The Great Risk Shift

A lot of Republicans–and media types–profess confusion over why polls are showing that Americans in general don’t believe the US economy is ‘turning the corner’ and ‘getting better’ as the president insists it is. After all, some of the economic indicators aren’t as bad as they were a couple of years ago when Bush’s tax cuts helped shove a slightly faltering economy over the cliff into a full-blown recession. About a third of the jobs lost during Bush’s first three years have been made up in the last eight months; unemployment appears to be going down slightly; and Wall Street (up until this week anyway) has been reacting positively: stocks and investments have been up. Is this simply a problem of perception?

FTT has argued that it is far from that, that our ‘perception’ is based on hard-core economic realities that have been ignored both by those in power and by a majority of the media, neither of whom seem to be terribly interested. Wages are stagnant and have been since trickle-down began in the 80’s, yet our taxes are up, our costs are up, and we’re working longer hours than at any time since 1969. Our jobs are disappearing overseas at an alarming rate and being replaced by lower-paying service-sector jobs (often half what we were getting before–or less). Pension funds are under attack, and the Republicans want to privatize Social Security even as they raid it.

The last couple of items I spoke of referred to perception in the sense that they are not only important for our understanding of what’s happening right now but for understanding what we expect to happen in the future. We perceive that in an atmosphere where corporations continue to behave as if we’re just cannon fodder they can dispense with whenever they need to shore up their profit margin a tad, our jobs aren’t very secure. Therefore our future isn’t very secure. Therefore we don’t feel secure about the future. Since one’s ‘perception’ of one’s security is a sizable portion of what we think about when asked if we feel things ‘are getting better’, even if we’re hanging on at the moment, we’re likely to say No. ‘Getting better’ to us doesn’t mean that the numbers have been better the last three months; it means the threats to our future stability have decreased.

Jacob Hacker, a Yale Professor of Political Science, has been studying the factors that comprise a feeling of ‘security’ and measuring them. In a New Republic article, Hacker argues that the actual income squeeze from which we’re all suffering is less a factor in our attitude toward the economy that our perception of how secure we are–or aren’t. In other words, the income squeeze wouldn’t be affecting us so much if we saw signs that it was about to end. And we don’t. According to Hacker, we have good reason not to.

[T]he income squeeze that families face is not exactly the same as insecurity. Insecurity is something larger–the risk of large drops in living standards caused by loss of income or catastrophic expense. And, my research suggests, insecurity is something that more and more Americans, even the relatively well off, are confronting.

The signs are everywhere. Fourteen million more Americans lack health insurance now than two decades ago. Meanwhile, corporations have abandoned “defined-benefit pensions” that offer a fixed payment in retirement in favor of more risky “defined-contribution” plans like 401(k)s. And, according to Princeton economist Henry Farber, the effect of job loss on work hours, pay, and prospects for reemployment has worsened substantially since the 1980s. Indeed, in area after area, there’s evidence of a vast shift in the economic security of most Americans–a massive transfer of financial risk from corporations and the government onto families and individuals.

This great risk shift has gone surprisingly underreported. Though we’ve heard about economic hardship, most of the stories concern static measures–poverty, inequality, wages, joblessness. That’s in large part because no standard economic statistic tries to assess the stability of family income. We know with great precision how many Americans are rich and poor at any moment and how large the gap is between the bottom and the top. But we know next to nothing about the extent to which their economic status changes over time or what causes these shifts.

In response, I have spent the last couple of years trying to assemble new figures on changes in family income, aided by Professor Nigar Nargis of the University of Dhaka. Our research has centered on the Panel Study of Income Dynamics–a nearly 40-year project that tracks the same families from year to year and, hence, provides unique insights into how and why incomes change over time.

What has become clear from this research is that family incomes rise and fall a lot–far more than one would suspect just looking at income-distribution figures.


The search for economic security reflects a basic human desire to guard against losing what one already has.Judged on this basis, what my evidence shows is deeply troubling. When I started out, I expected to see a rise in the instability of family income. But nothing prepared me for the sheer magnitude of the increase. At its peak in the mid-’90s, income instability was almost five times as great as it was in the early ’70s, and, although it dropped somewhat during the late ’90s (my data end in 1999), it has never fallen below twice its starting level. By comparison, permanent income differences across families have risen by a more modest, if still troubling, 50 percent over the same period.

The full explanation for this dramatic rise in instability is still unclear, but two causes loom large. The first, and most obvious, is changes in the nature of work. In today’s postindustrial economy, less skilled workers are much more vulnerable than when unionized, manufacturing labor was more of the norm. (Not surprisingly, instability is greater for families headed by less educated workers, though it has actually risen more quickly in the last decade for workers who went to college.) Workplace benefits, such as health insurance and pensions, have been on the chopping block. And corporate America increasingly relies on part-time, contingent, and contract workers–all of whom enjoy precious little security.

The second overarching cause of increased insecurity is a shift we often take for granted: the movement of women from home to work. As mothers have entered the labor force in increasing numbers, families have gained a second income, which most desperately need. But they’ve also had to take on new expenses and face the increased job insecurity of having two family members in the workforce.

A stunning finding from my research illustrates this double-edged effect: When adjusted to account for the expenses a family of a given size incurs, a family’s total income actually falls when a couple starts living together. That’s not, of course, because families in which there are two potential earners receive less in earnings. It’s because they are likely to receive less in public benefits and to pay more in taxes just as their family size increases–and so their overall economic standing drops. Divorce and separation obviously aren’t good for income security. But it turns out that marriage and cohabitation aren’t a guarantee of it either.

All this reveals a truth often forgotten amid talk of “family values”: The United States has never done much to deal with the income risks that come from having both mom and dad in the workforce–from child care costs, to the need for time off to have kids and care for sick family members, to the increased risk to accustomed standards of living that plague families dependent on two jobs. We live in a twenty-first century economy dominated by two-earner families. Yet, social protections for working Americans have changed remarkably little since the mid-twentieth century–and, when they have changed, they have usually been cut, not expanded.

This isn’t a coincidence, of course. The last two decades have witnessed a revival of the American credo of personal responsibility, championed by conservatives as an all-purpose tonic to every social ill. Bush voiced the credo while criticizing Kerry in May: “My opponent is against personal retirement accounts, against giving patients more control over their medical decisions through health savings accounts, against providing parents more choices over education for their children, against tax relief for all Americans. He seems to be against every idea that gives Americans more authority and more choices and more control over their own lives.” To the extent government has any role to play in this everyone-on-their-own vision, it is limited to giving people tax breaks to encourage them to save and invest on their own.

Not surprisingly, then, spending on social programs has barely budged over the past two decades, but private-sector spending, subsidized by hundreds of billions of dollars in tax breaks for retirement and health benefits received disproportionately by the well-off, has grown at a much faster clip. Indeed, private expenditures on such benefits now represent more than one-third of all U.S. social spending–an amount that, if added to public spending, would make the American welfare state larger than Denmark’s.

(emphasis added by me)

This is a long-ish piece I can only excerpt here, but I urge you to read the whole thing. What Hacker is getting at is that his study shows that all the risks of the new global economy are being limited–by the govt they say they hate–for corporations and shifted onto the backs of the rest of us–‘We still have limited liability for American corporations, but, increasingly, we have full liability for American families.’ Even as the ‘free-market’ Republicans are shifting onto us reponsibility for paying the corporate share of federal taxes as well as our own, they’re shifting the risks corporations should be taking on themselves to us as well. We’re expected to pay for their growth, to indemnify them from the risks they take, to take on their share of social responsibilities, to provide them with goodies like roads and sewers and water service out of our own pockets, and to do all this while they shrink what they’re willing to pay into those pockets and constantly threaten to stop paying altogether and move our jobs to India because we’re ‘too demanding’.

And then they wonder why we’re feeling insecure.

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