Holiday Thoughts about Three Especially Vulnerable Groups

I try to be optimistic — especially this time of year when the days are short and cold, when almost everybody things everyone else is having a better time than they are, and now that we’re in the worst economic downturn in almost anyone’s memory. Yet I also try to be realistic about the effects of this Mini-Depression. At least three distinct groups are especially vulnerable, each quite differently:

1. The poor and near poor, with family incomes typically under $20,000 a year. Their connections to the labor force are tenuous at best, often involving part-time and temporary jobs. They’re also the first to be let go during downturns. Not surprising, this recession is taking a toll, and about to take a larger one. Few in this group qualify for unemployment insurance, and an increasing number have exhausted the five-year maximum for temporary welfare assistance. To the extent they’re getting by, they’re moving in with relatives. The media have missed this story almost entirely.

2. Middle and lower-middle class households whose breadwinners are within five years of being eligible for Social Security. Many are in danger of losing jobs and a large number are already working fewer hours. They’re cutting back on all discretionary purchases. But their biggest problem is that both their savings and the value of their homes have shrunk dramatically, and probably won’t bounce back before they planned to retire. Social Security will cover about 40 percent of their pre-retirement earnings. So many are now planning to work well beyond age 65. This will be a particular challenge for blue-collar workers whose earnings have depended largely on physical labor. Their bodies may not last.

3. Middle and lower-middle class retirees. Most are dependent on income from savings, which has declined sharply. They’re cutting expenses where they can, but they’re running out of resources. To the extent they can turn to their children for help, they are doing so. That means a large and growing cohort of middle-income people between the ages of 35 and 65 have begun subsidizing their parents, even though they and their immediate families are under financial stress. Here’s another untold story.

Other Americans are in distress but these three groups are particularly worrisome, and in the years ahead it seems likely they’ll be in worse shape than they are today. If this is to be avoided, these three groups will need distinct public policies crafted to their particular needs. More on this to come.

In the meantime, happy holidays.

About Robert Reich 545 Articles

Robert Reich is the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.

He has served as labor secretary in the Clinton administration, as an assistant to the solicitor general in the Ford administration and as head of the Federal Trade Commission's policy planning staff during the Carter administration.

He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

In 2003, Mr. Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

Mr. Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

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