The Fragile American: Hardship and Financial Troubles in the 21 st Century

1. Laura McCloud mccloud@plu.edu Department of Sociology and Social Work Pacific Lutheran University The Fragile American: Hardship and Financial Troubles in the 21st Century

2. Overview • Debt in 21st Century America • Discussion of “The Fragile American: Hardship and Financial Troubles in the 21st Century” • Debt and hardship since the bubble burst • Concern about debt

3. How did the United States become a society of debtors? Inequality trends Rising costs Banking deregulation Financialization Individualized risk

4. Increasing income inequality

5. A low and stagnant minimum wage

6. Rising costs Everything got more expensive Particularly necessities

7. Banking deregulation

8. Financialization Before. . . After

9. Neoliberal economic policy + An individualistic culture Individualized risk

10. Motivation for our study • The paradox of debt • Weighing in on the “good debt”/”bad debt” debate • Expanding The Fragile Middle Class

11. Financial well-being and life chances • Our understanding of stratification is growing • Understanding financial hardships • Experiencing hardships may be bad luck • Our ability to recover from them is not • Some hardships are worse than others

12. Hardship and credit troubles • What we learn from bankruptcy research • Important class differences • May be eroding • A national view of hardship and financial troubles • Need for a representative, updated test • Multiple financial troubles

13. Multiple financial troubles • Consumers face a range of financial problems • No clear credit trouble trajectory • Hardship creates financial limitations • Increasing the likelihood of default • Increasing problems with access to credit

14. Class inequality, hardship, and financial troubles • Looking beyond bankruptcy, looking at class • Class shapes how we experience hardship • Middle class more vulnerable than upper class • Lower class also vulnerable • No class is immune from the financial implications of hardships

15. Data and sample • 2004 Survey of Consumer Finances • Nationally representative • Extensive financial data • Multiple imputation • 5 data sets • N = 4,159 respondents who ever applied for credit

16. Measures • Financial troubles • Declared bankruptcy • Defaulted on payments • Denied credit • Offered less credit • Hardships • Poor health • Divorced or widowed • Unemployed • Income disruption

17. Odds ratios of hardship on financial troubles for all respondents (N=4159)

18. Odds ratios of hardship on financial troubles for lower-class respondents (N=950)

19. Odds ratios of hardship on financial troubles for middle-class respondents (N=2152)

20. Odds ratios of hardship on financial troubles for upper-class respondents (N=1057)

21. Discussion and implications • Poor health and job loss most associated with financial hardship • The “great risk shift” (Hacker 2006) • The importance of credit in American households

22. What has happened since 2004? • Economic instability and depression • Credit reform • Credit tightening • Declining credit use

23. How has the recession affected credit troubles? • Cash is king? • Defaults, not delinquencies • Consumer debt as a safety net

24. Why we should be concerned about debt • Universal vulnerability to poor health • Changing financial obligations in households • Increasing importance of access • Young adults starting out in the red • Unemployment, underemployment and low-wages

25. mccloud@plu.edu Questions?