his career. Let us not forget our neighbors working in factories, warehouses, retail and services. 40% of working people do not make enough to live comfortably. They struggle to pay rent, groceries, healthcare or utilities. Any unexpected expenses or hardship derails being able to pay bills. Even though unemployment is down, food insecurity is on the rise.

Why? Middle-wage workers’ hourly wage is only up 6% since 1979. Low-wage workers’ wages are down 5%.  Outsourcing, the rise of a global workforce, and shrinking unionization has weakened the power to ask for raises. 

Education, housing and medical care have all gone way up. Fewer jobs offer stable hours or health insurance creating no safety net. Imagine you are on disability raising a teenager like my childhood friend.  My sister, trying to get disability for 3 years, lives on half of what he makes.  Hard to make your money last till the end of the month on so little.

All governments are in too much debt now to be able to do more. They need businesses growing their economy. Inflation needs to continue to rise, so governments get out of their overspending and over promising. However inflation hurts people on fixed income.  There are no easy ‘tax the rich’ solutions. Hard choices have to be made to cut spending and raise taxes.

Middle-wage workers may save some, but mostly rely on Social Security to retire.  Low-wage workers are completely dependent on Social Security. Yet healthcare costs are taking more every year, and your spouse being ill or dying can bankrupt you.

Was taught there are no unimportant jobs growing up. Everything has to be done by someone to contribute to success. Everyone is important. 

What can we do to care for family, friends and neighbors? $15 per hour minimum wages? Health care for all? Guaranteed work for all? Mental health treatment for all? We need ideas and we need action. Take some time this weekend to think how we can help.

Financially Impotent Secret Shame of Middle Class Americans

Neal Gabler is a brave man. He writes openly about his own financial troubles in “The Secret Shame of Middle-Class Americans” in the May issue of The Atlantic. 47% of Americans cannot raise $400 for a minor emergency, and Neal is one.

Mind you Neal is a successful writer, publishing 5 books, writing television scripts, and reviewed movies on PBS for 3 years. However being a writer is not a path to riches. Neal admits to making mistakes - his wife quitting work, living in an expensive city, more home than they could afford, sending his children to expensive universities, using a 401K to pay for a wedding. Neal knows borrowing money just to pay bills.

Credit Howard Gold for his commentary on Neal’s article. Howard estimates living the American Dream costs $130,000 a year for a family of four. Only 1 in 8 families earn that much. The median income is $53,657 per the US Census.

The truth is in a global economy incomes have stopped growing. The median family income peaked around $57,000 in 1999. Companies cannot pay as much when other companies sell completive products for less. Compensation has dropped 5% of GDP from 1970 to 2013 per FRED. Our salaries have not kept up (unless you have a high demand profession/skill).

We are uneducated money managers. We spend too much, save too little, and do not manage risk well. Was budgeting ever taught in school? How about picking investments? Look for information on the Internet, and you will find people selling you something. Not always the information you need. Retirees are going from stable pensions to self-managing 401Ks and IRAs. We rely too much on Social Security.

We are no longer getting ahead. Now you know why Donald Trump and Bernie Sanders are so popular. A great Bruce Eric Kaplan’s New Yorker cartoon says it all, “We thought it was a rough patch, but it turned out to be our life.”

Personally have dug out from failing industries, running my own business, real estate investment losses, and returned to manufacturing engineering. Had to move to another state, and my wife has not been able to find work here for 3 years. Most people would think we are lucky. No, it has taken years hard work.

We live frugally, paying off a median priced house, no other debt, save over 20%, and I drive an 18-year-old very used Volvo to work. Probably can’t retire before 70 and would like to work 10-15 years past that.

What can you do? Spend less than you make, pay off debt, increase your savings with every raise, educate yourself, develop more skill, buy insurance, take risks, and develop resilience.

Hard times happen to us all. You can do better.

Read Neal Gabler’s “The Secret Shame of Middle-Class Americans”

Read Howard Gold’s “We’re going broke chasing the American Dream”