Cash Flow is Huge for Low-and-Moderate Income Families

Money coins fall out of the golden tapNew Orleans   In reckoning with the daily, survival and success struggles of low-and-moderate income families given the myriad of challenges they face, sometimes the experts stumble over the obvious in one of those, “Oh, yeah!” moments that we all have. Reading a recent copy of Shelterforce magazine, there was an article called “Is Financial Unsteadiness the New Normal” by Jonathan Morduch and Rachel Schneider which offered a case study of just such a moment. They examined the demands of financial security for lower income families closely and argue that in addition to looking at income, especially annual income, and assets, as paltry as they are, we need to look at cash flow to understand the full dimensions of citizen wealth for such families. Now, we can all say together, “of course!”

In dealing with the crises facing such families in our increasingly inequitable society, economists have long noted that assets have fallen to hardly above zero for many families, especially in the wake of the clawback of home ownership for minorities. The Pew survey folks have found that 41% of all households have less than $2000 in liquid savings. Other reports have noted that many families do not have the liquid resources to deal with a financial crisis of even $400 without help from family, friends, or lady luck.

The authors point out that looking at their US Financial Diaires Study Households of about 235 families in California, Mississippi, Ohio-Kentucky, and New York City they found some discomforting information,

“…we found…evidence of a lot of volatility within the year. On average, families in the study had more than five months a year when income was 25 percent above or below their monthly average. For example, a household making $36,000 a year isn’t necessarily making $3000 a month. Based on our data, for more than five months a year, that family will earn less than $2250 or more $3750.”

All of which makes it hard to save and hard to spend and contributes to the problem. The irregularity of a families’ income stream means the issue for many is more “illiquidity than insolvency.”

The issue is so severe that the author’s cite a report from the Consumer Financial Protection Bureau and Pew people that 85% of the 2000 households surveyed would prefer financial stability over “moving up the income ladder.” In essence, people are voting give me stability rather than stress even if it means less cash and a lower lifestyle: a good bird in hand, rather than who knows what in the bush.

The authors found that this illiquidity creates a snowball effect on other issues as well. These are not problems solved by the bankers favorite stopgap of “financial literacy” programs either. People are very well informed that they have irregular income, and given the rise of the contingent employment and informal employment economy, they know there are going to be ups and downs. When I was organizing hotel housekeepers and other hospitality employees, all of them knew they were going to be hurting for money in the New Orleans summer as well as over Thanksgiving and Christmas holidays when the room count was down, but that didn’t mean they could grow other dollars on different trees, though many tried, more fail.

The authors correctly point out that this makes budgeting horrific, and exacerbates the affordable housing dilemma for low-and-moderate income families. You can forget about home ownership if your income never gets to the point where you can create a down payment. Of course the home ownership model for citizen wealth for lower income families is already severely challenged, if not destroyed, but recognizing the role of cash flow puts another nail in the coffin of that dream rather than in the beams of a new house.

Representing school workers in Texas who have an option of choosing to receive their money year round rather than just during the school year, our union can see that some employers have long understood the simple facts of cash flow, but clearly as Morduch and Schneider point out, that’s not enough to start seeing a solution to the problem even if underscores the continuing crisis. This is a “new normal” or a clearer picture of the old normal hardly matters, it’s a huge barrier for millions of families and getting bigger, not smaller.


Precarious Employment Spreading in USA

working-at-living-croppedNew Orleans       Unstable and precarious employment and income is something that every union organizer in labor unions involved in the service sector recognizes as a daily fact of life for workers.

In Walmart, 1o years ago, just as it is today, we organized Walmart workers in Florida against the computer scheduling from Bentonville, Arkansas that would take them from 40 hours to 24 hours to 16 then back to 32 and anywhere they felt based on their algorithms.

In nursing home, home care, mental health centers, head start work, childcare centers, schools, and countless other service sector work, our members and other workers live with seasonal work, and sometimes no unemployment benefits, standard shifts are often 35 hours or 32 hours, and with the pressure of the Affordable Care Act mandate dipping below 30 on an average to escape payment.

Now new reports are coming down on us like a hard rain as others discover and document this increasing precariousness.

· A 2012 study by government and university economists found that “household income became noticeably more volatile between 1970 and the late 2000s” despite a period of “increase stability throughout the economy as a whole.”
· A 2013 Federal Reserve report according to the New York Times, “suggests the problem has not only persisted as the economy recovers, but may even have worsened. More than 30 percent of Americans reported spikes and dips in their income. Among that group 42 percent cited an irregular work schedule; and additional 27 percent blamed a span of joblessness or seasonal work.”
· U.S. Financial Diaries has released an in-depth report on low-and-moderate income families and finds that almost all of them “experienced a drop in monthly income of at least 25 percent in a single year.”
· There are now 7 million people working part time in the US who indicate that they would prefer full-time work but can’t find it, accounting for 4.5% of the workforce, almost double the figure before the recession.

Given this internal, hidden inequality it should not come as a surprise, as organizers also find routinely, that many lower income, lower waged families view financial stability as a higher priority than higher wages or advancement. The bird in the hand can be eaten, while the bird in the bush, no matter how close, can easily disappear leaving the family in bad straits.

Is there a plan? No way!

In fact, a Department of Labor study of the records of 300,000 minimum wage workers in New York State and California found that employers routinely short pay 3.5 to 7% of all such workers. Extended and supplemental unemployment benefits have been caught repeatedly in Congressional deadlocks as well. Families caught in these crises are then caught in cycle of dependence on our families, relatives, predatory loans, and whatever it takes to pay the bills.

Are we responding by organizing these workers aggressively? Not so much.

All of which indicates that this is a mess that stands to continue to worsen since there still appears to be no light at the end of the deep tunnel where so many US families are currently falling.