Fed says downturn hit middle class hardest
Kai Ryssdal: There comes every now and then an economic report that makes you go: ‘Wait, what?’
Today’s one of those days. The Federal Reserve does a survey of consumer finances every three years. The most recent came out yesterday, and it shows median income was down almost 8 percent.
But there’s one nugget that has economists scratching their heads. Turns out the more money and education you had, the bigger your losses. From the Wealth and Poverty Desk, Marketplace’s Sarah Gardner reports.
Sarah Gardner: Just to make clear, we’re not talking about net worth, like houses, yachts or land. We’re talking income, like from a paycheck. And according to the Fed’s latest survey, incomes among the American middle class dropped the most during the recession. The bottom 25 percent of earners fell too, but by much less.
Timothy Smeeding at the University of Wisconsin says the poor had less to lose, of course. But he says the public safety net was what really helped them weather the recession, especially aid like food stamps.
Timothy Smeeding: You only need to be poor to get it. And many states have eased access to the program such that it provides a real stabilizer.
But what about low-income Americans who weren’t collecting public assistance? They didn’t lose as much ground as the college-educated middle either.
Smeeding: That’s a puzzle. Many of them might have moved in with someone else because they couldn’t afford their own apartment anymore. Some of them, probably, y’know. I don’t know. That’s the best answer I’ve got. I’m sorry.
Smeeding says he and other economists have been emailing and texting about this puzzle all day. We caught NYU economist Ed Wolff on his cell phone. He suspects the income numbers are skewed somewhat by all those recent grads stuck working part-time at The Gap.
Ed Wolff: I don’t think this is a long-term situation. I think eventually college graduates will get back into their usual relatively high-paying jobs.
Timothy Smeeding says this week’s Fed report shouldn’t discourage Americans from getting a B.A. College grads still make more money overall. That is, when they have a job.
I’m Sarah Gardner for Marketplace.
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