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Why US Workers Have Lost Leverage

A 1970 contract negotiation between GE and its unionized workforce is unimaginable today.

A strike then slowed production for months at 135 factories around the country. With inflation running at 6 percent annually, the company offered pay raises of 3 percent to 5 percent a year for three years. The union rejected the offer, and a federal mediator was brought in. GE eventually agreed to a minimum 25 percent pay raise over 40 months.

“They said we couldn’t, but we damn sure did it,” one staffer said about his union’s victory.

Former Wall Street Journal editor Rick Wartzman tells this story in his book about the rise and fall of American workers through the labor relations that have played out at corporate stalwarts like GE, General Motors, and Walmart.

FiguresCritics use examples like GE to argue that unions had it too good – and they have a point. But that’s old news. What’s relevant today is that the pendulum has swung in the opposite direction, and blue-collar and middle-class Americans seem barely able to keep their heads above water even in a long-running economic boom.

New York University economist Edward Wolff in a January report estimated that workers lost much ground in the 2008 recession and never recovered. The typical family’s net worth, adjusted for inflation, is no higher than it was in 1983 and far below the pre-recession peak. Granted, workers’ wages have gone up recently, though barely faster than inflation, but they had been flat for 15 years. Workers are also funding more of their retirement and health insurance.

Wartzman’s theme in “The End of Loyalty: the Rise and Fall of Good Jobs in America” is that the system no longer works for regular people, because companies have weakened or broken the social contract they once had with their workers.

The loss of employer loyalty is one way to look at the state of labor today. The loss of workers’ leverage against global corporations is another. …Learn More

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Game Show Pays Off Student Loans

The student loan problem has gotten under our collective skin – so much so that a new game show revolves around it.

“Paid Off,” on TruTV, promises to pay off a share of the winning contestant’s student debt – 20 percent, 50 percent, or 100 percent – depending on how many answers he or she gets right in the final round of questioning.

“Paid Off” is as inane as any television game show. The format is more “Family Feud” than “Jeopardy,” with softball questions designed to spark as much faux competition as possible among the former students who compete. One example: name the most romantic date costing under $10: picnic, walk, Netflix movie, etc.

The show’s host, Michael Torpey, who also plays a corrections officer in “Orange is the New Black,” explains in the first episode of “Paid Off” that he created it because he and his wife struggled with student loans. He was only able to pay them off because he landed a long-shot acting job for a television commercial.

Torpey says his goal is to help debt-laden students “achieve their dreams by paying off their student loans.”  He’s right that college debt is, indeed, standing between many Millennials and the adult milestones of buying a house, saving some money, or getting married.

The average amount of debt owed by college graduates increased again last year, to more than $39,000, according to Student Loan Hero

Unfortunately, the weekly show won’t make a dent in this growing problem. …
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Book Review: the Middle-class Squeeze

book coverMarketplace recently estimated that a family’s common expenses have increased 30 percent since the 1990s. This was based on the inflation-adjusted prices for 11 necessities and small luxuries, from food, housing, college, and medical care to movie tickets and air fare.

On the income side of the household ledger, one well-known study estimates that the lifetime, inflation-adjusted income of a typical 60-year-old man today is substantially less than it was for a man who turned 60 back in 2002. Women, who have benefitted from getting more education, are earning more, but they started out at much lower pay levels and still trail men.

These trends – rising expenses and shrinking paychecks – get to the essence of the middle-class struggle described in Alissa Quart’s new book, “Squeezed: Why Our Families Can’t Afford America.”

Putting faces to the numbers, she had no trouble finding workers who feel they are losing their tentative grip on the middle class. Her focus is the 51 percent of U.S. households earning between $40,000 and $125,000.

That’s not to say that Americans’ quality of life hasn’t improved in some ways. Consider the dramatic increase in the square footage of U.S. houses over the past 30 years or the enormous strides in medical technology. In today’s strengthening economy, the Federal Reserve Board reports that a majority of adults say they are doing okay or even living comfortably, and they are feeling more optimistic. Yet this doesn’t entirely square with another of the Fed’s findings: a large majority of adults would not be able to cover an unexpected $400 expense without selling something or borrowing money. …Learn More

Medicaid Now Critical to Aging Workers

For decades, the Medicaid program has subsidized health care for the poor, including retirees.

Yet, until recently, it largely excluded most working-age adults without disabilities due to a strict monthly income limit.

medicaid logoAll that changed in the 32 states and the District of Columbia that accepted the Affordable Care Act’s (ACA) option to expand their Medicaid coverage to low-income working people.

In 2010, the ACA increased Medicaid’s income limits for people to qualify for the insurance. Today, working baby boomers, as well as younger workers, can qualify if their income is below 138% of federal poverty levels – or $1,396 per month for a single person and $1,892 for couples.

This joint federal-state program now completely or partially insures about one in six people approaching retirement age, according to a new report citing U.S. Census Bureau data.

The expansion is at least partly responsible for a striking improvement in one statistic: the uninsured rate for adults between ages 50 and 64 fell from 15.5 percent in 2012 to 9.1 percent in 2016. …Learn More

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Why Retirement Inequality is Rising

Just as the wealth and income gap between the well-to-do and working people is growing, so, too is retirement inequality.

tableResearchers increasingly want to know what’s behind this phenomenon. They’ve uncovered reasons ranging from low-income workers’ greater difficulty saving to the well-to-do’s longer life spans – which means they’ll get more out of their Social Security benefits.

Having a low income doesn’t necessarily mean a retiree can’t live comfortably. What matters is how much of their earnings they will be able to replace with Social Security and any savings.

Even by this standard, lower-income workers come up short: 56 percent are at risk of having a lower standard of living when they retire. The decline is slightly less for middle-income workers – 54 percent – but the risks fall sharply, to 41 percent, for the people at the top.

The roots of this inequality span Americans’ lives from cradle to grave:

  • In our 401(k) system, financial security in retirement increasingly hinges on how much people can save in their 401(k)s as they work. But it’s harder for low-income workers to save, mainly because their employers are less likely to offer a savings plan, according to a 2017 study by The New School for Social Research. The study also found that basic living expenses gobble up more of their paychecks, and they experience more financial disruptions from layoffs and divorce, leaving less for savings.
  • Some research assesses inequality trends for specific groups of people.  Incomes tend to rise over time, even after being adjusted for inflation, but they rise more slowly for people near the bottom of the earnings scale. Lower earnings translate later to lower retirement incomes.  For example, the future retirement income of well-heeled members of Generation X, relative to today’s retirees in the high-income bracket, is estimated to be two times more than it will be for low-income Gen-X retirees, according to an Urban Institute study. …
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Video: Kids Say the Darndest Things

The children in this video have a delightful take on our cultural attitudes and mores about money – what it is, what it can do, and whether to share it.

The interviewer borrowed the format Art Linkletter used when asking kids questions on his Emmy Award-winning television show, “Art Linkletter’s House Party,” which aired between 1952 and 1969 – as boomers and their parents will remember.

The new video about kids and money is posted on the American Financial Services Association Education Foundation’s website.  The foundation’s mission is to educate people about responsible money management, starting with young children and teenagers.

The adorable factor makes this 6-minute video fly by.Learn More

Dependence on Social Security is Striking

Social Security chartA retiree’s sources of money are often described as a three-legged stool: Social Security, pension, and savings.

But many seniors’ financial support looks more like a single, sturdy pillar: Social Security.

This is shown dramatically in new U.S. Social Security Administration (SSA) estimates of just how critical the federal program is to millions of older Americans.  The data speak for themselves:

  • One in two retired households counts on Social Security for at least 50 percent of their total income.
  • One in four gets virtually all income – 90 percent – from the program.

The differences among myriad demographic groups also follow the usual socioeconomic patterns, according to the SSA researchers, Irena Dushi, Howard M. Iams, and Brad Trenkamp. …Learn More

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