During the past generation, the American middle-classs family that once could count on hard work and fair play to keep itself financially secure has been transformed by economic risk and new realities. Now a pink slip, a bad diagnosis, or a disappearing spouse can reducea family from solidly middle class to newly poor in a few months.
In just one generation, millions of mothers have gone to work, transforming basic family economics. Scholars, policymakers, and critics of all stripes havedebated the social implications of these changes, but few have looked at the side effect:family risk has risen aswell. Today's families have budgeted to the limits of their new two-paycheck status. As a result, they have losst the parachute they once had in times of financial setback——a back-up earner(usually Mom)who couldgo into the workforce if the primary earner got laid off or fell sick. This "added-worker effect" could support the safety net offered by unemployment insurance or disability insurance to help families weather bad times.But today, a disruption to family fortunes can no longer be made up with extra income from an otherwise-stay-at-home partner.
During the same period, families have been asked to absorb much more risk in their retirement income. Steelworkers, airline employees, and now those in the auto industry are joining millions of families who must worry about interest rates, stock market fluctuation, alnd the harsh reality that they may outlive their retirement money.For much of the past year,President Bush campaigned to move Social Security to a savings-account model, with retirees trading much or all of their guaranteed payments for payments depending on investment returns. For younger families, the picture is not any beetter. Both the absolute cost of healthcare and the share of it borne by families have risen——and newly fashionablehealth-savings plans are spreading from legislative halls to Walmart workers, with much higher deductibles anda large new dose of investment risk for families'future healthcare. Even demographics are working against the middle-class family, as the odds of having a weak elderly parent——and all the attendant need for physical and financial assistance—have jumped eightfold in just one generation.
From the middle-class family perspective, much of this, understandably, looks far less like an opportunity to exercise more financial responsibility, and a good deaI more like a frightening acceleration of the wholesale shift of financial risk onto their already overburdened shoulders. The financial fallout has begun, and the political fallout may not be far behind.
When it comes to the slowing economy,Ellen Spero isn't biting her nails just yet. But the 47-year-old manicurist isn't cutting, filling or polishing as many nailsas she'd like to, either. Most of her clients spend $ 12 to $50 weekly,but last month two longtime customers suddenly stopped showing up. Spero blames the softening economy.“I’m a good economic indicator,”she says.“I provide a service that people can do without when they're concerned about saving some dollars." So Spero is downscaling,shopping at middle-brow Dillard's department store near her suburban Clevelandhome, instead of Neiman Marcus.“I don't know if other clients are going to abandon me, too.”she says.
Even before Alan Greenspan's admission that America's red-hot economy is cooling, lots of working folks had already seen signs of the slowdown themselves.From car dealerships to Gap outlets, sales have been lagging for months as shoppers temper their spending. For retailers, who last year took in 24 percent of their revenue between Thanksgiving and Christmas, the cauttious approach is coming at a crucial time. Already, experts say,holiday sales are off 7 percent from last year's pace. But don't sound any alarms just yet. Consumers seem only mildly concerned, not panicked, and many say they remain optimistic about the economy's long-term prospects,even as they do some modest belt-tightening.
Consumers say they're not in despair because, despitte the dreadful headlines, their own fortunes still feel pretty good. Home prices are holding steady in most reegions. In Manhattan,“there's a new gold rush happening in the $4 million to $10 million range,predominalntly fed by Wall Street bonuses,"says broker Barbara Corcoran.In San Francisco,prices are still rising evenas frenzied overbidding quiets.“Instead of 20 to 30 offers, now maybe you only get two or three,”says Jolhn Tealdi, a Bay Area real-estate broker. And most folks still feel pretty comfortable about their ability to find and keep a job.
Many folks see silver linings to this slowdown. Potentiial home buyers would cheer for lower interest rates. Employers wouldn't mind a little fewer bubbles in the job market. Many consumers seem to have been influenced by stock-market swings, which investors now view as a necessary ingredient to a sustained boom. Diners might see an upside, too. Getting a table at Manhattan's hot new Alain Ducasse restaurant used to be impossible. Not anymore. For that, Greenspan & Co. may still be worth toasting.
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