The Washington Post has a solid story this morning on the hardships facing the working class—illustrating them with the story of a Virginian named Regino Romero.
But with the economy sputtering, inflation increasing to levels not seen in nearly two decades and his family life in flux, he is struggling to survive economically. Although he has worked full time for nearly 14 years as a cook at the Hilton Crystal City hotel, he feeds his own family with help from a local food pantry.
Romero makes $13.84 an hour. Imagine a family trying to make it on the minimum wage of $6.55.
Romero’s dilemma is not unlike that of many low-wage workers struggling to cope in an economy that has left them behind. A national survey by The Washington Post, Henry J. Kaiser Family Foundation and Harvard University found that large percentages of low-wage Americans struggle to pay for life’s staples. Eight in 10 find it hard to pay for gasoline or save for retirement, while more than six in 10 said it was tough to afford health care. And roughly half said they were having difficulty affording food and housing.
Workers are more productive than ever, as the output per person has hit new highs in the past eight years. But rather than funding wage increases for most employees, the fruit of that new efficiency has largely bypassed all but the people in the best-paying jobs, as inflation-adjusted incomes for typical Americans edged downward from 2000 to 2007.
Now, as the global financial system strains to absorb its biggest shocks since the Great Depression, the once faraway world of Wall Street is making things worse for low-wage workers.
Even before last week’s dramatic declines on Wall Street, credit markets had tightened, making borrowing more expensive — or impossible — for people and businesses whose credit histories are less than stellar. Already, most lenders are requiring higher down payments for mortgages and more collateral for other loans. Tighter credit means less spending and fewer jobs. Inevitably, those at the bottom of the income ladder are most vulnerable to all of those changes.
I’d like to see more reporting like this.
Meanwhile, The New York Times has a timely piece on families struggling to pay for college.
With the unemployment rate rising and a recession mentality gripping the country, financial aid administrators say they expect many more calls like the one from Ms. Jacobs. More families are applying for federal aid, and a recent survey found that an increasing portion of families expected to need student loans. College administrators worry that as fresh cracks appear in family finances, they will not have enough aid money to go around, given that their own endowment returns are disappointing, states are making cutbacks and fund-raising will become more difficult.
Speaking as part of a household with six-figure student-loan debt: Welcome to the club, if colleges even have the money to lend, that is!
Bloomberg takes a good look at the state of the credit markets, which are what we really need to pay attention to, but which are much harder to find information about than stock markets.
Prices of loans rated below investment grade declined to a record low 66.1 cents on the dollar, virtually guaranteeing investors get their money back, based on historical recovery rates, according to data compiled by Standard & Poor’s. Yields on corporate bonds show investors expect 5.6 percent of the market will go bust, the highest default rate since the Great Depression…
While central banks injected $3 trillion into the global economy, credit markets are tumbling because banks are clamping down on lending, forcing investors to unload assets they bought with borrowed money…
“It’s quite possible that we had priced in Armageddon,” said Robert Gahagan, head of taxable fixed-income in Mountain View, California at American Century Investment Management, which oversees $23 billion in fixed-income assets.
And the selloffs causing bond prices to plunge probably won’t end anytime soon, according to the story, as hedge funds are forced to liquidate.