Just as amusement parks build roller-coaster rides with ever more dramatic dips and twists, the Bush administration and conservative lawmakers have succeeded in building a roller-coaster economy where family incomes are exposed to sharper drops and turns. It’s no fun.
That reality is exposed in a new briefing paper by the Economic Policy Institute, in which economists Jacob S. Hacker and Elisabeth Jacobs look at 30 years of income instability among families. What they’ve found:
The instability of family incomes has risen substantially over the last three decades. Although the precise magnitude of the increase depends on the approach to measuring income variance that is used, we estimate that short-term family income variance essentially doubled from 1969-2004. Much of the rise in income volatility occurred prior to 1985, and volatility dropped substantially in the late 1990s. It has, however, risen in recent years to exceed its 1980s peak.
What this means is that even though the recessions in the early 1980s and in the early 2000s were relatively shallow ones when looked at in a historical context, families found their finances buffeted around much more. In fact, the percentage of working-age individuals who within a year experienced a greater than 50 percent decrease in their income within a year has doubled since the 1970s, from 4 percent to 8 percent.
It is noteworthy that the times of greatest income volatility were also the times that the conservative grip on the economy’s reins were the firmest. It is also clear from the data that the conservative dismissals of the trend—that income volatility is really a factor of women cruising in and out of the workforce as they have children or change their interests, for example—just don’t wash. In fact, the greatest income volatility is occurring among men, not women, according to the EPI study.
This is more proof that the economic anxiety that working-class families feel is not a figment of the liberal imagination; it is based on reality. And it has serious implications. When breadwinners find their incomes fluctuating, they more often than not use credit as a means of softening the blows. They don’t have much else in an environment in which their earnings have not kept up with their cost of living and they have therefore have not been able to save significant amounts for times such as these. But relying on credit is dangerous when banks and other credit issuers operate in a deregulated, low-disclosure environment in which lenders are free to raid borrower wallets in increasingly venal ways.
Conservatives would just as soon either pretend that the problem doesn’t exist at all or just say that people should figure out how to adjust. But the experience of the past seven years under conservative economic policies proves that is not working. But news this week that some Democrats in Congress are prepared to abandon a proposal to extend unemployment benefits an additional 13 weeks is a bad sign that the unwillingness to forthrightly address the economic struggles of working families is not the sole preserve of the radical right. It’s a sign that the progressive movement has work to do to force policy change on the long-term solutions to income volatility, including fair trade policies, jobs that pay living wages and government investments in human capital and infrastructure.