Jacob Hacker’s data show that the typical American family today is running a risk marathon. Some may make it, but every year more families are falling as the risks catch up with them.
Jacob explains that the predicted probability of a 20 percent or greater income drop among such average families was 4 percent at the beginning of the 1970s. By the early 2000s, it had more than doubled to 10.6 percent. See the graphic in the continuation.
This is a powerful change with huge implications. Jacob shows that on the income side alone, families are far more vulnerable than they were a generation ago. Combine that with the data we developed in The Two-Income Trap on rising costs for mortgages, health insurance, transportation, childcare and total taxes. A generation ago the median one-income family spent about half of its income to cover these basic expenses, while today’s two-income family is spending about 75% of its total take-home pay to cover the same costs. In other words, it now takes two incomes instead of one to lay claim to the life that one income purchased in the early 1970s and the two-income family faces even higher risks of income instability than their one-income parents faced a generation ago.
These middle class families are running a race that fewer and fewer of them will win. They are working harder but their odds of an economic meltdown keep accelerating.
The middle class, once a comfortable designation marked by security and safety, has become high-risk. Kudos to Jacob for producing the data that too many people would like to ignore.
