Is a booming economy hiding working-class suffering? A look at who is thriving and who is not
Medical bills, student loans, rising housing costs and underemployment are some of the challenges for middle- and low-income Americans
SALT LAKE CITY — The view from the top of the economy is heady: Low unemployment, a healthy stock market and plenty of high-fives because things genuinely are rolling along pretty well for many American families.
Most Americans are feeling better about their finances. A recent Gallup poll found 61% of Americans say they are better off than they were three years ago.
But at the base of the income mountain — and even along the trails mid-height — there’s suffering, too. Not everyone finds life in America affordable. While unemployment’s down, housing and food costs are up, student loan debt is soaring and medical bills are threatening to kick some families off a cliff.
Consider these facts, to be unpacked below:
- Pew Research Center reports that “Americans’ paychecks are bigger than 40 years ago, but purchasing power has hardly budged.”
- Some U.S. workers — especially millennials — are putting in longer hours because certain costs, like housing, have been rising faster than income, according to a new study from the Bureau of Labor Statistics.
- Annual average earnings growth has remained below 3% while housing prices rose 5%, according to Reuters.
- Housing costs are rising faster than wage growth, driven by a national housing shortage that is expected to continue, according to a Reuters poll of property market analysts.
- Millennials are putting off home ownership, according to The Urban Institute, which argues they are struggling to save a down payment with high rents and student loan payments.
- Student loan debt has reached $1.6 trillion and now exceeds accumulated car loans and even credit card debt, according to the Harvard Business Review.
- 1 in 7 families is struggling to pay medical bills, as reported last week by the Centers for Disease Control and Prevention.
“I think that maybe we lowered the bar about what it means to be thriving when the Great Recession came and so many people were in such desperation trying to make ends meet,” said Elise Gould, senior economist at the Economic Policy Institute.
The job market has improved, with “jobs being added, by and large, across the economy,” Gould told the Deseret News, but with limited wage growth acting as an anchor instead of a balloon, most families are not making great gains.
Flourishing and floundering families
Gallup said the fact that 61% of those polled say they’re feeling better about their finances is a milestone. That’s a higher percentage than in recent election cycles that featured an incumbent president running for reelection. Gallup reported that prior to the 1992, 1996 and 2004 elections, Americans were divided, with 50% saying they were better off; in 2012, as America was climbing out of the Great Recession, 45% felt that way.
Who gets ahead and who doesn’t is linked to family structure. An analysis of census data by Wendy Wang and Bradford Wilcox at the Institute for Family Studies found intact families have more economic success: “The median family income in 2018 was $100,000 for U.S. adults ages 25-64 with children who are in their first marriages and $96,400 for parents in their second or subsequent marriages. Incomes are much lower for parents who have never married, at $32,000, and for divorced parents, whose median income was $43,350,” Wang said.
Who’s thriving depends partly on one’s prospects and for many Americans that’s hard to predict. While unemployment has fallen, Stephanie Coontz, director of research for the Council on Contemporary Families, said wages and hours are “less predictable and more volatile than in the past.” She believes “the things you need for future security — health care, college tuition for your kids or yourself and housing — have all gotten relatively more expensive compared to most people’s incomes.”
The problem is that “the effect of inflation means that the same U.S. $1 bill buys less stuff over time as prices increase,” David Salkever, professor emeritus of public policy at the University of Maryland, wrote in The Conversation recently.
“At first glance, the latest data — which came out on Feb. 7 — looks pretty good. They show nominal hourly earnings rose 3.1% in January from a year earlier. But the operative word here is nominal, which means not adjusted for changes in the cost of living. ... The real, inflation-adjusted data show most U.S. workers have not benefited from the growing economy.”
Meanwhile, factors like student debt and housing costs hurt some families.
The $1.6 trillion in student loan debt is likely to reach $2 trillion next year, according to a Harvard Business Review article written by Daniel M. Johnson, president emeritus and professor of public policy and economic development at the University of Toledo. He also wrote “The Uncertain Future of American Public Higher Education.”
Gould pointed out that much of the student debt is owed by people who didn’t finish college — and they won’t get any financial rewards associated with earning a degree.
Millennials, now the largest generation of working adults — the oldest are now 39 — are more likely to be struggling. The Washington Post reported last fall that “millennials are significantly worse off financially than prior generations. The net worth of Americans in the 18-35 bracket has dropped 34% since 1996,” according to a May study from Deloitte, which found their average net worth was less than $8,000.
The author noted that “costs for education have climbed 65% in the past decade, and the price of food has risen 26%. Add on housing, health care and transportation expenses, and millennials’ behaviors are often less a reflection of their preferences than the result of being strapped for cash.”
That 1 in 7 families struggling with medical bills reported by the CDC is actually down from its peak in 2011 — when the Affordable Care Act was being rolled out — but the number has leveled off in the past couple of years. The CDC said that’s cause for concern because it’s not really improving.
“People who are in families with problems paying medical bills may experience serious financial consequences, such as having problems with paying for food, clothing or housing, and filing for bankruptcy,” wrote study authors Amy E. Cha and Robin A. Cohen.
The challenge isn’t just that they lack adequate insurance, said Gould. Insurance doesn’t cover everything and even those with insurance may have seen their deductibles, copayments and coinsurance — the triplets of out-of-pocket health care costs — go up.
Most families don’t have much disposable income, she said, pointing out studies that find a large number of families can’t afford a $400 emergency like a car repair.
Gail Trauco, patient advocate and founder of Medical Bill 911, helps families detangle medical bills and figure how to manage them. She said she sees young couples struggle financially just to start a family. A lot of hospitals ask for sizable up-front retainers to deliver a baby, for instance. And those are young families that have health insurance.
Pew said wage gains have not been evenly distributed among workers. “Wage gains have gone largely to the highest earners. Since 2000, usual weekly wages have risen 3% (in real terms) among workers in the lowest tenth of the earnings distribution and 4.3% among the lowest quarter. But among people in the top tenth of the distribution, real wages have risen a cumulative 15.7%, to $2,112 a week — nearly five times the usual weekly earnings of the bottom tenth ($426),” according to the report.
Jaime-Alexis Fowler, founder and executive director of Empower Work, a national nonprofit crisis text line for workers, said trained peer counselors deal all the time with workers struggling with caretaker issues, those stitching together employment from two or three part-time jobs, as well as people in small towns who can’t find new jobs and have to move away or stay in an existing job that doesn’t satisfy personal or economic needs.
Lots of workers don’t feel like they’re thriving, she said. “We see the daily economic concerns — bills, student loans, health care — tied to larger concerns about pay and dignity. Many workers feel like they’re caught in an endless cycle with little support or recourse.”
Empower Work hears from many who are looking for full-time employment and not finding it, she said. Some have inadequate benefits or lack leave to care for ailing children or aging parents. Even the flu can be devastating for an employee: “I am really sick and my manager still wants me to come to work. I don’t want to make anyone sick, but need the income and have no sick time.”
Even highly skilled workers run into roadblocks. Many employers use noncompete agreements to keep them in place, Gould said. “One of the best ways to increase your wages is to get an offer and go back to the employer and say how much do you want me?” Workers in specialized occupations may have given up their ability to bargain for better wages.