The Insecure American

Most Americans today are on an unstable financial footing. Could this become the next hotbutton political issue?

Laudably, former Senator John Edwards has been spotlighting poverty in America while New York Times columnist Paul Krugman has been documenting the widening gap between the rich and the rest. Politically, poverty and inequality are non-starters. As an "issue," poverty asks white voters to extend compassion to urban blacks and single mothers, people with whom they do not identify and who are easily blamed for their own poverty. Class politics has had less traction here than in any other industrialized country. In People of Plenty (1957), historian David Potter explained why: "[S]ocial barriers in this country are a violation of our national ideals, and therefore the mere awareness of them impairs public morale." Moreover, economic inequality is an abstract problem; it does not come up in daily life.

By contrast, economic insecurity—a structure of feeling built on fears about "Risky Jobs," “Risky Families," "Risky Health Care," and "Risky Retirement," to use chapter titles from Jacob Hacker's new book, The Great Risk Shift (Oxford University Press)—pervades the lives of most Americans. Hacker characterizes economic insecurity as "the defining feature of the contemporary American economy," and his book provides a fresh diagnosis of a familiar complex of problems from structural unemployment to the erosion of retirement plans you can retire on.

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."

Hacker’s chapter on "Risky Health Care" makes for even more painful reading. And "Risky Retirement" worse yet. Those of us who have spent all we earned on family emergencies or education for our children can never stop working. Terrifying for a writer, what must working until you die mean to a slaughterhouse worker?

Hacker calls for wage insurance, Medicare-For-All, and a new Universal Pension on top of Social Security to mitigate the risks of living in a dynamic economy. "Risk" does not force Americans to confront race and class issues, and so might catch on among politicians seeking a less divisive or morale-impairing concept to frame the new insecurity. Americans are familiar with the policy answer to social risk: social insurance. But by some measures, the crippling myths of individualism—portrayed as "personal responsibility" by conservatives—has more Americans in its thrall now than at any other time since the 1920s. History suggests that it may take an economic collapse to move this political culture toward the left. Before Social Security and unemployment insurance could be enacted, sink-or-swim individualism and the laissez-faire capitalism it legitimated had to be discredited by the Great Depression.

Meanwhile, the politics of economic insecurity are likely to prevent Hacker's proposals from becoming law. These politics follow from the existential reality feelingly described by Hacker: "For most, insecurity is a private experience, hidden away behind closed doors, felt in quiet despair." Fear has tended to drive voters to the right, toward self-blame and its projection in social resentment. Historian Fritz Stern wrote a book called The Politics of Cultural Despair. It was about German democracy in the 1920s.