Unions are stupid... Mesaba screwed

[N422NM]

yay someone missed me!

Where's my freakin' rum at !?

 

[frog_flyer]

I have to wait for kinky to get elected governor. Then he'll pull some strings in washington for me to get there legally.

I expect payment before I go, hoe. Joe, blow, know, toe, show, tow, glow.

 

[Malko]

http://biz.yahoo.com/ap/061023/mesaba_labor.html?.v=3



AP
Judge Blocks Threatened Strike at Mesaba
Monday October 23, 11:52 pm ET
By Joshua Freed, AP Business Writer
Bankruptcy Judge Blocks Strike by Unions at Mesaba Aviation, a Feeder for Northwest Airlines


MINNEAPOLIS (AP) -- A bankruptcy judge on Monday blocked a strike by unions at Mesaba Aviation Inc., clearing the way for the feeder for Northwest Airlines Corp. to impose pay cuts later this week.
Mesaba, which has been reorganizing under bankruptcy protection for a year, had said a strike would probably put it out of business.


On Monday, U.S. Bankruptcy Judge Gregory Kishel agreed.


So I think Skywest has it right. Let your company be good to you on their own and keep that percentage you pay to the union.

Taken from the article in the local newspaper here in msp:

"This is a total outrage," said Tom Wychor, chairman of the Mesaba branch of the Air Line Pilots Association (ALPA). "We will appeal this ridiculous decision."

Elizabeth Costello, a Mesaba spokeswoman, said the judge made the "appropriate decision."

She added, "We will continue our efforts to negotiate consensual agreements. We hope to accomplish that goal yet this week before it becomes necessary to impose terms Thursday."

Also, the creditors' committee had threatened to file a motion for liquidation if Mesaba didn't cut its labor costs.

"We have worked diligently to address the unions' concerns and are hopeful that they will step forward now and address the company's needs in a critical cash situation," Costello said.

But she acknowledged Monday that talks with the unions haven't been scheduled.

No talks scheduled.....You really have to wonder what is going to happen. I get the impression here in town after talking with a few Mesaba pilots that I know (former CFI's) that one can only take so much. They are making little, and now they may make even less.

So what if the judge says they cannot strike. He has not said that they can't quit. If the terms are imposed I foresee many of the people striking, quitting, resigning......Call it what you want but they will be done.

I am surprised somewhat that the mothership NWA hasn't said much. Can they easily replace the planes if Mesaba goes under? If so, how fast can that be done? We'll see what happens when I get to the apt on Thursday a.m. At least I am not taking the mothership to NJC...

 

[Maximilian_Jenius]

He has said that they can't quit.

No judge or employer or anyone...can tell you that you can't quit you're job if it is your choosing. We have rules in this country against slavery. Even if airline management is trying to resurect a new form of it.

 

[Malko]

No judge or employer or anyone...can tell you that you can't quit you're job if it is your choosing. We have rules in this country against slavery. Even if airline management is trying to resurect a new form of it.

Oops, can't type and think so early in the morning,,,,,, see edit.......

 

[TheShortOne]

question here (sincere one) - why is it that unions always tell the companies that they are going to strike? It gives the company time to prepare and find "other" workers whereas if just one day no one showed up and *poof* Seems like it'd push the management to the table a lot quicker because they don't have any provisions in place.

I mean, look at the NWA mechanics - they've been striking now for a couple of years and nothing has happened. More people got hired, life went on

 

[Malko]

question here (sincere one) - why is it that unions always tell the companies that they are going to strike? It gives the company time to prepare and find "other" workers whereas if just one day no one showed up and *poof* Seems like it'd push the management to the table a lot quicker because they don't have any provisions in place.

I mean, look at the NWA mechanics - they've been striking now for a couple of years and nothing has happened. More people got hired, life went on

?1 I believe it is part of the labor law. cooling off period, strike notification, etc....

?2 I think the mechanics just went over a year and they are no longer officially on strike. The strike has really been over effectively for longer, but they jsut recently settled with the company allowing them some very minimal benefits; unemployement, severance, possibly a few jobs back, etc... As we know most jobs were lost long ago with teh replacements (some of which were strikers who saw no end so they went back to work....)

 

[B767Driver]

I think unions do have their place, but it sure as hell isn't working for Mesaba right now.

There's lots of stuff in that contract besides pay and benefits. Let's say you go in for a checkride and you draw the "village idiot" of the training department who hates all first year pilots and he busts you for something trivial. It's nice to have the ALPA rep to help work out a more rational training experience.

I'm not saying they should help a weak person through training...but to smooth over any politics encountered.

 

[seagull]

isn't this kindof an oxymoron? of course the red and blue states make a difference because it's who you elect into congress that makes/adjusts the rules of our society..so i think they go hand in hand.. vote accordingly!

Most of the truly anti-labor legislation that has been passed in the last 30 years has been signed into law by democrats, and all of it was generally passed with a generous helping of BOTH parties.

No, this is not a red state/blue state issue, sorry, I do not agree. If you think that having a democrat in the White House would have made a difference in all of this, I have a bridge to sell you....

Bankruptcy laws. Who sponsored the current crop of them, who signed them into law, who made them actually tougher for the corporations? It's not as simple as you might think, and if you've ever spent any time in the beltway, you'd know that any legislation is hardly a partisan project, regardless of how some politicians may vote publically or talk....

Politics of fear, both parties are guilty of it, but the constant "you are the victim" mentality is generally a blue state issue. Sorry, I just cannot buy into the "victim" mentality. It does not help, nor is it designed to help, those it is claiming to be concerned about. Nor can I support the legal system "status quo" party. I am also not impressed with the fundamentalist party, and I am against ANY politician that believes protectionism works or is actually good for the average American. That is truly preying on the fear and lack of education that is out there, and I find it disgusting. It seems which ever party is out of power uses that card.

So, that pretty much eliminates most of the current crop from BOTH parties, I guess.

I will also note that when something happens that people don't like, they tend to blame who ever is in office, regardless of whether those individuals had anything to do with what has happened, and I see a LOT of that happening in the airline industry right now.

 

[pilot602]

Most of the truly anti-labor legislation that has been passed in the last 30 years has been signed into law by democrats

Specifics, please ...

And BTW it was actually the Republican Congress/President that made personal bankruptcy harder and corporate bankruptcy easier. Not to mention the complete and total decay of the middle class in the last six years ...

 

[Chris_Ford]

Specifics, please ...

And BTW it was actually the Republican Congress/President that made personal bankruptcy harder and corporate bankruptcy easier. Not to mention the complete and total decay of the middle class in the last six years ...

complete and total decay of the middle class in the last six years?

Specifics, please ...

 

[kellwolf]

Here's the deal: no union, these guys and gals would already be working for peanuts LONG ago while management got fat off the profits. Their options would be take it or quit, sorta like what they have now.

I don't blame either Reps or Dems for this, I blame the judges responsible for interpreting a law that has been on the books since the 1930s. According to the RLA, self-help (imposing the contract or striking) is available to BOTH sides after a cooling off period. Well, bankruptcy seems to give an edge to teh company and effectively skips several steps in the CBA process. The problem is, there's nothing in the bankruptcy code that protects the workers. You've got the Norris-LaGuardia act, but it's outdated and full of holes as well.

Jtrain, this wasn't the case that set the precedent. You'll have to look at NWA and the FAs for that one. Their strike was blocked a little over a month ago. I'm pretty sure Kishel probably viewed that one as precedent. So, I'd say the precedent is already set, and you can't blame the regional guys for it this time.

If I were a Mesaba pilot, I'd be gone as soon as they impose terms. I couldn't subject my family to the kind of wage cuts that are potentially going to be imposed. 17.5%? I can make more as a CFI, set my own schedule and sleep in my own bed every night. I'm officially flying an airliner for as little as I'm willing right now. Mesaba would be significantly lower than what I'm making at Pinnacle. Doesn't matter that it's a turboprop, it's still an airliner carrying passengers, punching through weather and trying to make it from point A to point B on time.

The thing I'm afraid of is Pinnacle following suit, cooking the books (we're making money right now, so bankruptcy is sorta out unless they do something weird in accounting), filing Ch 11, forcing terms or getting another cert going to whipsaw us Go Jets-style. If that happened, I think I'd rather be flying at Mesa.....

 

[blee256]

The thing I'm afraid of is Pinnacle following suit, cooking the books (we're making money right now, so bankruptcy is sorta out unless they do something weird in accounting), filing Ch 11, forcing terms or getting another cert going to whipsaw us Go Jets-style. If that happened, I think I'd rather be flying at Mesa.....

You think contract negotiations sucked for us now, management aint gonna give us sh*t, now that they can say hey pilots, mesaba will do it for less, so now sign this even sh*ttier contract or we lose all our flying to Mesaba....i say STFD

 

[pilot602]

complete and total decay of the middle class in the last six years?

Specifics, please ...

Look out your window.

Middle Class wages are stagnating (in in some cases falling) as inflation skyrockets. Every single economic boom since WWII has seen an increase in disposable income at the middle class level except this last boom, it has fallen 2% - yet corporations are experienceing record profits (some call it the golden age of corporate profits). Credit Card companies are waging outright war on card holders (the majority of which are Middle Class) with intrest rates that are surpasing usary levels (loan shark) yet nothing is done. Pensions are eroded on a daily basis - again the majority of pensions deal with the middle class. The cost of an average house is, every year, out pacing by leaps and bounds the yearly salaries of the middle class (I guess in your world only rich people should be allowed the right to own a home). Protections for labor are eroded and outsourcing (which definately has become popular under the current regime) are eating away at mid-level jobs. Not to say anything about "guest workers."

Crawl out of your elitist economic dreamworld and take a look around at the severing of America's backbone.

 

[farmerbrown]

The Average American: 1967 and Today
Forbes.com
By Tom Van Riper

As the U.S. population crossed the 300 million mark sometime around 7:46 a.m. Tuesday (according to the U.S. Census Bureau), the typical family is doing a whole lot better than their grandparents were in 1967, the year the population first surpassed 200 million.

Mr. and Mrs. Median's $46,326 in annual income is 32% more than their mid-'60s counterparts, even when adjusted for inflation, and 13% more than those at the median in the economic boom year of 1985. And thanks to ballooning real estate values, average household net worth has increased even faster. The typical American household has a net worth of $465,970, up 83% from 1965, 60% from 1985 and 35% from 1995.

Throw in the low inflation of the past 20 years, a deregulated airline industry that's made travel much cheaper, plus technological progress that's provided the middle class with not only better cars and televisions, but every gadget from DVD players to iPods, all at lower and lower prices, and it's obvious that Mr. and Mrs. Median are living the life of Riley compared to their parents and grandparents.

 

[pilot602]

The Average American: 1967 and Today
Forbes.com
By Tom Van Riper

As the U.S. population crossed the 300 million mark sometime around 7:46 a.m. Tuesday (according to the U.S. Census Bureau), the typical family is doing a whole lot better than their grandparents were in 1967, the year the population first surpassed 200 million.

Mr. and Mrs. Median's $46,326 in annual income is 32% more than their mid-'60s counterparts, even when adjusted for inflation, and 13% more than those at the median in the economic boom year of 1985. And thanks to ballooning real estate values, average household net worth has increased even faster. The typical American household has a net worth of $465,970, up 83% from 1965, 60% from 1985 and 35% from 1995.

Throw in the low inflation of the past 20 years, a deregulated airline industry that's made travel much cheaper, plus technological progress that's provided the middle class with not only better cars and televisions, but every gadget from DVD players to iPods, all at lower and lower prices, and it's obvious that Mr. and Mrs. Median are living the life of Riley compared to their parents and grandparents.

And the top 1% of the wealth is in the top 1% of the population compared to the top 5% of the population at the time of "the" stock market crash.

 

[pilot602]

Middle class barely treads water
By Christine Dugas, USA TODAY
Millions of middle-class families can no longer afford to live on two incomes.
A generation ago, a typical American middle-class family lived on the income of a single breadwinner. In recent years it has taken two working spouses to live the modern middle-class dream. Now, it seems even that is not enough to survive the skyrocketing cost of housing, health care and college while saving for retirement and shouldering growing debt loads.
Bill and Terry Will of Chesapeake, Va., together earn about $70,000 a year, and yet it's a struggle to provide for their family and pay off their credit card debt. Terry, 44, is a nurse and Bill, 50, manages a warehouse that ships food and supplies to other countries.
The Wills have five children at home, ages 2 to 17. They budget every penny and have no savings, no college fund, no retirement nest egg.
Like many middle-class families — often broadly defined as those earning $25,000 to $99,999 — the Wills have little room to maneuver if something unexpected comes up. They barely survived when Bill's job as an oil company sales manager was eliminated in 1999. They came close to losing their home and nearly ended up in bankruptcy before they went to a non-profit credit counseling agency for help.
What happened to the Wills is being repeated in legions of middle-class homes across the USA. With personal bankruptcy at an all-time high, it's mostly the middle class that gets trapped: 92% of the record 1.6 million filers in the year ended June 30 were middle class, according to a Harvard University study.
The Wills acknowledge that they didn't know much about managing money before they went into debt counseling, but they didn't live beyond their means.
"We didn't have cable TV before, and we still don't," Terry says. "We used credit cards to pay for diapers, food and school stuff."
It may be hard to believe, but the average family of four spends 21% less on clothes and 22% less on food — both at home and in restaurants — than a similar family did a generation ago, according to a new book, The Two-Income Trap. And though families may spend more today on things like Internet services, DVDs and airline travel, those increases are offset by declines in other expenditures.
Instead of splurging on gourmet meals and designer clothing, families are spending more on essentials such as day care, housing and health insurance.
"Costs are rising quickly, and benefits that used to be provided by employers now must be provided by workers themselves, including health insurance and retirement," says Christian Weller, an economist at the Economic Policy Institute.
The average employee contribution toward health insurance premiums is $2,412 for family coverage this year, according to the Kaiser Family Foundation. That's a 13% increase over 2002.
Housing also is eating up more of the average family's budget. About 80% of low- and moderate-income homeowners spent more than half of their income on housing in 2001, according to the Center for Housing Policy. Many experts say no more than 36% of gross monthly income should go toward credit card bills, car payments and mortgages combined.
Today, much of a family's second income goes to paying for a suburban home in a good school district, says Elizabeth Warren, Harvard law professor and co-author of The Two-Income Trap.
"Middle-class families are taking on ruinous mortgages just to find a home in the right ZIP codes," Warren says.
"The cost of living is crazy in the top-rated school district here," says Emily Derr, 25, a renter who lives in Houston with her husband, Jeremy, and their 5-month-old daughter, Madison. A house that costs $145,000 in that neighborhood would cost $20,000 less one suburb over, she says.
Using credit to make ends meet
The Derrs can't afford to buy a house yet. They have struggled since Jeremy got out of college with $16,000 in credit card bills and student loans.
Emily has a nursing degree. She had hoped that with two incomes they'd be fine. Instead, she says, "We were making a little more than minimum payments, but it didn't seem like it was going anywhere. I thought it was going to be 40 years before we'd be able to buy a house."
To economize, they moved into a cheaper apartment and sold one of two cars. But Jeremy made only $12,000 in his first year as a financial adviser for Morgan Stanley Dean Witter, and they paid $500 a month for health insurance. "I felt like I was drowning," Emily says.
Credit card debt became an albatross. Eventually, the Derrs went to a credit-counseling service for help. Jeremy joined the Army and is now in officer candidate school.
Credit card debt for middle-income families is soaring — up 75% to $5,031 between 1989 and 2001, according to a new report by Demos, a non-partisan public policy organization.
"Middle-class families are using credit cards to fill in a gap between their income and costs," says Tamara Draut, director of the economic opportunity program at Demos. "It's more about maintaining their standard of living than frivolous consumption."
At one point, when Bill Will had no income and no health insurance, he still had credit cards and continued to use them. "I did what I had to do for my family," he says.
Average card debt declined somewhat in 2001, according to Federal Reserve data. But some experts don't see much cause for optimism. Many families traded high-interest card debt for lower-rate home equity loans. That lowers debt payments but puts homes at risk. The percentage of homeowners facing foreclosure in the second quarter was 1.12%, down only slightly from the record 1.2% in the first three months of the year, according to the Mortgage Bankers Association of America.
Facing financial failure
As consumers shoulder more debt, bankruptcy filings have exploded. Nearly 90% of families with children who file for bankruptcy cite three reasons: job loss, divorce or medical problems, according to the Consumer Bankruptcy Project at Harvard University, the largest study of consumer bankruptcy in America. About one-third of the families owed an entire year's salary on their credit cards.
Single parents typically have the hardest time juggling financial obligations. A divorced woman with a child is nearly three times more likely to file for bankruptcy than a single person with no children, Warren says.
Pamela Robbins, 36, is a single mother of three children, ages 5, 11 and 12. Her problems snowballed after she split from the children's father about 10 years ago. "There were weeks when my groceries went on my credit cards," says the Mashpee, Mass., resident. "It was a matter of survival. I had to do it to pay the gas bill so it wouldn't get shut off."
Her credit card debt grew to $56,000. Creditors were calling. Robbins earned about $30,000 last year working two jobs to try to keep up. She runs a home day care business and works at a grocery store. Like Emily Derr, she says she felt like she was "drowning."
With bankruptcy looming, Robbins wanted to save her home. She went to Auriton Solutions, a credit-counseling agency. They negotiated with creditors to reduce her interest payments and put her on a repayment plan.
"I am still stretched to the limit," Robbins says. "But in the last six months I've noticed the debt is going down. It's going to take a few years, but eventually it's going to get cleared up."
Putting retirement at risk
Many people like Robbins manage to avoid bankruptcy by going to a credit-counseling agency. Even then, it can take years to climb out of debt. Saving for retirement usually gets put on hold.
"I have no savings account," Robbins says. "I have no IRA — no retirement plan." And the need to save for college could put retirement further out of reach.
Most workers are on their own when saving for retirement as fewer companies offer traditional pensions. Nearly two-thirds of middle-income families in 2001 had only a 401(k) type of plan at work, according to a recent report by the Employee Benefit Research Institute. The median plan balance for families earning $25,000 to $49,999 was just $7,000.
Though many employers provide a matching contribution to 401(k) plans, during the economic downturn many suspended or reduced contributions.
Recent efforts in Congress to improve retirement programs have focused on increasing the maximum amount that workers can contribute each year to 401(k) plans and IRAs. "But if they can't afford to put in $2,000, they're not going to take advantage of the $3,500 limit," says Cindy Hounsell, executive director of the Women's Institute for a Secure Retirement.
"Workers not only have to save for retirement, but they have to make wise financial decisions," Weller, the economist, notes. The nearly three-year stock market downturn underscored the potential for investment losses in nest eggs.
And during the mortgage refinancing boom, many families depleted their biggest asset: home equity. Last year alone, about $200 billion of home equity was cashed out as homeowners refinanced, according to economist Mark Zandi.
"The large mortgage payments will prevent many middle-income workers from retiring when they want," says Steve Brobeck, executive director of the Consumer Federation of America.
Despite their financial woes, middle-class families are often in a Catch-22 situation. They typically make too much to qualify for federal aid programs, and yet they don't earn enough to benefit much from expanded retirement plan limits, tax cuts on dividend income, capital gains and the like, consumer advocates say.
Bill and Terry Will, meanwhile, are doing the best that they can to remain positive. It will take the couple another three to five years to get rid of their debts.
They also have to think about college for their son, Michael, who is a senior in high school. And they have no retirement savings. Terry does not contribute to her 401(k) plan at work now because all their money is going to paying off their debt.
"If we worried about all of this we'd be physically sick," Terry says. "We just have to trust in God to help us."

 

[pilot602]

As Income Gap Widens, Uncertainty Spreads
More U.S. Families Struggle to Stay on Track


By Griff Witte
Washington Post Staff Writer
Monday, September 20, 2004; Page A01

Scott Clark knows how to plate a circuit board for a submarine. He knows which chemicals, when mixed, will keep a cell phone ringing and which will explode. He knows how to make his little piece of a factory churn hour after hour, day after day.
But right now, as his van hurtles toward the misty silhouette of the Blue Ridge Mountains, the woods rising darkly on either side and Richmond receding behind him, all he needs to know is how to stay awake and avoid the deer.

So he guides his van along the center of the highway, one set of wheels in the right lane and the other in the left. "Gives me a chance if a deer runs in from either direction," he explains. "And at night, this is my road." It's his road because, at 3:43 a.m. on a Wednesday, no one else wants it. Clark is nearly two hours into a workday that won't end for another 13, delivering interoffice mail around the state for four companies -- none of which offers him health care, vacation, a pension or even a promise that today's job will be there tomorrow. His meticulously laid plans to retire by his mid-fifties are dead. At 51, he's left with only a vague hope of getting off the road sometime in the next 20 years.
Until three years ago, Clark lived a fairly typical American life -- high school, marriage, house in the suburbs, three kids and steady work at the local circuit-board factory for a quarter-century. Then in 2001 the plant closed, taking his $17-an-hour job with it, and Clark found himself among a segment of workers who have learned the middle of the road is more dangerous than it used to be. If they want to keep their piece of the American dream, they're going to have to improvise.
Figuring out what the future holds for workers in his predicament -- and those who are about to be -- is key to understanding a historic shift in the U.S. workforce, a shift that has been changing the rules for a crucial part of the middle class.
This transformation is no longer just about factory workers, whose ranks have declined by 5 million in the past 25 years as manufacturing moved to countries with cheaper labor. All kinds of jobs that pay in the middle range -- Clark's $17 an hour, or about $35,000 a year, was smack in the center -- are vanishing, including computer-code crunchers, produce managers, call-center operators, travel agents and office clerks.
The jobs have had one thing in common: For people with a high school diploma and perhaps a bit of college, they can be a ticket to a modest home, health insurance, decent retirement and maybe some savings for the kids' tuition. Such jobs were a big reason America's middle class flourished in the second half of the 20th century.
Now what those jobs share is vulnerability. The people who fill them have become replaceable by machines, workers overseas or temporary employees at home who lack benefits. And when they are replaced, many don't know where to turn.
"We don't know what the next big thing will be. When the manufacturing jobs were going away, we could tell people to look for tech jobs. But now the tech jobs are moving away, too," said Lori G. Kletzer, an economics professor at the University of California at Santa Cruz. "What's the comparative advantage that America retains? We don't have the answer to that. It gives us a very insecure feeling."
The government doesn't specifically track how many jobs like Clark's have gone away. But other statistics more than hint at the scope of the change. For example, there are now about as many temporary, on-call or contract workers in the United States as there are members of labor unions. Another sign: Of the 2.7 million jobs lost during and after the recession in 2001, the vast majority have been restructured out of existence, according to a study by the Federal Reserve Bank of New York.
Each layoff or shutdown has its own immediate cause, but nearly all ultimately can be traced to two powerful forces that reinforce each other: global competition and rapid advances in technology.
Economists and politicians -- including the presidential candidates -- are locked in a vigorous debate about the job losses. Is this just another rocky stretch of the U.S. economy that, if left alone, will foster new industries generating millions of as-yet-unimagined jobs, as it has during other times of upheaval? Or is the workforce hollowing out permanently, with those in the middle forced to slide down to low-paying jobs without benefits if they can't get the education, credentials and experience to climb up to the high-paying professions?
Over the next several months, The Washington Post, in an occasional series of articles, will explore the vast changes facing middle-income workers and the consequences for businesses and society.
Some of the consequences are already evident: The ranks of the uninsured, the bankrupt and the long-term unemployed have all crept up the income scale, proving those problems aren't limited to the poor. Meanwhile, income inequality has grown. In 2001, the top 20 percent of households for the first time raked in more than half of all income, while the share earned by those in the middle was the lowest in nearly 50 years.

 

[kellwolf]

The typical American household has a net worth of $465,970, up 83% from 1965, 60% from 1985 and 35% from 1995.

Wow. I need to meet this "typical" American. I don't know very many. My house alone isn't even worth a quarter of that figure, and my parents' house (which they bought 16 years ago) is maybe a little more than a quarter of that. Factor in my income and my wifes, add in another $40K. Add in our meager assets (2 cars and some computers and a TV), you MIGHT get another $10K. So, we're looking at around.....$150K. I guess I better get moving to catch up with the "typical" American.

Remember, there's lies and stats. I like to figure on reality, not some statistically flawed report. Reality says, I'm hurting, my parents aren't doing as well as they were 10-15 years ago, and most of my friends are in the same boat. But since some analyst ran some numbers, it must be true....

Oh, and go Mesaba pilots (to keep it on topic).

 

[pilot602]

The Middle Class on the Precipice

Rising financial risks for American families

by Elizabeth Warren




During the past generation, the American middle-class family that once could count on hard work and fair play to keep itself financially secure has been transformed by economic risk and new realities. Now a pink slip, a bad diagnosis, or a disappearing spouse can reduce a family from solidly middle class to newly poor in a few months.
Middle-class families have been threatened on every front. Rocked by rising prices for essentials as men’s wages remained flat, both Dad and Mom have entered the workforce—a strategy that has left them working harder just to try to break even. Even with two paychecks, family finances are stretched so tightly that a very small misstep can leave them in crisis. As tough as life has become for married couples, single-parent families face even more financial obstacles in trying to carve out middle-class lives on a single paycheck. And at the same time that families are facing higher costs and increased risks, the old financial rules of credit have been rewritten by powerful corporate interests that see middle-class families as the spoils of political influence.


Raising Incomes the Two-Worker Way
In just one generation, millions of mothers have gone to work, transforming basic family economics. The typical middle-class household in the United States is no longer a one-earner family, with one parent in the workforce and one at home full-time. Instead, the majority of families with small children now have both parents rising at dawn to commute to jobs so they can both pull in paychecks.
Scholars, policymakers, and critics of all stripes have debated the social implications of these changes, but few have looked at their economic impact. Today the median income for a fully employed male is $41,670 per year (all numbers are inflation-adjusted to 2004 dollars)—nearly $800 less than his counterpart of a generation ago. The only real increase in wages for a family has come from the second paycheck earned by a working mother. With both adults in the workforce full-time, the family’s combined income is $73,770—a whopping 75 percent higher than the median household income in the early 1970s. But the gain in income has an overlooked side effect: family risk has risen as well. Today’s families have budgeted to the limits of their new two-paycheck status. As a result, they have lost the parachute they once had in times of financial setback—a back-up earner (usually Mom) who could go into the workforce if the primary earner got laid off or fell sick. This “added-worker effect” could buttress the safety net offered by unemployment insurance or disability insurance to help families weather bad times. But today, a disruption to family fortunes can no longer be made up with extra income from an otherwise-stay-at-home partner.
Income risk has shifted in other ways as well. Incomes are less dependable today. Layoffs, outsourcing, and other workplace changes have trebled the odds of a significant interruption in a single generation. The shift from one income to two doubled the risks again, as both Mom and Dad face the possibility of unemployment. Of course, with two people in the workforce, the odds of income dropping to zero are lessened. But for families where every penny of both paychecks is already fully committed to mortgage, health insurance, and other payments, the loss of either paycheck can unleash a financial tailspin. Nor are such risks solely related to unemployment. Consider health-related exposures. Two wage-earners means either Mom or Dad could be out of work from illness or injury, losing a substantial chunk of the family income. Finally, the new everyone-in-the-workforce family faces higher risks for caregiving. When there was one stay-at-home parent, a child’s serious illness or Grandma’s fall down the stairs was certainly bad news, but the main economic ramification was the medical bills. Today, someone has to take off work—or hire help—in order to provide family care. At a time when hospitals are sending people home “quicker and sicker,” more nursing care falls directly on the family—and someone has to be home to administer it.
Even the economic risks of divorce have changed. A generation ago, the end of a marriage was an economic blow, but a nonworking spouse usually took a job, bringing in new income to stay afloat. Now, whatever the two-income divorcing couple earns has to cover both their old and new expenses. Evidence mounts that post-divorce, both women and men are struggling to make ends meet as they try to support two households on the same combined income. A divorced woman with children, for example, is about three times more likely to file for bankruptcy than a man or woman, single or married, without children. And men who owe child support are about three times more likely to file for bankruptcy than men who don’t.
The news is even worse for single parents. They face all the difficulties of dual-income families—all income is budgeted, there is no one at home to work if the primary earner loses a job or gets sick, and no one to take over if a child gets sick or an elderly parent needs help—and they are trying to make it on a lot less money, competing with two-income families for housing, daycare, health insurance, and all the other goods and services. As one divorced, working mother put it, “With what my ex contributes and what I earn, I can just about match what a man can make, but I can’t match what a man and woman both working can make.” The two-parent families are struggling to swallow the risk, but their single-parent counterparts are choking.
Does this mean that middle-class women should return to the home in order to reduce their families’ risk? Before jumping to that conclusion, it is important to look at the expenses middle-class families face.


Soaring Expenses— and Risk
Why are so many moms in the workforce? Surely, some are lured by a great job, but millions more need a paycheck, plain and simple.
It would be convenient to blame the families and say that it is their lust for stuff that has gotten them into this mess. Indeed, sociologist Robert Frank claims that this country’s newfound “Luxury Fever” forces middle-class families “to finance their consumption increases largely by reduced savings and increased debt.” Others echo the theme. A book titled Affluenza (by John De Graaf, David Wann, and Thomas H. Naylor) sums it up: “The dogged pursuit for more” accounts for Americans’ “overload, debt, anxiety, and waste.” If Americans are out of money, it must be because they are over-consuming—buying junk they don’t really need.
Blaming the family supposes that we believe that families spend their money on things they don’t really need. Over-consumption is not about medical care or basic housing; it is, in the words of Juliet Schor, about “designer clothes, a microwave, restaurant meals, home and automobile air conditioning, and, of course, Michael Jordan’s ubiquitous athletic shoes, about which children and adults both display near-obsession.” And it isn’t about buying a few goodies with extra income; it is about going deep into debt to finance consumer purchases that sensible people could do without.
But is this argument true? If families really are blowing their paychecks on designer clothes and restaurant meals, then the household expenditure data should show them spending more on these frivolous items than ever before. But the numbers don’t back up the claim.
A quick summary of the data from the Bureau of Labor Statistics’ Consumer Expenditure Survey paints a very different picture of family spending. Consider what a family of four spends on clothing. Designer toddler outfits and $200 sneakers are favorite media targets, but when it is all added up, including the Tommy Hilfiger sweatshirts and Ray-Ban sunglasses, the average family of four today spends 33 percent less on clothing than a similar family did in the early 1970s. Overseas manufacturing and discount shopping mean that today’s family is spending almost $1,200 a year less than their parents spent to dress themselves.
What about food? Surely, families are eating out more and buying shopping carts full of designer water and exotic fruit? In fact, today’s family of four actually spends 23 percent less on food (at-home and restaurant eating combined) than its counterpart of a generation ago. The slimmed-down profit margins in discount supermarkets have combined with new efficiencies in farming to cut more costs for the American family.
Appliances tell the same picture. There is a lot of complaining about microwave ovens and espresso machines: Affluenza rails against appliances “that were deemed luxuries as recently as 1970, but are now found in well over half of U.S. homes, and thought of by a majority of Americans as necessities: dishwashers, clothes dryers, central heating and air conditioning, color and cable TV.” But manufacturing costs are down, and durability is up. Today’s families are spending 51 percent less on major appliances than their predecessors a generation ago.
This is not to say that middle-class families never fritter away money. A generation ago, big-screen televisions were a novelty reserved for the very rich, no one had cable, and DVD and TiVo were meaningless strings of letters. So how much more do families spend on “home entertainment,” premium channels included? They spend 23 percent more—a whopping extra $180 annually. Computers add another $300 to the annual family budget. But even that increase looks a little different in the context of other spending. The extra money spent on cable, electronics, and computers is more than offset by families’ savings on major appliances and household furnishings alone.
The same offsetting phenomena appear in other areas as well. The average family spends more on airline travel than it did a generation ago, but less on dry cleaning; more on telephone services, but less on tobacco; more on pets, but less on carpets. When we add it all up, increases in one category are offset by decreases in another.
So where did their money go? It went to the basics. The real increases in family spending are for the items that make a family middle class and keep them safe (housing, health insurance), that educate their children (pre-school and college), and that let them earn a living (transportation, childcare, and taxes).
The data can be summarized in a financial snapshot of two families, a typical one-earner family from the early 1970s compared with a typical two-earner family from the early 2000s. With an income of $42,450, the average family from the early 1970s covered their basic mortgage expenses of $5,820, health-insurance costs of $1,130 and car payments, maintenance, gas, and repairs of $5,640. Taxes claimed about 24 percent of their income, leaving them with $19,560 in discretionary funds. That means they had about $1,500 a month to cover food, clothing, utilities, and anything else they might need—just about half of their income.
By 2004, the family budget looks very different. As noted earlier, although a man is making nearly $800 less than his counterpart a generation ago, his wife’s paycheck brings the family to a combined income that is $73,770—a 75 percent increase. But higher expenses have more than eroded that apparent financial advantage. Their annual mortgage payments are more than $10,500. If they have a child in elementary school who goes to daycare after school and in the summers, the family will spend $5,660. If their second child is a pre-schooler, the cost is even higher—$6,920 a year. With both people in the workforce, the family spends more than $8,000 a year on its two vehicles. Health insurance costs the family $1,970, and taxes now take 30 percent of its money. The bottom line: today’s median-earning, median-spending middle-class family sends two people into the workforce, but at the end of the day they have about $1,500 less for discretionary spending than their one-income counterparts of a generation ago.
What happens to the family that tries to get by on a single income today? Their expenses would be a little lower because they can save on childcare and taxes, and, if they are lucky enough to live close to shopping and other services, perhaps they can get by without a second car. But if they tried to live a normal, middle-class life in other ways—buy an average home, send their younger child to preschool, purchase health insurance, and so forth—they would be left with only $5,500 a year to cover all their other expenses. They would have to find a way to buy food, clothing, utilities, life insurance, furniture, appliances, and so on with less than $500 a month. The modern single-earner family trying to keep up an average lifestyle faces a 72 percent drop in discretionary income compared with its one-income counterpart of a generation ago.
Combine changes in family income and expenses, and the biggest change of all becomes evident—on the risk front. In the early 1970s, if any calamity came along, the family devoted nearly half its income to discretionary spending. Of course, people need to eat and turn on the lights, but the other expenses—clothing, furniture, appliances, restaurant meals, vacations, entertainment, and pretty much everything else—can be drastically reduced or even cut out entirely. In other words, they didn’t need as much money if something went wrong. If the couple could find a way—through unemployment insurance, savings, or putting their stay-at-home parent to work—they could cover the basics on just half of their previous earnings. Given the option of a second paycheck, both could stay in the workforce for a few months once the crisis had passed, pulling the family out of their financial hole.
But the position today is very different. Fully 75 percent of family income is earmarked for recurrent monthly expenses. Even if they are able to trim around the edges, families are faced with a sobering truth: every one of those expensive items—mortgage, car payments, insurance, childcare—is a fixed cost. Families must pay them each and every month, through good times and bad; there is no way to cut back from one month to the next, as can be done with spending on clothing or food. Short of moving out of the house, withdrawing their children from preschool, or canceling the insurance policy altogether, they are stuck.
In other words, today’s family has no margin for error. There is no leeway to cut back if one earner’s hours are cut or if the other gets sick. There is no room in the budget if someone needs to take off work to care for a sick child or an elderly parent. Their basic situation is far riskier than that of their parents a generation earlier. The modern American family is walking a high wire without a net.


The Rules Have Changed
The one-two punch of income vulnerability and rising costs has weakened the middle class, at the same time that the revision of the rules of financing delivers a death blow to millions of families each year. Since the early 1980s, the credit industry has rewritten the rules of lending to families. Congress has turned the industry loose to charge whatever it can get and to bury tricks and traps throughout credit agreements. Credit-card contracts that were less than a page long in the early 1980s now number 30 or more pages of small-print legalese. In the details, credit-card companies lend money at one rate, but retain the right to change the interest rate whenever it suits them. They can even raise the rate after the money has been borrowed—a practice once considered too shady even for a back-alley loan shark. When they think they have been cheated, customers can be forced into arbitration in locations thousands of miles from home. Some companies claim that they can repossess anything a customer buys with a credit card.
Credit-card issuers are not alone in their boldness. Home-mortgage lenders are writing mortgages that are so one-sided that some of their products are known as “loan-to-own” because it is the mortgage company—not the buyer—who will end up with the house. Payday lenders are ringing military bases and setting up shop in working-class neighborhoods, offering instant cash that can eventually cost the customer more than a thousand percent interest.
For those who can stay out of debt, the rules of lending may not matter. But the economic pressures on the middle class are causing more families to turn to credit just to make ends meet. When something goes wrong the only place to turn is credit cards and mortgage refinancing. At that moment, the change in lending rules matters very much indeed. The family that might manage $2,000 of debt at 9 percent discovers that it cannot stay afloat when interest rates skyrocket to 29 percent. And the family that refinanced the home mortgage to pay off other debts suddenly faces escalating monthly payments and may find itself staring at foreclosure. Job losses or medical debts can put any family in a hole, but a credit industry that has rewritten the rules can keep that family from ever climbing back.


A Politics of Living on the Edge?
Every day, middle-class families carry higher risks that a job loss or a medical problem will push them over the edge. Although plenty of families make it, a growing number who worked just as hard and followed the rules just as carefully find themselves in a financial nightmare. The security of middle-class life has disappeared. The new reality is millions of families whose grip on the good life can be shaken loose in an instant.
Although my own work, on bankruptcy and credit, has focused on the specifics of families’ household finances, I cannot help but think that their changed circumstances during the past generation have larger echoes for public policy.
During the same period, families have been asked to absorb much more risk in their retirement income. In 1985, there were 112,200 defined-benefit pension plans with employers and employer groups around the country; today their number has shrunk to 29,700 such plans, and those are melting away fast. Steelworkers, airline employees, and now those in the auto industry are joining millions of families who must worry about interest rates, stock market volatility, and the harsh reality that they may outlive their retirement money. For much of the past year, President Bush campaigned to move Social Security to a savings-account model, with retirees trading much or all of their guaranteed payments for payments contingent on investment returns. For younger families, the picture is not any better. Both the absolute cost of healthcare and the share of it borne by families have risen—and newly fashionable health-savings plans are spreading from legislative halls to Wal-Mart workers, with much higher deductibles and a large new dose of investment risk for families’ future healthcare. Even demographics are working against the middle class family, as the odds of having a frail elderly parent—and all the attendant need for physical and financial assistance—have jumped eightfold in just one generation.
From the middle-class family perspective, much of this, understandably, looks far less like an opportunity to exercise more financial responsibility, and a good deal more like a frightening acceleration of the wholesale shift of financial risk onto their already overburdened shoulders. The financial fallout has begun, and the political fallout may not be far behind.

Elizabeth Warren is Gottlieb professor of law and faculty director of the Judicial Education Program. This article is based in part on “Rewriting the Rules: Families, Money, and Risk,” a paper written for the nonprofit Social Science Research Council (see http://privatizationofrisk.ssrc.org/Warren). Warren and her daughter, Amelia Warren Tyagi, are the authors of The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke (see “The Middle-Class Trapdoor,” January-February 2004, page 10) and All Your Worth: The Ultimate Lifetime Money Plan.