Middle class more vulnerable to financial shock

The Center for American Progress, a self-described non-partisan think-tank that is nonetheless fairly left-wing, has issued a report called "America's Middle Class Still Losing Ground." Authors Christian Weller and Amanda Logan find that middle-class families are less able to weather a financial disaster today than they were as recently as 2000. They write:

--The sharpest deterioration in middle-class financial security is associated with the cost of a medical emergency.

--Drops in personal wealth have contributed to the decline in middle-class financial security. Because house prices started to fall and debt continued to rise in 2007, we also observed the share of families who could weather an unspecified emergency equal to three months of income decrease to 29.4 percent in 2007 from ... 39.4 percent in 2000.

--The share of families who had enough resources to cover a spell of unemployment has declined since 2000. (To 44.1 percent in 2007 from 51 percent in 2000.)

Weller ads in a video presentation that middle-class Americans have been whalloped by a "trifecta" of decline in wealth: a stock market crash in 2001 that is repeating itself in 2008; falling home prices; and high and increasing mortgage levels.

The report's prescription includes a bigger earned income tax credit, easier access to union membership, universal health care and a stronger program of unemployment insurance. At the same time, the Center's David Madland finds that unemployment figures hide some of the job loss that is happening today. Many people are being asked to work fewer hours for less pay. And only 35 percent of people who are unemployed are getting over the hurdles to actually receive unemployment checks.

Madland writes:

The job numbers released today by the Department of Labor provide further evidence that that the economy is not working for most Americans, with new indications that the labor market is likely to remain weak for some time. In July, the economy lost another 51,000 jobs, and unemployment increased to 5.7 percent from 5.5 percent, its highest level since March of 2004. Job losses were widespread, declining in construction, manufacturing and several service industries....

The economy has lost jobs for seven straight months—the longest stretch since the period ending May 2002—shedding 460,000 jobs since January. This is the longest stretch of job loss since the period ending May 2002 – the tail of the last recession....

Not only are people losing jobs, but those with jobs are increasingly likely to have their hours reduced to part-time. The number of people who are working part time involuntarily—predominantly those who have lost hours or cannot find full-time work—jumped to 5.7 million last month, an increase of almost 1.4 million over the last 12 months. And many people who have lost jobs are having significant difficulty finding new ones. The number of people who have been unemployed for 27 weeks or longer increased to 1.7 million people, up from 1.6 million the previous month and 1.3 million the previous July.

... when Congress returns from their August recess, one of the first things they should address are reforms to unemployment insurance. They should temporarily extend the length of time the unemployed can collect benefits, and significantly expand the reach of unemployment insurance. The reason: currently only about 35 percent of those who are unemployed receive unemployment benefits due to structural rigidities in the system that do not take into account new work patterns in the economy.