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Alissa Quart, executive editor of the Economic Hardship Reporting Project, hopes readers will take her latest book, Squeezed: Why Our Families Can’t Afford America, as a call to action. Her examination of the disappearing middle class shows that the American Dream is in jeopardy. Saddled with college debt, rising housing costs and fewer well-paying jobs, younger Americans aren’t able to live or save like their parents once did. But there are solutions, Quart says. She joined the Knowledge@Wharton show on SiriusXM to shed light on the issue. (Listen to the podcast at the top of this page.)
An edited transcript of the conversation follows.
Knowledge@Wharton: There’s a great statistic at the outset of the book: Middle-class life is 30% more expensive than it was 20 years ago. What is the greatest concern regarding this problem of affordability in America?
Alissa Quart: The main problem is the cost of housing — at least that’s what I found from my research and interviews — especially in places like San Francisco, Los Angeles and New York City. The second problem was the cost of daycare. A lot of it had to do with wages that were just not keeping up with other kinds of expenses — [individuals’] own student debt and then the cost of their children’s educations.
Knowledge@Wharton: Why has the cost of housing become such an issue?
Quart: In some of these desirable places, real estate is no longer a place to live, but it’s an investment vehicle. That has driven up the cost of housing for ordinary people or the precarious middle class, as I call them. And it makes a lot of places that are desirable cities practically unlivable.
Knowledge@Wharton: But a place like San Francisco also has Silicon Valley, which pays the kind of wages needed to live there.
Quart: Yes, so I think what you need is affordable housing if you’re going to be requiring people to live in these cities that have gone nuts because of Google or other kinds of companies also moving into the cities themselves…. They often have headquarters in the cities. What I advocate in my book is for affordable housing for people like municipal workers and firefighters and teachers. I interview teachers who drive Uber on the weekends and evenings because they can’t afford to get by on a union teacher’s salary in the areas around San Francisco and Los Angeles.
“In some of these desirable places, real estate is no longer a place to live, but it’s an investment vehicle.”
Knowledge@Wharton: How much do you think we’ve lost the middle class, and do you think it is going to be an incredible challenge to get back to what it was 30 years ago?
Quart: Yes, it is a challenge. Part of what I’m hoping my book will do is open people’s eyes to the ways that they are at risk and precarious, and instead of feeling bad about it and turning it on themselves, they’ll start to vote differently. They’ll start to feel aligned with the working poor, who have long been precarious, rather than identifying with the top 1% or the top 5%. They’ll start to say, “How do we organize and vote differently and ask for reforms and things like universal pre-K that will help all of us who are vaguely precarious?”
Knowledge@Wharton: You use the word shame in the book. It’s an important word because there are many people who feel ashamed of their financial situation.
Quart: I use the word because I’m very interested in the emotional and existential elements of financial struggle, and also financial victory. I’m interested in what’s going on inside people. [“Shame”] is a word that comes up. People are blaming themselves, saying, “What did I do wrong? I did everything right. I got these degrees. I worked hard. Why is this not coming together?”
I wanted to shine a light on this stigma. There’s also a stigma [around the fact that] you’re not poor, you’re middle class — so how can you complain? There’s an added shame with that, too. I think that’s the thing that we need to open our eyes to and say, “I’m not ashamed. This is a system failure.” Maybe I do need to live my life a little differently if I’m doing what I love and it’s not paying off, but I also need to start thinking about other kinds of solutions. As a middle class, what can we do differently?
Knowledge@Wharton: Is there an area where you cast the most blame?
Quart: I think we’re looking lately at wealth. There was an article recently about how wages aren’t keeping up, prices are soaring, and who has been profiting from this recent sunshine moment on our economy? It’s all corporate wealth. Obviously, we need to be thinking differently about our so-called tax reform and trying to get some share of this wealth for workers. That’s something that is going to have to start with us by voting differently. But some of it is local. Some of it is activity we can do on a local level. We can vote differently on a local level.
“America has the greatest inequality.”
I also feel like people should start mobilizing for these so-called pie-in-the-sky things like better maternity leave. There are laws against pregnancy discrimination; they’re just not enforced. This is something that people can do in the corporate sector. They can start saying, “We’d better make sure these norms are enforced, that people are not being discriminated against on the job.”
One of the things I keep thinking, and I kind of want to write about this, is that everyone says, “Oh, this is so pie in the sky,” like the universal basic income idea that [Facebook co-founder] Chris Hughes talks about. That would provide an income guarantee for people, especially people who are lower-income, but potentially to larger swaths of the population. Or maternity leave for more than the current 14% of the population of workers.
But the question is, why are these things so out there? Look at #MeToo. Norms around harassment have seemingly changed in the course of a year. Gay marriage passed. These might have seemed strange outliers five years ago. So, my question is, why are we not seeing these meat-and-potato things — like pregnancy anti-discrimination or maternity leave or daycare – as things that could happen?
Knowledge@Wharton: A college education is becoming more expensive. It’s not just the costs associated with going to school, it’s paying off the loans for 20 or 30 years after you’re done.
Quart: It’s true. One thing that was new to me — and I call it the second-act industry — is people whose debt didn’t come from when they were in college. It was from when they were in their 40s and 50s and went back to school because they felt like they needed to be retrained. They kept being told they need to be retrained, and then they wound up quite in debt. We need to be careful of that, too. Offer free or cheap retraining programs. Have apprenticeship programs more available to adults. Oversee when people are being snookered.
I talked to a guy who is $60,000 in debt for getting retrained with a degree in IT from one of those for-profit colleges. I think it has since been shut down. It was so corrupt, but he didn’t know. I’m hoping if we keep talking about this second-act industry, people will think twice before they enroll in some of these colleges.
Knowledge@Wharton: Many young people are encouraged with a “do what you love” philosophy. That advice isn’t always beneficial. Do those conversations between parent and child need to change?
Quart: Yes. That was one of the things that really affected me and has affected my parenting. I have a 7-year-old who said, “I want to be an artist.” What do you do when they say these wonderful, creative things they want to be?
I used to teach at Columbia journalism school and other colleges, and I would try to get the students to get a job at a nonprofit or an NGO (nongovernmental organization) and then write on the side. I now run an organization called Economic Hardship Reporting Project, and we give grants to journalists who are struggling. Something like 50% of journalism jobs have shrunk since 2005. So, it’s hard to say, “Yeah, go ahead and do that.”
Knowledge@Wharton: How much is the economy influencing the decision-making of the younger generation?
“We should be identifying with people who are more vulnerable or as vulnerable as we are, and not the very rich.”
Quart: They’re not having kids at the same rate. They’re not owning homes, either…. They have a partner, maybe. They have ambitions. And they often have these degrees that are incredibly expensive, and they don’t know how they’re going to pay them back.
So, I do think it’s going to change things. One thing we should start talking about is debt forgiveness or cheaper universities and colleges, but also just keeping some of those costs of colleges in check because it’s ridiculous. If it starts to stymie our population and our productivity, that doesn’t seem like a very good education at all, does it?
Knowledge@Wharton: This division between the top income earners and the middle class is growing. How is that affecting living standards in America?
Quart: Under all of these questions is this huge division and this enormous inequality. America has the greatest inequality. There is a lot less mobility than it used to have, too. It’s almost like the mobility piece is connected to the inequality piece. That’s where you start to get people feeling like they can’t live the lives that their parents lived, and it has a chilling effect. Who are we as Americans? We’re supposed to be aspiring and progressing, right? This is the American dream. But when you know you can’t, what does that do to you as a citizen?
Knowledge@Wharton: There was a recent report about the decline in jobs in the gig economy in the last year or two. Doesn’t that indicate an even greater economic problem down the road?
Quart: Yes. This is when you start to think that we need better unions. Part of this thing that has heightened inequality is that corporate wealth and taxation is very unfair to people who are self-employed and on the poorer side. But there’s also the whole question of whether we should start to wonder why there are people who are that wealthy. Should there be people who are that wealthy? What does this do to people who are forced to do these sideline jobs, like these gig jobs? Should they have some ownership of their own gig job?
If you think about unions, 30% of workers in the 1960s were in unions. Now it’s something like 10% or even less. It’s 7% in the private sector. That just heightens it. They can’t fight for their own rights, they don’t own their part of the gig economy, and they don’t have any solidarity in the workplace.
Knowledge@Wharton: You have a chapter in the book that talks about the rise of 1% television. What is that?
Quart: We should be identifying with people who are more vulnerable or as vulnerable as we are, and not the very rich. But so many shows – “Billions,” “Downton Abbey,” “The Crown,” “Ozark” — are all about the very wealthy, and we’re supposed to be identifying with these often morally compromised people. Many of the precarious middle-class people in my book were also watching these shows and using them as an escape. I found it fascinating.
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21 Comments So Far
Robert Arvanitis
Correction, the 30% rise was since 1998. CPI made $100 worth $156. Still a bargain…
Anthony Jackson
I don’t get this: “What I advocate is… for affordable housing for people like municipal workers and firefighters and teachers.”
So we should give government employees more benefits? How about the regular middle class that does not work for one of those well paying companies?
Robert Arvanitis
You’re in good company Mr. Jackson. No specific from Quart, nor any thoughts on the policies that in fact created her issues.
Rick Nappier
Your guest, Alissa Quart, is partially right. However, The areas where there is inequality are mostly areas in or near San Francisco, Seattle, Los Angeles. Cities not on the West Coast are doing just fine. My son left San Jose at $38/hour because he was sleeping in his car because rent was outside his budget. Now he lives in GA at $26/hour and just bought his first house and lives comfortably like the major of America’s citizens not living on the West Coast.
Rick Nappier
Pretty good interview though…but the problems are squarely on the West Coast. Let’s not drag all of America into these solutions that have socialism written all over them.
Robert McNally
The biggest cost to the middle class are State and local taxes. They are a drag on everyone, regardless of income level. And the local politicians, particularly in red states, hide behind the “its all for the kids” mantra. When we all know its union featherbedding and corruption.
José Pallì
Union featherbedding, corruption, fake news, are all part of what troubles US as a nation AND, specifically, the regular middle class who cannot land a a job at one of “those well paying companies”. Granted!
But our greatest trouble is that, instead of the admirable model of a nation (which we once were), beginning in the eighties, and thanks to our devotion to Saint Ronnie and our blessed lady Saint Margaret of Iron, we have devolved into a fake nation: our present model is based on the dogmatic belief in the in-existence 0f society as such (Saint Maggie’s dictum) since we are nothing more than a collection of individual interests, human and corporate.
For instance, our model regular middle class citizen is someone who is expected to lay down his life defending his employer’s right to be free of any regulations that would prevent his being laid off at the drop of a hat, in the belief that his or her sacrifice will result in more and better paying jobs for himself and others. Believing otherwise would be unpatriotic for someone like, say, Paul Ryan -still tethered with crazy glue to his copy of Atlas Shrugged.
The fact we currently have a fake president is but the cherry on top of the fake nation we gave birth to roughly forty years ago.
michael pettengill
Thirty years ago, Reagan sold America, and the world on free lunch economics.
Basically, the middle class worker costs too much and that kills jobs, so the way to put money in the pockets of middle class workers is to cut costs, like taxes, food, clothing, cares, etc, by firing middle class workers, or slashing their wages. Then the lower costs will put money in the pockets of the middle class.
After all, everyone knows the rich got rich by cutting their costs, not by being paid high incomes!
Economies are zero sum. You can only have a high income to get into the middle class by being a high cost to others, and tanstaafl, employers will simply pass the high cost of middle class workers to middle class consumers.
Or, to put it another way, low income workers can’t afford to buy much, so businesses need few workers, at least few middle class workers. Zero sum. You can’t have high income middle class workers and low costs.
Housing is low cost in flyover country because incomes are low, but things that come from high cost coastal areas sold in flyover country have high cost coastal prices.
Advocate higher prices for everything to pay higher minimum wages, say $15 an hour, which will force all wages up by $7-10, but that means $30 goes to $40, $50 to $60, $100 to $110, $500 to $510, $1000 to $1010, etc.
Robert Arvanitis
Mr. Pettengill:
Your view of economics is incorrect. Economics is a positive sum game. Specialization and trade creates gains. Two agents cooperating produce MORE than twice what one alone can. And President Reagan oversaw a prosperous era that ALSO drove the failed USSR into banktruptcy
Now positive sum does NOT mean infinite gains. That right there is the failure of socialism.
Minimum wage is feel-good failure. Otherwise why limit it to $15?!
The rich don’t get rich by cost cutting, nor do any workers deserve more than their skills and energy command.
If I’ve missed any embedded fallacies let me know and I will continue the corrections.
Rick Nappier
Mr. Arvanitis, I agree with you 100%. My father’s side of the family is from Haiti. Socialism and, I regret to say some communist economic policies, are trying to rear their ugly heads in America. Americans do not want anything to do with the type of socialist-communist policies and the effect Haiti and Venezuela are experiencing now.
Like I mentioned before, the issues Ms. Quart mentions are West Coast issues. There is more income inequality in metro California cities and Seattle than any other area in the US.
Living here in California, much of the problem has to do with how the state of California continues to tax residents into poverty and shutting down businesses. Some of the problem has to do with the dumbing down of education. Basket weaving, gender studies political science and anthropology degrees will not prepare college graduates to earn good salaries.
I’m fortunate that my three black sons studied math and science degrees are fully prepared to do well in America.
Rob Dinerman
How is it possible that effective tax rates are not discussed? As a member of my local Board, I see the impact on homeowners and communities. Fiscal policy and the inefficient use of labor and capital by the public sector is the main cause of middle-class economic hardship.
Mike M
I believe at least a portion of the issue is the standard for middle class has changed vs 40 years ago. Today every member of the house has a cell phone, a TV in every room, internet, 3 or 4 vacations per year, multiple cars, dishwasher, clothes dryer, etc. Middle class 50 years ago had 1 or possibly 2 land lines, 3 freee network channels, a single TV in the family room, hung clothes on the line in the backyard, carpooled to work because the family had only one car, cut your own grass, ate out at a restaurant 1 time per month or only special occasions, if you had AC it was a single window unit in the family room, a typical home was less than 1500 sq ft, etc. Today that is not the case.
Morgan Bays
The United States has devolved into an oligarchy over the last 40 years. In order to reverse that and move forward, the elitist Electoral College needs to be overcome at the voting booth by the populace voting for progressive Democrats, and stop voting for oligarchy by voting Republican. Elections have consequences and we have suffered because of Republican/right-wing looting.
Robert Arvanitis
Mr. Bays, above, posts an opinion replete with emotion-laden terms yet perfectly devoid of facts or reason.
That is exactly why the Founding Fathers gave us the Constitution, three-part government and of course the Electoral College.
Rick Nappier
Morgan, Wow! I didn’t realize Soros employees had reach this far off LinkedIn to places like Wharton, Trump’s alma mater. But I guess you knew that already. Lol. Yes, it’s pretty interesting that all the cities with the biggest problems are run by Democrats. I’m in California where this place is crumbling by the minute under Jerr Brown. It’s funny that the very forum with which we are communicating with each other was created by two capitalists: Steve Jobs and Bill Gates. I’m assuming you Gates was a Republican the Democrats made him sign a pact with the Democrats devils in the mid 1990’s when the Dems were trying to dismantle his company because Microsoft was number 1 in operating systems. Since I have your eyeballs, can you name one progresive Democrat who invented something over the last 40 years? For all other readers, don’t let your state become like California, New Jersey and NYC.
Melanie Grapes
What we fail to talk about is the growing number of programs that use tax dollars to provide income sources to people that are fully capable of working, they just choose not to. I started entry level and worked my way up, I paid back my college loans, I pay my taxes and I pay my mortgage. I’ve been unemployed and got up every morning treating my job search like a job. I have friends working just as hard because that’s what our parents taught us and they taught us, ethics and integrity. The free handouts and subsidies have to stop. To get welfare or some of these other programs, make people show up for some type of work each day. The middle class is only being squeezed because we are funding the handouts. When we are gone, where will the funding then come from? This isn’t about doing what’s right for people, it’s about control and about buying votes to keep the powerful few in power… nothing more.
Richard Avila
Ms. Quart’s Article is Spot On. I agree with many but not all of her proposed solutions. I certainly agree that if we as a Nation are to have middle class friendly public policies, then the middle class has to vote for them which means that the middle class has to admit to its financial vulnerability, stop being ashamed of it, and blame the plutocrats and their “trickle down” economic policies for the squeeze on the affordability of middle class life in America. Many of the comments made about Ms. Quart’s Article, instead, make excuses. It’s a West Coast ONLY problem. Not true. It’s because of Welfare Handouts to the Poor. Not True. It’s just inevitable. Not True. We have a Middle Class Squeeze in this Country because we reward the Richest Americans at the Expense of EVERYONE else in America. We can change that if we choose to do so. FDR changed that 80 years ago. Do we have to become a Majority Poor Nation again like 80 years ago to enact Middle Class Friendly Public Policies. I would hope not.
Rick Nappier
Yes, middle-class economic challenges are purely a West Coast problem, and primarily a California problem. Most of it is overtaxation as West Coast cities recycles taxpayer money to buy votes to secure constituent votes. This buying vote problem is like a person on heroin. You always need more. Sooner or later, California will have no one to tax to support its habit. It may take 40 years for California to reach Venezuela status, but it’s coming. And, I hope the federal government does not interfere with California’s demise.
All a person has to do is leave California and he or she will experience lower gas prices, lower real estate prices, a more robust economy, a market driven job market, a better quality of life, etc. Yes, wages are lower outside of California, but your costs of living is dramatically much lower, resulting in a better standard of life.
Second, one poster used the phrase “trickle down economics”. I laughed when I still see this phrase which has its origins in pro socialist-communist economic forums. As an economics graduate at a liberal college in San Francisco, I’m so thankful I had a professor whose father was a French Foreign Legion fighter in WWII who fought against Nazism (socialism). Professor Renault taught the free-enterprise version of economics (the other version is the Keynesian, central planning government which is socialism and borderline communism).
The term “trickle down economics” was started in the 1980’s when socialist politicians, again, wanted to secure votes by overtaxing other people. “Trickle down” is attractive to those who did not graduate from high school, did not prepare themselves to meet workforce demands, and anyone jealous of other people’s success. In fact, the phrase “trickle down economics” is not even a real phrase. It laughable when I hear it used.
To use the phrase “trickle down” correctly, if that’s possible, means a person graduates from high school, maybe graduates from college or finds a good blue collar vocational skill, and is equipped to compete in today’s workforce. If you don’t make yourself valuable, you won’t make enough money you need.
California’s (I am a CA resident) other problem is the surge of illegal alien workers dragging down wages and simultaneously driving up home prices. Many American blue-collar workers in California have seen their wages drop over 50% over the last 10 years because employers hire non-citizen workers for $10-12 per hour. To make a long story short, wage depression causes a “trickle down” effect where every industry, except gasoline, alcohol, casinos, and prostitution, is harmed.
Nathaniel Mullikin
Humans for all of our history have been an oligarchal and fuedalistic. This is the natural order for a species that evolved in continuous tribal alpha combat. The alpha got the best of everything. Everyone not the alpha got nothing- unless you could kill the alpha. The problems we face will not be solved with guartanteed minimum wage or some other handout. We need to stop focusing on what we are naturally. What do we humans want to be?
Edward Dodson
When analysts such as this author refer to the cost of housing as a serious societal issue, they put the blame on the wrong asset. Housing is a capital good that depreciates over time. Thus, the value of a housing unit is its replacement cost, less depreciation. The value of a housing unit only increases when the owner or buyer expands the size of the unit or significantly upgrades and modernizes its systems and interior. So, what increases the cost of a residential property? It is the land on which the unit sits.
The reason why affordable housing is scarce is actually quite simple. Every parcel or tract of land has some potential annual rental value. This rental value is a function of locational advantage; and, locational advantage exists based on natural factors (e.g., topography, climate, nearness to water, etc.) and on the quality of public investment in infrastructure and other amenities. Thus, this rental value has nothing to do with what the individual owner of land does or does not do to improve the location. The argument can be made on grounds of economic efficiency as well as distributive justice that the “rent of land” should be collected to pay for public goods and services, exempting actual housing units and other buildings from the revenue base of a community.
An annual tax on land equal to its potential annual revenue value removes the potential to profit by speculating in land. Owners of land will have a strong financial incentive to improve the land they hold to its highest, best (legal) use, or sell it to someone who will. The result is that the so-called “price mechanism” will operate in land markets in the same way it operates for labor, capital goods and even credit.
Land prices will come down when land markets are truly competitive. Theoretically, land prices over time could fall to near zero. Land will still have a rental value, but the land cost component will be removed or at least greatly reduced from the cost of development.
Robert Arvanitis
Mr. Dodson misunderstands markets when he suggests a land tax will finally make real estate respond market forces (or what he calls the “so-called price mechanism.”)
The real distortion in real estate is the heavy hand of the state, including exclusionary zoning, destructive efforts at rent control, and confiscatory impositions by unthinking environmentalists.