The Fragile American: Hardship and Financial Troubles in the 21st Century

Laura McCloudmccloud@plu.eduDepartment of Sociology and Social WorkPacific Lutheran University

Overview

Debt in 21st Century America

Discussion of “The Fragile American: Hardship and Financial Troubles in the 21st Century”

Debt and hardship since the bubble burst

Concern about debt

How did the United States become a society of debtors?

Inequality trends

Rising costs

Banking deregulation

Financialization

Individualized risk

Increasing income inequality

A low and stagnant minimum wage

Rising costs

Everything got more expensive• Particularl

y necessities

Banking deregulation

Financialization

BEFORE. . . AFTER

Individualized risk

Neoliberaleconomic policy

+

An individualistic culture

Motivation for our study

The paradox of debt

Weighing in on the “good debt”/”bad debt” debate

Expanding The Fragile Middle Class

Financial well-being and life chances

Our understanding of stratification is growing

Understanding financial hardships

Experiencing hardships may be bad luck Our ability to recover from them is not

Some hardships are worse than others

Hardship and credit troubles

What we learn from bankruptcy research

Important class differences May be eroding

A national view of hardship and financial troubles Need for a representative, updated test Multiple financial troubles

Multiple financial troubles

Consumers face a range of financial problems

No clear credit trouble trajectory

Hardship creates financial limitations Increasing the likelihood of default Increasing problems with access to

credit

Class inequality, hardship, and financial troubles

Looking beyond bankruptcy, looking at class

Class shapes how we experience hardship Middle class more vulnerable than upper

class Lower class also vulnerable

No class is immune from the financial implications of hardships

Data and sample

2004 Survey of Consumer Finances Nationally representative Extensive financial data Multiple imputation▪ 5 data sets

N = 4,159 respondents who ever applied for credit

Measures

Financial troubles Declared bankruptcy Defaulted on payments Denied credit Offered less credit

Hardships Poor health Divorced or widowed Unemployed Income disruption

Odds ratios of hardship on financial troubles for all respondents (N=4159)

Declared bankruptcy

Defaulted on payments

Denied credit

Offered less credit

Hardship

Poor health 1.539*** 3.804*** 1.469*** 1.803***

Divorced or widowed

1.593* 1.290* 1.212** 1.600

Unemployed 1.476*** 1.911*** 1.317*** 1.023

Income disruption

1.732*** 1.935*** 1.420*** 0.614***

Social class

Middle class 2.422*** 1.192 1.359*** 1.104

Upper class 1.017* 0.331* 0.591* 1.695*

Odds ratios of hardship on financial troubles for lower-class respondents (N=950)

Declared bankruptcy

Defaulted on payments

Denied credit

Offered less credit

Poor health 5.620*** 2.291** 1.440** 0.244

Divorced or widowed 2.572*** 0.893 2.808** 0.534

Unemployed 0.000 1.249 0.802** 0.000

Income disruption 1.157** 4.081** 2.031*** 0.000

Odds ratios of hardship on financial troubles for middle-class respondents (N=2152)

Declared bankruptcy

Defaulted on payments

Denied credit

Offered less credit

Poor health 1.395*** 4.541*** 1.471*** 2.009***

Divorced or widowed 1.468* 1.479** 1.009* 1.717

Unemployed 1.779** 2.020*** 1.350** 0.911

Income disruption 1.903*** 1.632* 1.375** 0.616*

Odds ratios of hardship on financial troubles for upper-class respondents (N=1057)

Declared bankruptcy

Defaulted on payments

Denied credit

Offered less credit

Poor health 1.595** 5.500** 1.350*** 2.744***

Divorced or widowed 0.000 1.487 0.880 2.327

Unemployed 2.529** 3.529*** 1.659** 1.971***

Income disruption 2.476** 2.202** 1.173 1.016

Discussion and implications

Poor health and job loss most associated with financial hardship

The “great risk shift” (Hacker 2006)

The importance of credit in American households

What has happened since 2004?

Economic instability and depression

Credit reform

Credit tightening

Declining credit use

How has the recession affected credit troubles?

Cash is king?

Defaults, not delinquencies

Consumer debt as a safety net

Why we should be concerned about debt

Universal vulnerability to poor health

Changing financial obligations in households

Increasing importance of access

Young adults starting out in the red

Unemployment, underemployment and low-wages

Questions?

mccloud@plu.edu