A trio of books on middle class woes

A wave of books about the dwindling prospects of America's middle class is hitting the shelves. Author Nan Mooney has written "(Not) Keeping up with Our Parents: The Decline of the Professional Middle Class." For the book, she interviewed more than 100 social workers, product managers, college administrators, factory-equipment salesmen and other members of the middle class about their financial lives. Here's what they told her, according to a Q&A with Salon.com:

Most of them earned between $30,000 and $70,000 a year, yet despite good educations and respectable incomes, many still shouldered crushing debts and had serious doubts about their financial futures. They all aspire to basic comforts -- a place to live, reliable healthcare, education for themselves and their children -- but come across as a little bewildered by their seemingly perpetual state of financial insecurity. "As you get older, it becomes less okay to admit that you're struggling," one 42-year-old graphic designer tells Mooney. "People just assume that you must be doing okay. I've noticed that those who are still having trouble start to go underground about their financial lives."

Next up with his concerns about the American middle class is Peter Gosselin, an economics reporter with the Los Angeles Times (or, at least he's with the Times as of this current writing. The newspaper is planning to announce a huge layoff next week, which may have influenced Gosselin's mood as he wrote.)

Gosselin is the author of "High Wire: The Precarious Financial Lives of American Families." The book was reviewed in the New York Times last week.

The author focuses on how much more we feel our financial lives are at risk, according to reviewer Noam Scheiber, who writes:

Americans have seen their financial situations grow far less stable over the last few decades, he reports ....

Scouring the data, Gosselin finds that the income of a middle-class family in the early 1970s typically rose or fell by no more than 17 percent in a given year; today, that range is plus or minus 26 percent. And it’s not just the middle class who’ve seen their incomes fluctuate wildly. The most affluent tenth of the country saw a slightly greater rise in volatility.

The cause of this increased turbulence, Gosselin says, is a changing labor market and a decades-long erosion of the corporate and social safety net. A generation ago, when unemployment relief was more generous, when companies provided liberal health and pension benefits and private insurers weren’t as stingy as they are today, a serious illness or the loss of a job usually wasn’t devastating. Now, such a setback is much more likely to bring economic ruin.

Finally, there is "Strapped" from Tamara Draut, who works at the Demos think tank. Her subtitle is "Why America's 20- and 3-Somethings Can't Get Ahead." That pretty much says it all. Draut, like Mooney, places a lot of blame on the rising cost of college and health insurance. Here's a good link if you want to read more.

Bad news and callousness

A story in today's New York Times announces that the "deepening cycle of job loss" might last into 2009 -- bad news for those of us who were hoping for a short recession. Economists are making this prediction based on gloomy sales numbers that U.S. automakers reported on Tuesday. The news reminds me of a pet peeve: the Bush administration's attitude toward job loss. Robert Kimmitt, deputy secretary of the Treasury, wrote an op-ed piece in the Washington Post entitled, "Why Job Churn is Good." He points out that while 55 million Americans left their jobs in 2005, there were 57 million hires that same year. This indicates a flexible and dynamic economy, Kimmitt says, which allows America to compete globally.

The economist in me (I majored in economics in college) likes this argument. But personal experience has hardened me to this blythe treatment of disruption in families' lives. Maybe it can't be helped. Maybe we'll all be better off in the long run, and our economy will have successfully shifted from manufacturing to service -- or whatever the new frontier is.

Here's some of the Times' story today:

Joblessness has accelerated, and employers have slashed working hours even for those on their payrolls, shrinking the size of paychecks just as workers need them the most.

Now, add to that unsavory mix the word from automakers that sales plunged in June — by 28 percent for Ford, 21 percent for Toyota and 18 percent for General Motors — a sharp sign that consumers are pulling back, making manufacturers more likely to cut production and impose more layoffs. Until recently, the weak labor market has been marked more by the reluctance of employers to create new jobs than by mass layoffs.

This sort of news always worries me when Dan is between jobs. I fear that employers will just decide they can't afford that new hire after all -- at least not for now, while the economy is still sliding down and no one can see the bottom.

As for Kimmitt, as I have whined here in the past, employers are still doing old-economy things like offering two weeks' vacation to new hires, even people in their 40s with master's degrees like Dan and me. The rewards, at least in terms of vacation time, are based on longevity. And let's face it, people out of work have less and less bargaining power when the economy sours. So, often, we take the two weeks -- or the lower salary, or work that is far less challenging.

Not surprisingly, when Kimmitt published his piece in January 2007, responses came from the Midwest. Newspaper editorialists in Pennsylvania and Kansas pointed out that "churn" might be fine for urbanites, but rural workers suffered disproportionately.

From the Centre Daily Times in mid-Pennsylvania (no free link available):

For some, churning is positive if the person moves from a job with lower pay and unattractive working conditions to a better situation. But for others, churning results from forced movement -- layoffs or restructuring -- not a deliberate move to a better job.

Contrary to Kimmitt's rosy assessment, statistics on layoffs and plant closures suggest churning is liable to result in long periods of unemployment, forced shifts to other industries and lower wages. Lost wages and decline of steady work are particular problems today for workers living in rural areas and those employed in manufacturing industries or with jobs requiring few skills and little education....

Kimmitt's argument falls short by ignoring the transaction costs associated with shifting jobs. As anyone who has ever lost a job knows, re-employment rates depend on the condition of the local economy or the national economy and often are tied to whether you are willing to bear the cost of relocating.

Low-skill workers, particularly in rural America, are the most vulnerable to displacement caused by increases in productivity and international competition.

Rural workers tend to be less educated than urban workers and were more likely to be displaced. Rural workers also were less likely to be re-employed during the 1997-2003 period than urban workers and for rural workers the length of time out of work was 20 weeks longer than for urban workers.

Upon re-employment, urban workers were more likely to work full time compared with rural workers. And rural workers were more likely to receive a wage less than that provided in their previous employment compared with urban workers.

Yes, such evidence makes me feel very whiny when I complain about reductions in vacation time. But we spent one period when Dan was out of work (in Pennsylvania) for 20 months, and I feel I earned my right to complain after that. Especially in light of people like Kimmitt making little of the personal toll.