Perhaps the leading symptom of the "new economic insecurity" is the increasing volatility of family incomes—the swings in income between best and worst years of earnings. In 1970, families earned an average of 50 percent less in their worst years than in their best. So a person making $60,000 in her best made $30,000 in her worst. Today she'd earn $15,000 in her worst. In 1970, the chances of a family experiencing a 50 percent drop in income over a two year span was 7 percent; today it is 16 percent and rising. In the 1970s, a man in his forties had a 13 percent chance of experiencing a year in poverty before he turned fifty; by the 1990s he had a 36 percent chance. Poverty is practically a stage of growth for children. "More than half of American kids spend at least a year in poverty by the time they're eighteen, compared with less than a quarter of German children," Hacker reports.
What happened? Pressured by foreign competition and impatient domestic investors, Hacker says, employers broke the post-war "work contract" with employees under which they had shared the gains and risks of the post-war economy. As a result, more of the risks were shifted onto employees. Under the old contract, explains Hacker, "workers received job security, guaranteed benefits, and good pay,” while "employers got loyal, productive workers who invested in skills specific to their jobs and didn't jump ship when times were tough." Under the new contract, set unilaterally by employers in a labor market in which private-sector unions are about as weak as they were in 1906, workers have no job security, they pay more for their health insurance, and they face lean retirements on 401(k)s. A 1980s memo from the CEO of General Electric stated the new contract's terms: "The only job security is a successful business. If loyalty means that this company will ignore poor performance, then loyalty is off the table." Peter Drucker expressed the underlying dynamic in a chilling image: "Companies built to last like pyramids are now more like tents."
Education today is no path to security: "[T]he largest decline in labor force participation,” Hacker notes, “has occurred among workers with a college degree or higher." Nor does the two-earner family hold the key to economic stability: "By the 1990s, two-earner couples were about 40 percent more likely to break up than one-earner families." For women, divorce is often a ticket to downward mobility: "[A] startling 25 percent of young women (age twenty to thirty-five) who divorce experience catastrophic income losses that reduce their income to 150 percent of the poverty line or less. The corresponding figure for men is roughly 4 percent." Children, of course, are money sinks: "In 2001 people who were married and had kids were fully twice as likely to file for bankruptcy as single adults or childless couples." It can cost a middle-income family almost $237,000 to get to a child to eighteen, which is when the real spending and borrowing begins. The birth of a child accounts for a fourth of "poverty spells"—periods when, because the mother has had to leave her job to have the baby, a family's income dips below the poverty line. "Americans," Hacker dismally concludes, "increasingly find themselves forced to choose between economic security and having a family and children."