Let's call them "the working crunched." They're not poor, nor are they unskilled or otherwise unprepared for the modern economy. But somehow -- among mortgages, credit cards, retirement savings, gas prices, health emergencies, kids in college -- the numbers don't add up to financial security. The working crunched are middle class people who feel far from secure, running faster yet getting closer to the edge.
Susan Marsh is among them. "When I teach economics to my ninth grade students," she says, "what I like to say about credit cards is that they are 'little plastic cards of doom.'"
Susan and her husband John have a comfortable home in Minneapolis with an open view of Lake Nokomis. Susan is in her 16th year as a teacher in Shakopee. Their son is a freshman at the University of Wisconsin. Everything seems to be in order. But even John was surprised to hear Susan had just consolidated her credit card debt into loans totaling $20,000.
"It started with a transmission going down," she says. "And then that car was 500-dollaring me to death every month and there was no way to keep up. I eventually gave up the car, so now I have a car payment again.
"About that period of time, John's company laid him off and we started incurring significant medical bills. And pretty soon I started charging stupid things, like gas. I say, 'Never charge gas or groceries,' but I was starting to do it."
Susan's credit card woes mounted as John was laid off from his job as a computer programmer in 2004. "Basically, I got old and made too much money," he says. "I was really an economic cutback."
Soon after, John found out he needed hernia surgery. Their insurance called it an elective procedure, and the Marshes paid out of pocket. John's mobility is still limited, and he's nearing retirement age. They have begun tapping his 401(k) account, but John says taxes take a big bite.
Susan says they didn't live extravagantly, and after years as a two-income household they expected they could weather a string of bad luck. But this one has pushed them near the edge. They're planning to relocate to a smaller condominium next year, partly because of John's health. But he's not so sure it will help them financially. "We're going to end up trying to sell this house at the time we're trying to buy the other one, and of course the market is going to pot," he says. "I'm somewhat pessimistic."
While personal bankruptcy filings can be counted, the working crunched like the Marshes are not so easily defined. That's partly because most people feel crunched to some degree; whose life wouldn't be easier with more money?
But there are indications the Marshes are part of a trend. Credit card delinquencies are on the rise. Though consumer confidence rose in March, a recent survey found more than half of Americans believe the economy is getting worse. That's despite the fact that technically, the economy has been growing for almost five years and adding jobs for three.
Scott Anderson, a senior economist with Wells Fargo, offers more evidence of a consumer crunch: "The savings rate is in a long-term downtrend, and that suggests to me that consumers are stretching more and more to maintain their standard of living," Anderson says. "It's getting harder and harder for people to sock away that money. Wages and salaries have not kept pace with inflation of the last couple years."
Anderson doesn't believe our overall economy is in trouble. But when both wage growth and the savings rate are negative, it's clear many Americans are missing the fruits of the economic expansion.
One of the hallmarks of that expansion has been the strong housing market. But the market is cooling. That's bad timing for Nick Schrader.
We're these really model American families, and we're struggling beyond what you would think would happen.Jacque Bieber, South St. Paul
For Schrader, the American dream of home ownership has proved short-lived. The 26-year-old was excited to purchase his own condo last year in an art deco-style building in the Whittier neighborhood of Minneapolis. He followed the conventional logic that a home would be a solid investment in his financial future.
Now he's putting it up for sale, convinced he'll be better off mentally and financially if he goes back to renting. "For me it ended up being a life that I didn't want to live, because it was too much ... work to be done to make the payments that it came to be a sacrifice of my personal life," he says. "And my personal health, too -- just working like a dog six days a week, only having one day off for a year and a half. It just wasn't worth it."
Despite a college degree, Schrader's two jobs at a restaurant and working with disabled children at a local school pull in only about $1,600 a month. He has an adjustable rate mortgage, which means his payments are rising along with interest rates. Even though it's not an ideal time to sell, Schrader says he's doing what he has to do: "It makes more sense for me to sell this place, take what money I can from it, and get back on my feet somewhere else."
Schrader is struggling to find work that is both personally rewarding and provides more than a hand-to-mouth existence. Overall, while the U.S. economy has grown, incomes have failed to keep up with inflation for three straight years.
Wells Fargo's Scott Anderson says the benefits of growth have so far been concentrated with companies and their shareholders. Profits are not going into hiring and raises. "Companies are extremely well capitalized," he says. "Their retained earnings are very high, and they're using those retained earnings to do mergers and acquisitions, and stock buybacks."
Jacque Bieber says she has never felt so crunched, and neither have some of her friends. "We're these model American families, and we're struggling beyond what you would think would happen," she says.
Four years ago, Bieber was the director of research at the St. Paul-based American Academy of Neurology. But when a new executive director came in, she was out.
Employment has been more difficult than you might think for someone with a Ph.D and a prestigious work history. Bieber is 54, and it has been difficult to find a good fit for her specialized qualifications -- much less a job that approaches her earlier salary.
"I've sent my resume out plenty of times," she says. "I don't even end up getting an interview, and I have really good credentials, you know. I was earning $130,000 a year. And so I've been going into my retirement funds to make ends meet. You can only do that for so long."
Bieber's husband is a therapist who works out of their home in South St. Paul. Bieber says their only option was a drastic change in lifestyle, or trying to start her own business. She has been working with a partner to establish a consultancy using their specialized knowledge. She says they have some big contracts in the works, but no cash flow yet. At the time of this interview, Bieber was preparing to visit her bank for a stop-gap loan.
"It's this money thing that really worries me more than anything, more than anything. And I've never been in this position before. It's really difficult to be well-trained, to have a lot to offer, and to have nobody who's willing to really pay for what you can bring to the party," she says.
Bieber she knows a lot of people in a similar squeeze. "These are people that are really capable people. People that can read and write and think on a critical level, and speak well. It's not that all my friends are without work. But I have never known this many people who are capable, who are in similar situations to my own."
Like the others in this story, Bieber is thinking of selling her home to make ends meet. With one child in college and another going soon, she says the family could get by with less room.
The best -- and maybe only -- remedy for many of the "working crunched" may be time. Economist Scott Anderson of Wells Fargo says while the fruits of economic growth in recent years have gone disproportionately to businesses, a change is coming.
"As the expansion gets longer in the tooth we will see a transition of forces," Anderson says. "Businesses won't be able to continue to expand without hiring more workers and spending more on capital and equipment. That suggests businesses will have to start hiring more workers."
And paying them more.
Within five to ten years, many economists also expect the millions of retiring baby boomers to create an urgent need for skilled workers to take their place. So, better days are coming -- maybe. For many of Minnesota's "working crunched," the challenge will be hanging on until then.