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Posts Tagged ‘Middle Class’

No Job, Loads of Debt: Covid Upends Middle‑Class Family Finances

Posted by hkarner - 22. September 2020

Date: 21‑09‑2020

Source: The Wall Street Journal

The pandemic is wreaking havoc in loan‑laden white‑collar workers’ households; ‘I will never claw my way out of this situation’

‘It frustrates me to not be able to earn a living,’ says lawyer Alysse Hopkins.

Until mid‑March, Alysse Hopkins earned a comfortable living in Rockland County, N.Y., representing clients in foreclosure cases and personal‑injury lawsuits.

In a good year, the 43‑year‑old lawyer and her husband, Ian Boschen, 41, together brought in about $175,000, the couple said—enough to cover the mortgage, two car leases, student loans, credit cards and assorted costs of raising two daughters in the New York City suburbs.

After the coronavirus halted many foreclosures and closed courts, her work dried up. Unemployment benefits have helped, Ms. Hopkins said, but the family is running low on savings and can’t keep up with $9,000 in monthly debt payments including mortgage installments. “It frustrates me to not be able to earn a living,” she said. “I have a law degree, almost 20 years of practice.”

Millions of Americans have lost jobs during a pandemic that kept restaurants, shops and public institutions closed for months and hit the travel industry hard. While lower‑wage workers have borne much of the brunt, the crisis is wreaking a particular kind of havoc on the debt‑laden middle class.

Debt didn’t present a major problem before the coronavirus. The job market was booming and median household incomes were rising, allowing families to keep up with payments.

American families with nonhousing debt making over $98,018 a year in pre‑tax income owed an average of nearly $92,000 of such debt in 2016. That’s up 32% from 2004, adjusted for inflation, according to an analysis of Federal Reserve data by the Employee Benefit Research Institute, a nonpartisan nonprofit research group.

Consumer debt, including student loans and auto loans, have contributed to risingU.S. household indebtedness.

Average nonhousing debt owed by families making $52,655 to $98,01

Before the pandemic, Americans had amassed $4.2 trillion in consumer debt, excluding mortgages, according to the Federal Reserve Bank of New York, a record even when adjusting for inflation. Housing debt added an additional $10 trillion to the tally.

The coronavirus has spared few industries and expanded unemployment benefits designed to replace the average American income didn’t cover all the lost pay of higher‑earning workers, especially in or near expensive cities. The extra $600 weekly payments expired in July, putting them even further behind.

“What I see happening here is a core assault on successful college‑educated families, which are the new breed of middle‑class American families,” said Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce. “There’s a professional workforce that’s getting slammed.”

Roughly six months into the pandemic, many lenders that let borrowers skip monthly payments now expect to get paid again. They have set aside billions of dollars to cover potential losses on soured consumer loans—an acknowledgment that America’s decadelong debt binge has come to an end.

Credit‑card debt has fallen in recent months. But with a big chunk of government assistance gone, Congress is still haggling over a second round of coronavirus relief. President Trump signed an executive order in August to provide an extra $300 a week in federal unemployment benefits. The payments haven’t been distributed by every state yet, and Democrats say the president’s order violated congressional‑spending authority.

The increase in balances owed for student loans and auto loans has outpacedhousing debt

White‑collar pain

Unemployment has fallen from its pandemic peak of near 15%, but the rate stood at 8.4% in August, up from 3.5% in February, according to the Bureau of Labor Statistics. Unemployment for the arts, design, media, sports and entertainment was 12.7% in August, more than triple its year‑earlier level. In education, it more than doubled to 10.2%. Sales and office unemployment was 7.8% in August, up from 3.8% in August 2019.

Architects and engineers, who earn $1,826 in average weekly pretax income, well above the $1,389 average among full‑time wage and salaried workers, have seen unemployment rise to 3.7% from 0.8% a year earlier. Unemployment for computer and math occupations, which earn $1,919 a week on average, more than tripled to 4.6%.

It could get worse. “The pain so far in the economy has largely been at the lower end of the pay scale,” said Discover Financial Services Chief Executive Roger Hochschild, adding that many of “the white‑collar layoffs are still to come.”

Lynn Scott‑White, 47, was furloughed from her job as a corporate travel agent at the end of March. Before the pandemic, she and her husband together earned roughly $150,000, she said.

The Denton, Texas, couple pay $4,400 a month on their mortgage, four car loans and leases, and student debt, Ms. Scott‑White said. Minimum required monthly credit‑card payments total about $700. The debt was manageable pre‑pandemic, she said.

 She deferred lease payments on her Infiniti QX60 for three months and started paying again with unemployment benefits. Her husband traded in his Ford F‑150 in August for a lower‑cost car and reduced his original monthly payment of $820 by about $100, and his income covers the $2,100 mortgage.

Lynn Scott‑White is preparing to switch careers. ‘I didn’t think I would have to do this,’ she says.

After about 24 years in the travel industry, Ms. Scott‑White is preparing to switch careers, concluding it could be a long time before corporate travel returns to previous levels. In August, her employer gave her three options: severance of a week’s pay for each year employed, unpaid leave until late March or continue on furlough.

She resigned, opting to take the severance. She returned to college last month to complete a bachelor’s degree in kinesiology to pursue a sports‑medicine career. She borrowed $5,000 against her 401(k) to help pay for it. “I didn’t think I would have to do this,” she said. “I’m trying to decide what I want to be when I grow up.”

By some measures, the outlook for higher‑earning workers appears worse than during the 2008 financial crisis. In August, about 3.3 million people age 25 and over with bachelor’s degrees or higher were unemployed, up from 1.2 million in February, according to the Bureau of Labor Statistics. During the last downturn, that number peaked at about 2.2 million.

Postings for jobs with salaries over $100,000 were down 19% in August from April, while postings for all other salary categories increased, according to job‑search site ZipRecruiter Inc.

American Airlines Group Inc. and United Airlines Holdings Inc. have outlined plans to furlough or lay off thousands of employees on Oct. 1, when federal aid expires, unless they receive more government assistance. Business‑software company Salesforce.com Inc. is eliminating 1,000 jobs; a spokeswoman said the company is also adding 4,000 jobs over the next six months.

MGM Resorts International and Stanley Black & Decker Inc. notified some furloughed employees they would be laid off. The companies said they have brought back, or expect to bring back, many of these employees.

America’s biggest banks have indicated they are preparing for a protracted downturn to hurt businesses in industries that weren’t immediately affected by shutdowns.

JPMorgan Chase & Co. says it expects the U.S. to add roughly 5.4 million jobs in the third and fourth quarters. That would leave the U.S. economy with about 9.2 million fewer jobs since February.

“The pandemic has a grip on the economy,” Citigroup Inc. CEO Michael Corbat said when the bank reported second‑quarter earnings in July, “and it doesn’t seem likely to loosen until vaccines are widely available.” This month, the bank said many customers that previously enrolled in deferment programs are making payments.

‘Very dire’

Terri Smith, 64, said her job analyzing legal expenses for her employer was eliminated in a round of cost‑cutting. Even with the extra $600 a week, unemployment didn’t cover her lost earnings, and she is now down to $285 after tax in weekly unemployment benefits.

The monthly mortgage payment on her Charlotte, N.C., home is $1,550, she said. Her car payment is $550. Health insurance costs $600 a month, and a recent hospital visit cost $7,500 in out‑of‑pocket expenses. She has dipped into savings to keep up with bills and is thinking about withdrawing from her 401(k) or signing up for loan‑deferment programs until she can find a job.

“I don’t have a plan. It’s very dire,” she said. “I’m getting very nervous.”

Many people who have jobs are struggling with pay cuts. As of August, 17 million workers were getting paid less due to the pandemic, said Mark Zandi, chief economist at Moody’s Analytics. Some 9.5 million took pay cuts; the remaining 7.5 million are working fewer hours, he said.

Steven Sickinger’s income fell sharply in the spring, he said, when customers stopped coming to the auto‑repair shop he managed. Concerned that the shop was at risk of shutting down, Mr. Sickinger, 55, quit and took another job he considered more secure making $50,000—35% less than the $77,000 he made in 2019.

The pay cuts have made it difficult for the Tucson, Ariz., resident to keep up with bills. He said he owes at least $24,000 on his credit cards. His credit union let him skip his roughly $655 monthly payments on the loan for his Ford F‑150 in June and July. He said he hasn’t used his credit cards in months, but interest charges and late fees are pushing his balances higher. Eight of his credit cards have been reported late, he said. Pre‑pandemic, his credit report showed an on‑time record going back to 2014.

Before the coronavirus, his plan was to pay off the debt in about 2½ years and would then begin preparing for retirement. Now, Mr. Sickinger said, he is in the process of filing for bankruptcy: “I will never claw my way out of this situation.”

The economy is reviving in parts of the country including New York, where Ms. Hopkins lives. Most courts in the state have reopened. But law firms in New York City and Long Island that used to hire her to avoid the hour‑or‑more drive are now handling their cases online.

Ms. Hopkins says the pandemic has drastically reduced her work.

Ms. Hopkins is working again, taking virtual depositions, but the volume is nothing like it was. She had six assignments in August and a few so far this month. Pre‑pandemic, she appeared in court on average for four to six cases a day. “I don’t know if it’s ever going to go back to that,” she said.

She and Mr. Boschen paused their $750 in car payments for April and May. They got a one‑month break on a $680 payment on a personal loan taken for a bathroom renovation. Mr. Boschen said his nearly $800 in monthly student‑loan payments are deferred through December. That, and money set aside for their daughters’ summer camp, freed up enough to help cover their $3,000 monthly mortgage payment and $1,500 monthly health‑insurance premium.

Ms. Hopkins’s weekly state unemployment of $441 after taxes ended last week, she said, at the same time that she received a $262 deposit, the first of her unemployment benefits tied to President Trump’s August executive order.

Ms. Hopkins said she recently took out a $36,500 Small Business Administration loan, because she qualifies as a small business through her legal work, to cover the work bills. She said she has 30 years to repay it.

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China’s Decade of Sweeping Economic Change

Posted by hkarner - 3. April 2019

Zhang Jun is Dean of the School of Economics at Fudan University and Director of the China Center for Economic Studies, a Shanghai-based think-tank.

The changes China’s economy has undergone over the last decade are sweeping, unprecedented, and essential. The world would be far better served by an effort to understand them than by attempting to prove that the country’s achievements are less impressive than they are.

SHANGHAI – For the West, the year 2008 marked the beginning of a difficult period of crisis, recession, and uneven recovery. For China, 2008 was also an important turning point, but one followed by a decade of rapid progress that few could have foreseen.

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Saving the Shrinking Middle

Posted by hkarner - 27. März 2018

Mohamed A. El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers in 2009, 2010, 2011, and 2012. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

From the anchoring role in society of the middle class to the agility and resilience of mid-size firms, the middle has long been regarded as consistent with both individual and collective wellbeing. Yet, in recent years, the middle has become less stable, less predictable, and more elusive.

LONDON – There was a time when many regarded being in the middle of the distribution – socially, politically, and in the business world – as a favorable, stabilizing, and desirable outcome. From the anchoring role in society of the middle class to the agility and resilience of mid-size firms, the middle was seen as consistent with both individual and collective wellbeing. Yet, in recent years, the middle has become less stable, less predictable, and more elusive, and its primacy – in economics, politics, business, asset management, and even sports – has become increasingly unsustainable. Den Rest des Beitrags lesen »

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Haselsteiner: „Die Verarmung des Mittelstandes ist die größte Gefahr“

Posted by hkarner - 14. Januar 2018

Intervie wAndrás Szigetvari, 14. Jänner 2018, 12:00 derstandard.at

Die wachsende soziale Kluft in der Gesellschaft bedroht die Demokratie, sagt der Baulöwe Hans Peter Haselsteiner. Ein Gespräch über Hartz IV, die Regierung und Schmiergeldkassen

Hans Peter Haselsteiner ist einer der bedeutendsten Unternehmer des Landes und mischt sich auch politisch gerne ein, so unterstützte er etwa die Neos ebenso wie den Wahlkampf von Bundespräsident Alexander Van der Bellen. Regelmäßig im TV aufgetreten ist er zuletzt im Rahmen der Start-up-Castingshow „2 Minuten 2 Millionen“ auf Puls 4. Aber wie gefällt dem Unternehmer die Richtung, in die sich Österreich derzeit entwickelt? Mit dieser Frage im Hinterkopf erfolgte die Interviewanfrage an ihn. Geworden ist es ein Gespräch über Gerechtigkeit und die Verantwortung von Unternehmern.

STANDARD: Wenn Sie sich eine utopische Gesellschaft in Österreich zurechtzimmern könnten: Was würden Sie ändern?

Haselsteiner: Ich glaube, in Österreich, wie in den allermeisten Industriestaaten, besteht derzeit die größte gesellschaftspolitische Herausforderung darin zu verhindern, dass erneut Kasten entstehen, und zwar im materiellen Sinn. Dass es also eine Milliardärs- und Millionärskaste gibt, aber abseits davon nichts mehr kommt. Die Verarmung des Mittelstandes halte ich für die größte Gefahr, dass es künftig nicht mehr genügend selbstbewusste Bürger gibt, die durch ihre große Zahl die Politik bestimmen können. Der Mittelstand ist seit 20 bis 30 Jahren unter Druck.

STANDARD: Woran merken Sie das?

Haselsteiner: Für mich ist Italien das allerbeste Beispiel. Ich kenne das Land gut, ich lebe in Südtirol und habe viele italienische Freunde. Es herrscht ein harter materieller Druck vor, davon erzählen mir meine Freunde. Deren Arbeitsplatz und Einkommen sind aber nicht einmal gefährdet. Aber die Leute springen nicht mehr weit. Als Baumeister ist es für mich immer ein Maßstab ob man sich noch leisten kann, ein Eigenheim zu bauen. Wer kann es sich noch leisten, in Wien eine Eigentumswohnung zu kaufen? foto: apa Haselsteiner setzt sich politisch gegen EU-Gegner ein. Den Rest des Beitrags lesen »

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India has a hole where its middle class should be

Posted by hkarner - 13. Januar 2018

Date: 11-01-2018
Source: The Economist

That should worry both government and companies

AFTER China, where next? Over the past two decades, the world’s most populous country has become the market qua non of just about every global company seeking growth. As its economy slows, businesses are looking for the next set of consumers to keep the tills ringing.

To many, India feels like the heir apparent. Its population will soon overtake its Asian rival’s. It occasionally grows at the kind of pace that propelled China to the status of economic superpower. And its middle class is thought by many to be in the early stages of the journey to prosperity that created hundreds of millions of Chinese consumers. Exuberant management consultants speak of a 300m-400m horde of potential frapuccino-sippers, Fiesta-drivers and globe-trotters. Rare is the chief executive who, upon visiting India, does not proclaim it as central to his or her plans. Some of that may be a diplomatic dose of flattery; much of it, from firms such as IKEA, SoftBank, Amazon and Starbucks, is sincerely meant. Den Rest des Beitrags lesen »

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Delivering on Promises to the Middle Class

Posted by hkarner - 3. April 2017

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The ‘fourth industrial revolution’ will cause income inequality. Tech can also solve it

Posted by hkarner - 23. Januar 2017

Date: 23-01-2017
Source: The Wall Street Journal
Subject: Technology vs. the Middle Class

Nadella CCMicrosoft CEO Satya Nadella discussed tech innovation at Davos last week.

There is a reason we live in a golden age of dystopian science fiction: Increasingly, it feels like it is coming true. From “The Hunger Games” to “Elysium,” stories depict a world in which the trend of growing wealth and income inequality continues to its logical conclusion.

This narrative seems inevitable because it has occurred throughout history. The Luddites who attacked the automated looms that displaced them aren’t so different from the millions of truck drivers who could be displaced by self-driving vehicles.

What we’re going through now is called the fourth industrial revolution, marked by rapid innovation in automation, artificial intelligence, biotechnology, nanotechnology and other areas.

Last week, it was the talk of Davos, where Microsoft Chief Executive Satya Nadella worried it could lead to social unrest or excessive regulation. “If we don’t get it right we are going to have a vicious cycle,” Mr. Nadella said at a panel on AI. Den Rest des Beitrags lesen »

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Neue Töne in Davos: Lösungen für Krise der Mittelschicht suchen

Posted by hkarner - 18. Januar 2017

Alexandra Föderl-Schmid aus Davos, 18. Jänner 2017, 18:40 derstandard.at

Beim Weltwirtschaftsforum wird verstärkt über die Schattenseiten der Globalisierung diskutiert und darüber, was gegen Ungleichheit getan werden kann

Ein bisher kaum benutzter Begriff ist heuer in Davos plötzlich in aller Munde: die Mittelklasse. Auch US-Vizepräsident Joe Biden nahm in seiner Abschiedsrede darauf Bezug und rief dazu auf, dass man etwas tun müsse: Immer mehr Reichtum konzentriere sich auf immer weniger oben und immer mehr Menschen müssten kämpfen, um überhaupt im Mittelstand zu bleiben.

„Ausgepresst und zornig: Wie kann man die Mittelklassenkrise lösen“, lautete der Titel einer Podiumsdiskussion am Mittwoch, bei der rasch Einigkeit darüber herrscht, dass es diese Krise gebe. Die Chefin des Internationalen Währungsfonds, Christine Lagarde, machte die Politik dafür verantwortlich: „Die Menschen trauen der Regierung nicht mehr, haben keine Hoffnung und sind desillusioniert.“ Den Rest des Beitrags lesen »

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A Tale of Two Middle Classes

Posted by hkarner - 21. Dezember 2016

Date: 20-12-2016
Source: Businessworld – Nayan Chanda

Worry and anger permeate the middle classes of Asia and the Americas, and in a world that is tightly interconnected, individuals perceive cross-border competition. During the US presidential campaign, President-elect Trump suggested that “unfair trade deals” had hurt US workers and communities, and he promised to tighten immigration rules and curb abuses associated with the H1-B and other visas. Chanda points to findings by economist Branko Milanovic, author of Global Inequality: A New Approach for the Age of Globalization: “…at the same time as a large middle income group in the developed world has seen wages stagnate thanks to global economic integration, Asia has been resurgent. Although one cannot convincingly establish causality between the two developments, he says, the coincidence of the two will lead many to conclude that globalisation has created a more unequal world.” Chanda notes that technology and automation – not trade – have reduced manufacturing jobs. And ongoing development of robots and artificial intelligence ensures that middle classes everywhere have reason to be anxious. – YaleGlobal

Jobless Americans wait for Trump to crack down against offshoring and immigration, and middle class Asians anxiously await the fallout

If ever there was any doubt, the surprising election of Donald Trump has proved once again that hell hath no fury like a middle class scorned. The repressed anger that led voters to ignore all the President-elect’s glaring flaws has implications for the middle class in emerging economies. The same phenomenon of globalisation that had left a large swathe of the American middle class behind has also created a prosperous new middle class from China to India to Southeast Asia. As jobless Americans anticipate delivery on Trump’s campaign promises, middle class Asians are merely waiting anxiously. Den Rest des Beitrags lesen »

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The Complexity of Inequality

Posted by hkarner - 11. Dezember 2016

 

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