Everyday Economic Crises

By Karen Sternheimer

You have probably heard a lot about our country’s economic problems lately: the "mortgage meltdown", the federal bail out of Wall Street, and the 159,000 lost jobs in September 2008. For months politicians and economists have been debating whether the economy is officially in a recession, and if so, what this means for our national economic health.

We are paying attention to economic suffering more now, as the cost of just about everything has increased in the past year and people considered middle class are losing their homes too. Recently, a ninety-year-old woman facing foreclosure from the home she and her late husband purchased in 1970 attempted suicide. An unemployed man killed himself and his family; he left letters implying that his financial difficulties motivated the murder-suicide. These shocking stories might not have made national headlines had we not been so attuned to the effects this downturn has had on so many people.

For many Americans, everyday is an economic crisis, regardless of where the stock market’s major measures end that day. An estimated 37 million Americans lived in poverty in 2007, or just over twelve percent of the population, according to a report by the U.S. Census Bureau. As you can see from the graph below, this number has risen since 1999, although the percentage is lower than it was in the early 1990s—and significantly lower than it was in 1960. 

However, critics charge that the federal government's definition of poverty is artificially low. In 2007, this threshold was defined as having an income of less than $10,590 for one person, $13,540 for a family of two, and $16,530 for a family of three (the limit rises slightly for each member of the household). 

As the National Center for Children in Poverty (NCCP) details, the definition of poverty is based on an outdated measure, an estimate of a family’s food budget times three. This is because when data were first gathered, food costs were proportionally higher than they are now. NCCP estimates that to pay for basic needs a family needs at least two to three times the poverty level income depending on where they live. The Center for American Progress estimates that 90 million Americans are low-income, or earn less than double the poverty level. This means that nearly one third of all Americans have been struggling to get by—even before the national financial crisis hit. 

The vast majority of people in this category have jobs, often more than one, that provide no sick time, low pay, little room for advancement, and frequently no health insurance. According to research by the Commonwealth Fund, in 2007 28% of Americans went without health insurance for at least part of the year. Half of all families earning less than $20,000 had no health care coverage; the inability to pay mounting medical bills is one of the most common reason people end up filing for bankruptcy. 

Usually we think of financial problems as primarily due to personal failure—and yes, our individual decisions matter—but rarely do we understand how broader economic issues impact individuals. Typically, when people are struggling we tell them to work harder. And most people do. But take a look at the Bureau of Labor Statistics graph below: American worker productivity has nearly doubled in the past few decades. But compensation has been flat. With the higher costs of goods noted in the graphic above, what money American workers do earn doesn’t buy as much as it used to.

When we enter into economic difficulties as a society, those at the bottom of the income hierarchy are often the hardest hit. States facing declining revenues slash education budgets, threatening the quality of public education and health care benefits. Other programs find their resources dwindling too. 

People who work in service sector jobs, at retail stores, for instance, may have their hours cut or find their jobs eliminated all together. For people in this circumstance, a decline in the stock market isn’t what keeps them up at night, it’s whether they can continue to pay their rent and have a place to live.

Home foreclosures can disproportionately impact low-income neighborhoods, as people might have been encouraged to take out loans that they could not afford. For a family that can continue to pay their bills but lives in a neighborhood with many foreclosed homes, their property values decline, and there is a greater likelihood of crime increasing in communities where homes are boarded up and illegal activity can flourish.

Nobody likes economic hard times; they impact just about everyone at some level. But this downturn can also give us an opportunity to better understand what it is like for people who struggle to get by all the time. Typically we view poverty as personal failure; some people have even blamed low-income people of color for our country’s economic problems. But the sociological perspective considers how social structure affects people during bad times. How do you think our social structure creates challenges for people to get ahead during “good times” too?

Comments

[Chicago bankruptcy attorney]

A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world.