By David K. Shipler
We’re being peppered with a lot of numbers that tell us less than we need to know about financial hardship. We have the 99 percent and the one percent. We have the 8.6-percent unemployment rate. We have the average payroll tax cut of $1,000 this year, which next year will become either $1,500 or $0, depending on how well Congress dysfunctions before Christmas. Either 46.6 million or 49 million people are poor, depending on whether you want to reduce “poverty” by using the official formula based on families’ 1950s spending patterns, or would rather reconcile yourself to living in the 21st century, whose facts of life produce the higher calculation by the Census Bureau.
It is hard to get to the human story of poverty, and none of these numbers takes us there. A more revealing statistic helps, but it doesn’t get the attention it deserves: a household’s net worth—assets minus liabilities.
Income measures the present, net worth includes the past. Income is a still photograph, a snapshot of the moment. Net worth provides a moving picture of a family’s accumulated gains and losses. It carries the past into the present, measuring the resources available to cushion a fall, and assesses the weight of the past on the future. Unfortunately, net worth is given no role in computing the poverty rate.
The Federal Reserve surveys families and makes the calculation. On one side of the ledger are money in the bank, stocks, bonds, the value of a home, vehicles, jewelry, and other tangible possessions. On the other side are credit card balances, car loans, mortgages, unpaid bills, and other debt. In the United States, the disparities in net worth from top to bottom are striking.
A lot of wealth evaporated in the Great Recession beginning in 2008. Real estate values plummeted, stocks took a dive. People at all socio-economic levels lost net worth between 2007 and 2009. But those at the bottom rungs, who had the least to spare, took the biggest hit.
In 2007 before the crash, the median household net worth stood at just $1,700 for the bottom 25 percent, while the richest 10 percent had $2,039,000. Those wealthiest families dropped by 2009 to a median of $1,589,000. Still not too bad. But those in the lowest 25 percent slipped into negative territory, leaving them with a median household net worth of minus $4,900, meaning that they owed more than they owned.
Racial disparities were also acute. For white households, the 2009 median net worth stood at $113,149. For Hispanics it was $6,325, and for blacks, $5,677. The 20-1 ratio of white to black wealth doubled between 2004 and 2009, according to an analysis by the Pew Research Center.
With such tiny reserves, people at the bottom have little protection against reversals. For at least one quarter of America’s households, what may seem like a minor inconvenience to the rest of the country can trigger a catastrophic chain reaction. A car repair, a rent hike, or an out-of-pocket medical expense either deepens a family’s debt or squeezes other parts of the budget. You have to keep your car running if you need it to get to work. You have to pay the rent, electricity, heat, and phone bills. The part of the budget that can be squeezed is for food, so that’s what many families cut, producing a dangerous domino effect.
Because market rents can soak up 50 to 70 percent of a low-income family’s budget, a high correlation has been found between a lack of government housing subsidies and underweight children. Malnutrition in the early years, during the most crucial period of brain development, produces lifelong cognitive deficiencies, which do not disappear even if nutrition improves later on. School performance may suffer, dropout rates may rise, and impaired children grow up and enter the working world without the skills they need to keep them—and their country—competitive in a ruthless global marketplace. This pattern is well understood, yet it spurs no action that would be in the national interest.
Similarly, a medical problem can instantly decimate a family’s finances, as in the case of a young father in New Hampshire, unemployed and without health insurance, who couldn’t afford dental checkups. When he got toothaches, he went to emergency rooms. Hospitals are required by law to provide emergency treatment, even if you’re not insured, but they can also bill you. So they billed him repeatedly, and once he had run up $10,000 in debt, his credit rating plummeted and followed him like a curse. Even after he got a decent-paying job as a roofer, taking him above the poverty line, no company would install phone service in his house.
The weight of his debt was more than financial. It burdened his choices, damaged his sense of possibility, and taught him to feel helpless, exposing him to the sense of powerless that is a common characteristic of poverty. As long as money is equated with success, as it is in American culture, its lack suggests failure, and failure can take many forms.
If you have failed repeatedly—in school, in relationships, in job after job—you do not easily imagine success, and if imagination is impaired, so are confidence and therefore performance. When low-wage workers don’t show up on the job, their annoyed bosses might consider this insight from Ann Brash, who fell into poverty from the middle class after a divorce: “People who don’t call when they can’t come to work probably don’t think they’re important enough to matter.”
People who stop believing in possibility tend to slide toward defeat. The available numbers do not capture the psychological hardship, the anxiety, and the alienation that now flow through the American landscape. Those will not be described by statistics, except perhaps by the tabulations of votes next November.