May 6, 2006

Strapped: Read this Book!

Thanks, Matt, for taking Em for a while so I have time to review yet another gloomy book I've just read: Strapped : Why America's 20- and 30-Somethings Can't Get Ahead. I was initially somewhat skeptical of the premise behind this one, which basically is that our middle class is going to shrink if we do nothing to help them, because the up-and-coming children of the middle class have it much harder than their parents did.

Perhaps because of my history background, I admit to thinking, "Well, shoot, every generation thinks they've got it tough. Why, in my day, you young whippersnapper...." etc. Apparently, I'm an OLD 35!

The author makes some fairly compelling statistical points, however, to show that it's not just whining: the reason so many of us are struggling is NOT because we are the loser generation of slackers, but because many of the supports that previous economies provided are gone (she has a great three-word answer to how hard the "Greatest Generation" worked and strived [strove?] to get everything they had without any help from anybody, and why can't we do the same? It is: "the G.I. Bill", which provided free housing, low-cost mortgage help, and free college. A short analysis of her book is that basically our generation has the OPPOSITE of all three of those things, plus usurious lending practices.)

So, a slightly more detailed analysis of her main points:

~College is the new high school, in that you need to have at least a Bachelor's degree to achieve a traditionally middle-class lifestyle. While high school is free, college is not, and more and more, different colleges' degrees provide you with a different future income potential; naturally, the more the degree costs, the better your future (in general, mind you).

~The government is paying way, way less of the costs of college than it used to, creating a double economic whammy on us. Not only do we need it more, but we have to pay more out of pocket to get it.

~Student loans do not necessarily reflect any kind of reality in terms of ability to repay. They also hit most college grads right in their child-bearing years, making it very difficult to support a family without both parents working.

~That means, in order to be middle class, most parents have to rely on childcare. The U.S. is literally alone in "1st World" countries in not providing for low-cost, high-quality child care. Adam Smith's invisible hand is never going to fix this, either, because the supply and demand system won't work with this particular industry.

~Here again, I was skeptical about it just being whining, in that we are making it on one income. But then I started tallying up what we have going for us that many in our generation/class don't (fortunately, there's a "socio" in "socio-economic status", or we wouldn't be middle class at all, at the moment!):

1. As teachers, we make so little that in some ways it would be a pointless choice for me to be working; by the time we paid more in taxes and paid for childcare, my earnings would be negligible. It's just a good thing I'm happy being a SAHM!

2. We didn't have to save for a down payment for our house; Matt had a very small legacy, whose timing coincided happily with our need. Most people aren't that "lucky" [in quotes because the trade off was that Matt never knew his Dad]. Saving is very difficult for our generation not because we are partying on pizza every night, or horrible spendthrifts, but because the real value of the basics--food, housing, clothes, childcare--have all gone up. Waaaaay up, in the case of housing!

3. We were smart enough to ignore the amount our mortgage lender told us we could qualify for, knowing we'd want to be able to pay our mortgage on one income, and hence, bought much less house than we could have. I'm not gloating; I think it's sad that lenders don't take into account the future status of their lenders. And we wonder why there's a high default rate....

4. We were fortunate to be in a place where we were ready to enter the home market while rates were low and before prices skyrocketed. People in their late twenties now are really hurting; rates are still low, but they have ever-higher school loans coupled with high first-time home prices that we, on the older end of the demographic, didn't face.

5. About those loans...again, Matt's loans for undergraduate were very small, thanks to family contributions, and mine were non-existent, thanks to scholarships, so I had only graduate school loans. But even for us, those two are a pretty big percentage of our take-home income.

~Apart from wanting to make us feel better, the author asks our generation to get involved in solutions. There's currently a vicious circle, in that many of us "check out" because we feel that there aren't enough of us to make politicians listen, so what's the point in trying? And since we don't try, they don't listen. Her point is that while it's true that we would need to have a higher percentage of the available people in our age group vote than in others, we do have the raw numbers to make a difference...if only we will. Another part of her analysis is that most of us came of age in a time of strong conservative politics, with a focus on individual responsibility, and as a result, most of us think any shortcomings are our own rather than structural. Oh, the irony! So her solutions are:

~Read a paper, and get involved. In something. ANYTHING, beyond what looks good on your resume.

~Lobby to divert a relatively small part of the federal budget toward helping keep a middle class in existence: let the government again cover more of the cost of college, subsidize home buying, and use sliding scales based on need.

~Re-regulate the consumer loan industry. You can even get the Christian Coalition in on this; usury is a Biblical crime, but that's pretty much what we have going on now with credit cards. For an example, she mentions several times how ludicrous it is that lenders can change interest rates any time they want, and make them retro-active. So you're paying along, and suddenly all the things you purchased cost you more. She also points out that the lenders' stated reason for, say, raising your rates when you make a late payment TO SOMEONE ELSE make no sense; raising those rates just makes you more likely to not be able to pay.

~A final plea is to get other generations involved. This is not just about making our lives cushy; if we continue to make college off-limits to more and more people who happen to be born poor but have good brains, we're shooting ourselves in the foot. We need to have those minds at work, and contributing to the economy in meaningful and hefty ways, if we're going to keep competing in the world and simultaneously maintain the standards of living our elders have gotten used to.

This is a good book. The library has it. Check it out and make yourself read it. It's not difficult, and it IS very clear. Coupled with the other book I just reviewed, it could even be a manifesto.

5 comments:

Ty Davison said...

Thanks for the review, Ginger. Despite my misgivings (some of which I'll detail here), you've piqued my curiosity about the book, and I'm adding it to my reading list.

Most of the reticence I feel stems from a difficulty I have buying "poor me" (or "poor us") complaints from anyone who lives in this society. By virtually any historical measure our quality of life is far superior to what's gone before, and though ours is a nation in decline compared to many emerging economies, we still have it pretty cushy.

It's interesting to me that the author put such stock in the G.I. Bill as the great change agent between the generations since the G.I. Bill still exists (see http://www.gibill.va.gov/) and remains available to anyone who is nutty enough to join the armed forces during this time of neverending war. But I doubt she's advocating a return of the draft. =)

— I agree, in general, that college is the new high school in terms of what most employers are looking for. At the same time, it's also worth noting that neither Bill Gates nor Steve Jobs finished college. And as someone who is self-employed, I would note that nothing I do requires a college education and that I would not hesitate to hire someone without a college education if they were otherwise qualified.

— I would argue that the government is paying less toward college educational costs only because the costs of college have risen so dramatically in the last 30 years. I'm not certain what has accounted for these price increases, but they've far outstripped inflation and, so far as I can tell, have not included commensurate increases in educational quality. Regardless, I don't think this is government's fault, something you won't hear me say very often.

— Student loans are a choice. Typically a good choice, insofar as they should allow one to acquire a degree which in turn theoretically increases one's earning power. But they are a choice nonetheless. If the repayment of loans is burdensome, well, there was free will involved. And let's not forget about the community college option.

— I'm unconvinced that the childcare dilemma that so many in the US bemoan is as awful as it's made out to be. Everyone I know who is a stay-at-home parent is raising their kid(s) successfully. Everyone I know who is using childcare is having greater difficulty raising kids or is, I'm sorry to say, failing at the task.

I do not mean to say or imply that the US policy on childcare or parental leave doesn't need massive overhaul. And I'm not saying it's easy to forgo the opportunities (financial and otherwise) that one gives up when raising kids. But again, it's a choice, and if one cares about the outcome, a pretty easy one.

— Not crazy about the author's "do something, do anything!" call to arms. If folks want to lobby for something, I prefer True Majority's plan (http://truemajority.com/who/priorities.html).

— I wholeheartedly agree that the payday loan industry needs regulation. (The Oregon legislature just passed a law reining them in somewhat.) I'm much less convinced about banks who issue credit cards. If one does not wish to use credit cards, there is a simple answer: Pay cash. I have never been persuaded that high credit card balances are the fault of the banks; the "stop me before I charge again!" line of argumentation seems weak. =)

— Maybe my problem with the author is that her premise is not borne out by my experience. I've spent a life-time saving, forgoing desirable toys, and paying loans off ahead of schedule. My standard of living is comparatively higher than my parents' at the same age. (Still, there's plenty of time for me to be 65 and eating cat food from the can.)

In short, I've had a decent public school education and a solid lower- to mid-middle class upbringing. If I can delay gratification, save money, and spend wisely, anyone in a similar boat should be able to as well. If they don't, I'm not inclined to think it's the federal goverment's fault or anybody else's for that matter.

Just my 2 cents. Thanks for the engaging blog entry!

Ginger Ogle said...

Comments interspersed below...

>>curiosity about the book, and I'm adding it to my reading list.<<

Yay! I'll be interested in hearing what you think.

>>Most of the reticence I feel stems from a difficulty I have buying "poor me" (or "poor us") complaints from anyone who lives in this society. By virtually any historical measure our quality of life is far superior to what's gone before, and though ours is a nation in decline compared to many emerging economies, we still have it pretty cushy.<<

Absolutely, our nation still has it better than many others. Her point is that if we want to stay that way, we need to nurture the middle class in ways we haven't lately (but did in the 50's and 60's). So--at least the parts that resonated with me--were about economics, not necessarily individual well-being.

>>It's interesting to me that the author put such stock in the G.I. Bill as the great change agent between the generations since the G.I. Bill still exists (see http://www.gibill.va.gov/) and remains available to anyone who is nutty enough to join the armed forces during this time of neverending war. But I doubt she's advocating a return of the draft. =) <<

It's all about statistics. It's not that it doesn't still exist; it's that so many people were eligible (and took full advantage of it) after WWII. That provided a HUGE demographic shift. One of her concerns is that shift is now shifting the other direction.


>>— I agree, in general, that college is the new high school in terms of what most employers are looking for. At the same time, it's also worth noting that neither Bill Gates nor Steve Jobs finished college. And as someone who is self-employed, I would note that nothing I do requires a college education and that I would not hesitate to hire someone without a college education if they were otherwise qualified.<<

I would respectfully disagree with you here. I would hope that you got *something* out of college, if only that much-touted liberal arts thinking, exposure to ideas that maybe you hadn't encountered before, etc. Although those may be intangible, I hope you gained some of them...otherwise, you didn't get your money's worth! And all of those help make you the businessperson you are. And Erin couldn't do what she does without one, which helps support the family....

Obviously, there's still space for entrepreneurs who don't necessarily have a college education (although let's not forget that Bill G. came from a pretty well-heeled background--using that example sort of proves her point, in that he wasn't very middle-class to start with....)

>>— I would argue that the government is paying less toward college educational costs only because the costs of college have risen so dramatically in the last 30 years. I'm not certain what has accounted for these price increases, but they've far outstripped inflation and, so far as I can tell, have not included commensurate increases in educational quality. Regardless, I don't think this is government's fault, something you won't hear me say very often.<<

Oh, yeah. It's not that they're not helping at all. But they haven't at all kept pace with the inflation that is relevant, i.e., the cost of college. In the 70's, a Pell grant could cover about 75% of the tuition at a state school, if I'm remembering the stats. right. We could certainly change that.


>>— Student loans are a choice. Typically a good choice, insofar as they should allow one to acquire a degree which in turn theoretically increases one's earning power. But they are a choice nonetheless. If the repayment of loans is burdensome, well, there was free will involved. And let's not forget about the community college option.<<

All of life is a choice. :-) Again, her point is not that there aren't options; her point is that it's become exponentially harder to get to the same place our parents did by the same age. Unexplored by her is that maybe, once we get through that crucible, longer age spans will make it all moot. But one of her concerns is that many people are just giving up on college entirely, in *spite* of being excellent candidates academically, because the finances just don't add up. So you get a whole group of people who could be contributing more--intellectually and in tax dollars, etc.--but are not due to what are, statistically, structural problems.

She does address community college in depth. I'll let you read all about that from her. Again, she's got the stats; it turns out to be somewhat of a stop-gap, but not as much as we would wish.


>>— I'm unconvinced that the childcare dilemma that so many in the US bemoan is as awful as it's made out to be. Everyone I know who is a stay-at-home parent is raising their kid(s) successfully. Everyone I know who is using childcare is having greater difficulty raising kids or is, I'm sorry to say, failing at the task.

I do not mean to say or imply that the US policy on childcare or parental leave doesn't need massive overhaul. And I'm not saying it's easy to forgo the opportunities (financial and otherwise) that one gives up when raising kids. But again, it's a choice, and if one cares about the outcome, a pretty easy one.<<

Hey, thanks! ;-) I'll remember that next time she grabs one of Jonah's toys...

Yup. That's the point. There's no way most people can afford the quality of care that kids need if they can't be with their parents. So a whole bunch of kids are being raised crappily as their parents try to make ends meet. I, too, was skeptical about this point since we manage on one income. But that's part of why I started tallying up what we had going for us that many younger/less fortunate than we don't. Here again, her questions are, why was it possible in the '50's and '60's to be *firmly* in the middle classes, and live on one income? What she found is that it's NOT about conspicuous consumption, which is the bugaboo that's usually blamed. Young adults are actually spending *less*, as a percentage of their income, on "stuff" than their parents did as young adults. They have to, because things like housing cost about six times (I think I got that right...) more.

So, again, sure, one can choose....but for many, it's a choice between leaving the middle class entirely or staying and using child care that's crappy. Ugh. To me, that's a lousy choice to have to make, and one that's not good for the country at large any way it's looked at.

>>— Not crazy about the author's "do something, do anything!" call to arms. If folks want to lobby for something, I prefer True Majority's plan (http://truemajority.com/who/priorities.html).<<

Shoot the messenger on that one. I was getting tired. That's just the *first* step, in an effort to get those who don't pay any attention to the news (nope, not even on the internet) to get involved. Her bet is that if a disengaged one reads the paper for a month, they'll find *something* to get them interested in the process, as opposed to completely turned off.

She does have more specific policy plans than that. :-)

>>— I wholeheartedly agree that the payday loan industry needs regulation. (The Oregon legislature just passed a law reining them in somewhat.) I'm much less convinced about banks who issue credit cards. If one does not wish to use credit cards, there is a simple answer: Pay cash. I have never been persuaded that high credit card balances are the fault of the banks; the "stop me before I charge again!" line of argumentation seems weak. =)>>

It's not the balances--those are, of course, consumer's fault. (Although she has a whole side avenue about how many young adults turn to credit cards in times of financial stress, banking on their ability to pay them off when times aren't so tight. Matt and I both did that, and like many, we're fine paying them back later.) It's the interest and the way it's charged that she rails against. (and the marketing on campus...)


>>— Maybe my problem with the author is that her premise is not borne out by my experience. I've spent a life-time saving, forgoing desirable toys, and paying loans off ahead of schedule. My standard of living is comparatively higher than my parents' at the same age. (Still, there's plenty of time for me to be 65 and eating cat food from the can.)

In short, I've had a decent public school education and a solid lower- to mid-middle class upbringing. If I can delay gratification, save money, and spend wisely, anyone in a similar boat should be able to as well. If they don't, I'm not inclined to think it's the federal goverment's fault or anybody else's for that matter.

Just my 2 cents. Thanks for the engaging blog entry! <<

Ah...here we tread on sensitive waters. But I didn't define the demographic for you (she does). You're actually outside it, and I'm at the very weensiest edge. Again, that's why I tried to keep in mind the differing experiences I had had each time I went, "Oh, that can't be so bad..." That's why I added that disclaimer--I was very, very skeptical when I began. I have to give her credit for persuading me that, although *I* feel fine, I can see how we've structurally (and in many unintentional ways, really) made things a lot harder for those just entering adulthood. Basically, things have gotten a lot worse. College is one clincher for me--there's less free aid (per kid) out there, and less of it is need based than when I got my ride. Housing is the other--we were both fortunate enough to get into the market at a very good time. The rise in house values, especially in metro areas with concentrations of jobs, is huge, and wages are basically flat in comparison.

I don't agree with everything she says, but I see the need for some policy changes.

I do wish she'd addressed the issue of "the first national bank of mom" more...I had to wonder whether those supposedly selfish Boomers aren't helping their kids as much as their parents helped them....or if they are, and it's just not enough in the current climate. Getting those numbers is, I expect, a lot harder to do, though. There are some other issues that she just sort of skims by, assuming that her reader not only knows what she's talking about, but agrees with her. So I'm not her agent...but I do think it's a great way to start a discussion that ought to be had.

I also have in the back of my head one of my history profs, who predicted this shift. He referred to it as a time of "lowered expectations." "Rising expectations" are what you, and the boomers, and several generations in a row, had: the idea that they could do better than their parents had. We're out of those times now, and this is when the revolutions usually happen. Interesting times, to be sure.

Thank YOU for the comments. We love comments!!! And intelligent comments are the best. :-)

Ty Davison said...

(I wish Blogger had a better way to quote stuff.)

GI Bill
>>It's all about statistics. It's not that it doesn't still exist; it's that so many people were eligible (and took full advantage of it) after WWII. That provided a HUGE demographic shift. One of her concerns is that shift is now shifting the other direction.<<

My point is that it's shifting the other direction precisely because people are choosing not to qualify for the the GI Bill. If it's the be-all end-all the author claims, it's still available to those who want to make the sacrifice. Clearly the demographics bear out the notion that not nearly as many people want to take that leap, but again, it's a choice.

College education
>>I would respectfully disagree with you here. I would hope that you got *something* out of college, if only that much-touted liberal arts thinking, exposure to ideas that maybe you hadn't encountered before, etc. Although those may be intangible, I hope you gained some of them...otherwise, you didn't get your money's worth! And all of those help make you the businessperson you are. And Erin couldn't do what she does without one, which helps support the family....

Obviously, there's still space for entrepreneurs who don't necessarily have a college education (although let's not forget that Bill G. came from a pretty well-heeled background--using that example sort of proves her point, in that he wasn't very middle-class to start with....)<<

I'm not arguing that college is worthless or without merit. Indeed in many cases (because the US doesn't have anything approaching Europe's vocational training schools), it's the only option for career advancement.

I continue to believe, however, that in the business world a college degree is a non-issue. If you have the talent and capability to do whatever it is that needs doing—whether you are a computer programmer, a sous-chef, or a car salesperson—degrees don't matter. Successful businesses are very bottomline oriented; if a person can help them make money, degrees are irrelevant.

Educational costs & student loans
>>Oh, yeah. It's not that they're not helping at all. But they haven't at all kept pace with the inflation that is relevant, i.e., the cost of college. In the 70's, a Pell grant could cover about 75% of the tuition at a state school, if I'm remembering the stats. right. We could certainly change that.<<

But why has the cost of college education rocketed? I agree that government spending on college grants like the Pell hasn't kept pace, but I'm not certain it should. Sure, if I get to choose between funding the military or giving Pell grants, I'll give Pell grants, but I'm not a fan of any government program where we say, "Let's cover the cost and who cares what we're being charged." The increases in college costs have been wildly out of whack compared to the rest of the economy (except in recent times health care and energy).

I'm for giving grants and need-based grants especially, but I'm not of a mind to fund colleges without any cost controls in place.

>>All of life is a choice. :-) <<

Exactly. And if people choose poorly it's not necessarily up to the rest of us to mitigate the consequences.

>>Again, her point is not that there aren't options; her point is that it's become exponentially harder to get to the same place our parents did by the same age. Unexplored by her is that maybe, once we get through that crucible, longer age spans will make it all moot.<<

You make an excellent point, I think.

>>But one of her concerns is that many people are just giving up on college entirely, in *spite* of being excellent candidates academically, because the finances just don't add up. So you get a whole group of people who could be contributing more--intellectually and in tax dollars, etc.--but are not due to what are, statistically, structural problems.<<

I'm not sure if I think this is a problem of finite resources or of poor choices. Anyone given carte blanche to improve themselves can do better than they otherwise would. That's not to say that society owes us that opportunity (or can afford it).

If we're talking about building a utopia, then certainly I would concur that as much education as anyone wants free of charge would be a cornerstone. Seeing as how that plan is unlikely to intersect with reality, however, the question (it seems to me) becomes one of the choices individuals are making in real world circumstances. I have a hard time believing that two years at a community college followed by two years at a state school is all that onerous a financial burden even if it is more than our parents paid because they had the (still available) GI Bill.

Childcare
>>Yup. That's the point. There's no way most people can afford the quality of care that kids need if they can't be with their parents. So a whole bunch of kids are being raised crappily as their parents try to make ends meet.<<

The parents have made a lot of choices—from where they live to what they drive to even having kids— before they reach this point.

>> I, too, was skeptical about this point since we manage on one income. But that's part of why I started tallying up what we had going for us that many younger/less fortunate than we don't. Here again, her questions are, why was it possible in the '50's and '60's to be *firmly* in the middle classes, and live on one income?<<

Because in the post-World War II era the United States economy was so far beyond the rest of the world that workers needed very little skill or productivity in order for businesses to succeed. European and Asian economies had been war-ravaged, and if the bar for American employer and employee success had been any lower it would've been stepped on.

>> What she found is that it's NOT about conspicuous consumption, which is the bugaboo that's usually blamed. Young adults are actually spending *less*, as a percentage of their income, on "stuff" than their parents did as young adults.<<

I believe the statistics here, it's just that if people are spending anything on "conspicuous consumption" or discretionary spending items, they're not doing all they can to maximize their opportunities.

>>They have to, because things like housing cost about six times (I think I got that right...) more.<<

I believe that statistic as well, though there's still plenty of affordable housing in various parts of the country.

>>So, again, sure, one can choose....but for many, it's a choice between leaving the middle class entirely or staying and using child care that's crappy. Ugh. To me, that's a lousy choice to have to make, and one that's not good for the country at large any way it's looked at.<<

Well, again, I do think that the US childcare policy (and healthcare system, while I'm complaining) should be overhauled. Twelve unpaid weeks off is a travesty. In France (perhaps all of the EU, I dunno), it's three paid years off.

Having said that, I think middle class v. child care is a false choice. There a great many other, perhaps unpalatable, choices people can make to ease their financial burden.

Demographics
>>Ah...here we tread on sensitive waters. But I didn't define the demographic for you (she does). You're actually outside it, and I'm at the very weensiest edge.<<

I'm really not that old. =) The book did say 30-somethings, right? =)

>>Again, that's why I tried to keep in mind the differing experiences I had had each time I went, "Oh, that can't be so bad..." That's why I added that disclaimer--I was very, very skeptical when I began. I have to give her credit for persuading me that, although *I* feel fine, I can see how we've structurally (and in many unintentional ways, really) made things a lot harder for those just entering adulthood. Basically, things have gotten a lot worse. College is one clincher for me--there's less free aid (per kid) out there, and less of it is need based than when I got my ride.<<

I could be wrong, but I think that's primarily because more kids are going to college.

>>Housing is the other--we were both fortunate enough to get into the market at a very good time. The rise in house values, especially in metro areas with concentrations of jobs, is huge, and wages are basically flat in comparison. <<

When Erin and I were in Sillicon Valley it was clear to us that we'd never afford a house down there (even though that's where Erin's parents live and where she grew up). So we moved. Even with the recent real estate run-up, Salem prices are nowhere near the Bay Area's. But if one finds them unaffordable, all that's required is a move to the Midwest.

It is unfortunate when people can't live where they want, but that's the economic reality. I don't bemoan the fact that I can't live in Silicon Valley; I make other life choices. Others can do the same.

Thanks for the engaging discussion! We should do a podcast on this.

Ginger Ogle said...

How 'bout we save time, and hash this out some more *after* you've had a chance to read the book? I think that would help with definitions and "framing" the discussion. Besides, I sent my copy back to the library, and this way I can argue my OWN opinions instead of filling you in on the author's ('cause you'll have seen hers). :-)

Perhaps you can talk me into a podcast--tell me about the logistics!

Tami said...

Gah! Gah! You guys pulled me in on the childcare discussion alone. I wish I had time to say more, my online time these days is very very very sharply curtailed, though. I will be less busy in a couple of weeks. I would LOVE to talk about this. Off to grab the book...