WEBVTT 00:00:01.494 --> 00:00:04.243 (dramatic music) 00:00:34.119 --> 00:00:35.049 - I'm Mary Ann Mason, 00:00:35.049 --> 00:00:36.567 I'm the Dean of the Graduate Division, 00:00:36.567 --> 00:00:39.009 and I'm pleased, along with the Graduate Council, 00:00:39.009 --> 00:00:42.739 to present Elizabeth Warren, who is this year's speaker 00:00:42.740 --> 00:00:45.810 in the Jefferson Memorial Lecture series. 00:00:45.810 --> 00:00:47.990 As a condition of this bequest, 00:00:47.990 --> 00:00:50.460 we're obligated to tell you how the endowment 00:00:50.460 --> 00:00:53.829 supporting the lectures came to UC Berkeley. 00:00:53.829 --> 00:00:57.500 The Jefferson Memorial Lectures were established in 1944 00:00:57.500 --> 00:01:00.579 through a bequest from Elizabeth Bonestell, 00:01:00.579 --> 00:01:03.199 and her husband, Cutler L. Bonestell. 00:01:03.200 --> 00:01:05.299 A prominent San Francisco couple, 00:01:05.299 --> 00:01:07.819 the Bonestells cared deeply for history, 00:01:07.819 --> 00:01:10.669 and had hoped that the lectures would encourage students, 00:01:10.670 --> 00:01:13.275 faculty, visiting scholars and others 00:01:13.275 --> 00:01:16.609 to study the legacy of Thomas Jefferson 00:01:16.609 --> 00:01:20.959 and to explore the values inherent in American democracy. 00:01:20.959 --> 00:01:24.699 Past lecturers, Ambassador Jeane Kirkpatrick, 00:01:24.700 --> 00:01:27.560 Senator Alan Simpson, Representative Thomas Foley, 00:01:27.560 --> 00:01:30.710 Walter LaFeber and Archibald Cox have delivered 00:01:30.709 --> 00:01:33.839 Jefferson Memorial Lectures on early American history 00:01:33.840 --> 00:01:37.310 about Jefferson himself and on American institutions 00:01:37.310 --> 00:01:41.879 and policies in economics, education and the law. 00:01:41.879 --> 00:01:44.259 And now a few words about Elizabeth Warren. 00:01:44.260 --> 00:01:47.650 One of America's leading commentators on consumer issues 00:01:47.650 --> 00:01:51.630 and the law, Elizabeth Warren has been an outspoken critic 00:01:51.629 --> 00:01:53.869 of America's credit economy, 00:01:53.870 --> 00:01:56.579 which she has linked to the continuing rise in bankruptcy 00:01:56.579 --> 00:01:58.159 among the middle class. 00:01:58.159 --> 00:01:59.929 No one in the audience, I'm sure. 00:01:59.930 --> 00:02:02.770 Her critical analysis of Congress's latest revision 00:02:02.769 --> 00:02:05.039 of America's national bankruptcy law 00:02:05.040 --> 00:02:07.530 has received wide attention in the media 00:02:07.530 --> 00:02:10.439 as well as in academic and policy circles. 00:02:10.439 --> 00:02:13.259 At Harvard Law School, Warren's courses include 00:02:13.259 --> 00:02:16.729 contract law, bankruptcy and commercial law. 00:02:16.729 --> 00:02:19.239 She said recently that she has spent decades 00:02:19.240 --> 00:02:22.430 writing in academic books and teaching an entire generation 00:02:22.430 --> 00:02:25.129 of law students about the rules of money. 00:02:25.129 --> 00:02:28.960 Those rules include the formal statutes of commercial law, 00:02:28.960 --> 00:02:30.560 the policies inherent in them, 00:02:30.560 --> 00:02:33.500 and the ethical problems that they can produce. 00:02:33.500 --> 00:02:35.629 Warren is a frequent contributor to articles in 00:02:35.629 --> 00:02:37.828 The New York Times, The Washington Post, 00:02:37.828 --> 00:02:41.500 and Women's eNews, and her commentary appears regularly 00:02:41.500 --> 00:02:43.840 on National Public Radio's news program, 00:02:43.840 --> 00:02:45.390 All Things Considered, 00:02:45.389 --> 00:02:48.319 and on the internet forum, The Huffington Post. 00:02:48.319 --> 00:02:51.579 After earning a BS from the University of Houston in 1970, 00:02:51.580 --> 00:02:52.990 Warren was awarded a J.D. 00:02:52.990 --> 00:02:56.659 from Rutgers University-Newark in 1976. 00:02:56.659 --> 00:03:00.129 She joined the faculty of Harvard University in 1992 00:03:00.129 --> 00:03:01.329 and has served as the 00:03:01.330 --> 00:03:04.680 Leo Gottlieb Professor of Law since 1995. 00:03:04.680 --> 00:03:06.530 Prior to Harvard, Warren taught at 00:03:06.530 --> 00:03:08.370 the University of Pennsylvania Law School, 00:03:08.370 --> 00:03:09.770 the University of Texas Law School, 00:03:09.770 --> 00:03:11.560 the University of Houston Law Center, 00:03:11.560 --> 00:03:14.150 the University of Michigan, and Rutgers School of Law. 00:03:14.150 --> 00:03:16.830 Warren has channeled her expertise in commercial law 00:03:16.830 --> 00:03:20.100 into numerous other professional activities. 00:03:20.099 --> 00:03:21.509 She acted as chief adviser 00:03:21.509 --> 00:03:23.609 to the National Bankruptcy Review Commission 00:03:23.610 --> 00:03:26.160 from 1995 to '97. 00:03:26.159 --> 00:03:27.759 She served three terms on 00:03:27.759 --> 00:03:29.599 the Federal Judicial Center Committee 00:03:29.599 --> 00:03:33.189 on Judicial Education, 1990 to '99, 00:03:33.189 --> 00:03:36.680 and since 1995, Warren has been the United States advisor 00:03:36.680 --> 00:03:40.260 to the Transnational Insolvency Project. 00:03:40.259 --> 00:03:43.120 In presenting its nomination of Professor Warren 00:03:43.120 --> 00:03:45.370 for the lectureship, the selection committee 00:03:45.370 --> 00:03:47.930 spoke of Warren's prominence as a commentator 00:03:47.930 --> 00:03:51.520 in public discourse on bankruptcy and other consumer issues. 00:03:51.520 --> 00:03:53.920 A scholar of great originality 00:03:53.919 --> 00:03:56.869 and insight into commercial law and a law teacher 00:03:56.870 --> 00:03:59.520 and lecturer of exceptional distinction. 00:03:59.520 --> 00:04:02.550 According to committee chair Harry N. Scheiber, 00:04:02.550 --> 00:04:04.837 the Riesenfeld Professor of Law and History, 00:04:04.836 --> 00:04:07.036 "At a time when the social safety net 00:04:07.037 --> 00:04:09.787 "is no longer taken for granted by Americans, 00:04:09.787 --> 00:04:11.727 "its unremitting attack in Washington 00:04:11.727 --> 00:04:13.637 "and many state capitals, 00:04:13.637 --> 00:04:15.687 "Elizabeth Warren's unique importance 00:04:15.687 --> 00:04:17.716 "as a researcher and writer, 00:04:17.716 --> 00:04:19.947 "concerned with changing income distribution 00:04:19.947 --> 00:04:22.976 "and the imperiled condition of the nation's social welfare 00:04:22.976 --> 00:04:25.336 "makes this lecture one of special importance 00:04:25.336 --> 00:04:27.219 "to the campus community." 00:04:27.220 --> 00:04:29.847 I should say personally that I read her book last year, 00:04:29.846 --> 00:04:31.439 "The Two-Income Trap", 00:04:31.439 --> 00:04:33.579 and I would put it among my very favorites 00:04:33.579 --> 00:04:36.409 of policy books that both made sense 00:04:36.410 --> 00:04:38.100 and are going to change policy. 00:04:38.100 --> 00:04:39.710 So it gives me very great pleasure 00:04:39.709 --> 00:04:41.646 to welcome Elizabeth Warren. 00:04:41.646 --> 00:04:44.813 (audience applauding) 00:04:55.899 --> 00:04:58.300 - Thank you, Dean Mason. 00:04:58.300 --> 00:05:01.920 Thank you, members of the Berkeley faculty, 00:05:01.920 --> 00:05:04.240 Berkeley students and Berkeley friends. 00:05:04.240 --> 00:05:07.889 It's an honor to be invited to give the Jefferson Lecture, 00:05:07.889 --> 00:05:09.579 especially following the footsteps 00:05:09.579 --> 00:05:12.135 of such esteemed people. 00:05:12.136 --> 00:05:15.020 And it's also a particular pleasure to be here. 00:05:15.019 --> 00:05:19.479 I appreciate the hospitality, it has been extraordinary, 00:05:19.480 --> 00:05:21.009 and the good weather, 00:05:21.009 --> 00:05:23.899 since I was on a plane that had to be de-iced 00:05:23.899 --> 00:05:25.442 before it could take off, 00:05:26.459 --> 00:05:28.579 it really does seem that I've landed in heaven. 00:05:28.579 --> 00:05:33.149 So it's a special treat to be here today. 00:05:33.149 --> 00:05:34.479 I want to say, 00:05:34.480 --> 00:05:37.497 I like to talk about the things that I care about 00:05:37.497 --> 00:05:39.620 and that I'm passionate about, 00:05:39.620 --> 00:05:42.819 and I only get nervous about the fact that 00:05:42.819 --> 00:05:45.420 I may not tell you all the things that I want to make sure 00:05:45.420 --> 00:05:47.802 that you know and I may not be able to say it 00:05:47.802 --> 00:05:50.019 as clearly or distinctly, 00:05:50.019 --> 00:05:52.216 because I want you to hear these things, 00:05:52.216 --> 00:05:55.590 but today, I feel a special anxiety 00:05:55.589 --> 00:05:59.629 as I get ready to do this because the only two conversations 00:05:59.629 --> 00:06:02.420 that I have had running throughout the day today 00:06:02.420 --> 00:06:05.463 have been how appalling it is to use PowerPoints, 00:06:07.500 --> 00:06:10.699 and about boring lectures and falling asleep during them. 00:06:10.699 --> 00:06:15.699 So having my confidence boosted before I came in here, 00:06:15.942 --> 00:06:19.822 I will approach this somewhat gingerly. 00:06:21.360 --> 00:06:25.213 What I wanted to talk about today is I wanted to start 00:06:25.213 --> 00:06:30.213 by talking about what I think is the single most 00:06:30.781 --> 00:06:35.060 important economic shift of the second half 00:06:35.060 --> 00:06:38.170 of the 20th century in the United States, 00:06:38.170 --> 00:06:42.699 and that is that millions of mothers 00:06:42.699 --> 00:06:46.103 poured into the full-time paid workforce. 00:06:47.370 --> 00:06:49.817 A woman in 1970 00:06:53.040 --> 00:06:56.850 who had a 16 year old child 00:06:56.850 --> 00:07:01.110 was less likely to be in the workforce 00:07:01.110 --> 00:07:05.340 than a woman in 2003 00:07:05.339 --> 00:07:09.810 who had a six month old child at home. 00:07:09.810 --> 00:07:13.600 It was a profound shift in America. 00:07:13.600 --> 00:07:16.500 The median family in America, 00:07:16.500 --> 00:07:19.600 a married couple family in America, 00:07:19.600 --> 00:07:23.450 went over a 30-year period, median, middle, 00:07:23.449 --> 00:07:27.599 from being a one-income household to a two-income household, 00:07:27.600 --> 00:07:29.780 a significant shift. 00:07:29.779 --> 00:07:34.599 And so if we had known, let's say, 30 years ago, 00:07:35.800 --> 00:07:39.710 35 years ago, we've been sitting here in 1970, 00:07:39.709 --> 00:07:42.329 and as part of the Jefferson Lecture, 00:07:42.329 --> 00:07:44.106 I'd had my crystal ball and I'd said, 00:07:44.107 --> 00:07:48.067 "Here's what's going to happen over the next 30 years. 00:07:48.067 --> 00:07:50.076 "Mothers are going to pour into the workforce, 00:07:50.076 --> 00:07:51.637 "take on full-time work, 00:07:51.637 --> 00:07:53.127 "they're gonna get better education, 00:07:53.127 --> 00:07:54.406 "they're gonna have more work experience, 00:07:54.406 --> 00:07:55.757 "their incomes are going to rise. 00:07:55.757 --> 00:07:57.716 "They won't get all the way to where men are, 00:07:57.716 --> 00:08:00.089 "but they're gonna make substantial advances." 00:08:00.089 --> 00:08:03.049 Now let's speculate on what the family will look like 00:08:03.050 --> 00:08:08.050 30 years hence, that is, in 2000, 2005, 2007. 00:08:08.290 --> 00:08:10.170 Well the first thing I would have estimated 00:08:10.170 --> 00:08:12.319 is that people would stop living in suburbs 00:08:12.319 --> 00:08:13.199 that are far out. 00:08:13.199 --> 00:08:15.680 I would have guessed everyone would live close in, 00:08:15.680 --> 00:08:18.110 that no mother of a six month old child 00:08:18.110 --> 00:08:21.120 would commute an hour and 40 minutes to work. 00:08:21.120 --> 00:08:22.689 I would have been, of course, 00:08:22.689 --> 00:08:25.730 very wrong in that first estimate. 00:08:25.730 --> 00:08:29.360 The second thing I would have guessed is that families 00:08:29.360 --> 00:08:31.932 will be very wealthy. 00:08:32.919 --> 00:08:37.562 They're going to have lots of savings, no debt, 00:08:38.609 --> 00:08:40.710 and plenty of vacations, right? 00:08:40.710 --> 00:08:42.369 If you've got two people in the workforce, 00:08:42.369 --> 00:08:44.410 there's gonna be a lot of extra income. 00:08:44.409 --> 00:08:46.279 They're gonna be secure, 00:08:46.279 --> 00:08:47.269 there won't be a lot of bankruptcy, 00:08:47.269 --> 00:08:49.210 there won't be a lot of default, 00:08:49.210 --> 00:08:51.100 nobody's gonna be dealing with debt collectors, 00:08:51.100 --> 00:08:55.340 that's what it's gonna look like come the new era. 00:08:55.340 --> 00:08:56.800 So let's see what happened. 00:08:56.799 --> 00:08:58.209 This is all inflation adjusted, 00:08:58.210 --> 00:08:59.043 everything I'm gonna do today 00:08:59.043 --> 00:09:00.620 is gonna be inflation adjusted, 00:09:00.620 --> 00:09:03.700 so we can just make that assumption as we go forward. 00:09:03.700 --> 00:09:06.900 This is what happened to median income for married families 00:09:06.899 --> 00:09:08.600 and this is gonna be my period 00:09:08.600 --> 00:09:10.590 to the extent the data permitted. 00:09:10.590 --> 00:09:14.887 It's basically gonna be one generation, 1970 to 1971, 00:09:14.886 --> 00:09:16.053 to 2005, 2006. 00:09:17.259 --> 00:09:19.809 What happened in a single generation, 00:09:19.809 --> 00:09:22.319 from your mom and dad to you, okay, 00:09:22.320 --> 00:09:23.970 is what we're talking about here. 00:09:23.970 --> 00:09:27.870 And you see how income goes up for families. 00:09:27.870 --> 00:09:29.500 But there was an underlying message 00:09:29.500 --> 00:09:31.259 that was not nearly so good, 00:09:31.259 --> 00:09:35.409 and that is income went up for married couples, 00:09:35.409 --> 00:09:38.539 but the green line, the one underneath, 00:09:38.539 --> 00:09:43.209 you notice that income for males, fully employed males, 00:09:43.210 --> 00:09:45.250 in fact, didn't rise at all. 00:09:45.250 --> 00:09:46.960 And if you actually look at the numbers, 00:09:46.960 --> 00:09:48.690 a fully employed male today, 00:09:48.690 --> 00:09:50.910 once we had adjusted for inflation, 00:09:50.909 --> 00:09:55.909 makes about $800 less than his father made a generation ago, 00:09:56.899 --> 00:09:59.289 talking about median earners here. 00:09:59.289 --> 00:10:02.039 Okay, so what that begins to tell us 00:10:02.039 --> 00:10:06.069 is the first part of the story, family income rose, 00:10:06.070 --> 00:10:09.080 but as I said, it was rising only 00:10:09.080 --> 00:10:11.030 because women were going into the workforce. 00:10:11.029 --> 00:10:16.029 In other words, the bump we got is not a bump 00:10:16.529 --> 00:10:17.819 on top of the bump we were getting 00:10:17.820 --> 00:10:20.210 because men were also earning more over this period of time 00:10:20.210 --> 00:10:22.790 as they had been in the seven years that preceded, 00:10:22.789 --> 00:10:25.250 but is a bump that comes only because 00:10:25.250 --> 00:10:28.750 they put a second worker into the workforce. 00:10:28.750 --> 00:10:31.110 All right, but my prediction should still hold. 00:10:31.110 --> 00:10:33.409 After all, families are getting richer 00:10:33.409 --> 00:10:35.923 in the sense of more income over time. 00:10:36.970 --> 00:10:38.480 What happened? 00:10:38.480 --> 00:10:41.800 Savings went down in this same time period. 00:10:41.799 --> 00:10:46.179 So the one-income family in 1970 was putting away 00:10:46.179 --> 00:10:49.399 about 11% of their take-home pay. 00:10:49.399 --> 00:10:51.829 Think about it, week after week, month after month, 00:10:51.830 --> 00:10:54.060 they're putting away about 11%. 00:10:54.059 --> 00:10:59.059 By the year 2006, you notice the line goes below zero. 00:10:59.620 --> 00:11:02.830 This is a concept only Alan Greenspan would love, 00:11:02.830 --> 00:11:04.340 negative savings. 00:11:04.340 --> 00:11:08.810 The American family today puts away nothing, 00:11:08.809 --> 00:11:11.949 and frankly has been putting away nothing 00:11:11.950 --> 00:11:14.000 for the last five or six years. 00:11:14.000 --> 00:11:16.759 There's nothing there, there is no savings. 00:11:16.759 --> 00:11:20.439 So savings didn't go up the way I predicted. 00:11:20.440 --> 00:11:25.070 Oh, but something went up, and that's revolving debt. 00:11:25.070 --> 00:11:26.040 I picked revolving debt, 00:11:26.039 --> 00:11:27.269 I could have picked any of them, 00:11:27.269 --> 00:11:29.850 revolving debt just basically means credit cards 00:11:29.850 --> 00:11:32.490 where you can carry a balance outstanding. 00:11:32.490 --> 00:11:33.700 We could have picked consumer debt, 00:11:33.700 --> 00:11:36.970 which would also include car loans and payday loans 00:11:36.970 --> 00:11:39.350 and a few other kinds of debt, 00:11:39.350 --> 00:11:40.182 we could have included mortgage, 00:11:40.182 --> 00:11:43.039 and we would have gotten much the same picture. 00:11:43.039 --> 00:11:46.459 Revolving debt is a percentage of annual income. 00:11:46.460 --> 00:11:49.009 Notice there's supposed to be some decimal points in there 00:11:49.009 --> 00:11:50.000 that aren't showing up very well, 00:11:50.000 --> 00:11:52.399 I don't know what happened in the translation of the program 00:11:52.399 --> 00:11:57.019 but basically in 1970, the median family in America 00:11:57.019 --> 00:12:02.019 was carrying about 1.4% of its annual income 00:12:02.139 --> 00:12:05.279 in revolving debt, store charges. 00:12:05.279 --> 00:12:08.938 So there was a tiny little fraction on average. 00:12:08.938 --> 00:12:13.938 By the year 2005, the median family is carrying about 15% 00:12:15.600 --> 00:12:18.750 of its annual income in revolving debt, 00:12:18.750 --> 00:12:21.049 okay, just true there at the average. 00:12:21.049 --> 00:12:25.129 So savings have gone down, revolving debt has gone up, 00:12:25.129 --> 00:12:27.210 and it gives us this picture, 00:12:27.210 --> 00:12:29.389 if we put the whole thing together here. 00:12:29.389 --> 00:12:32.069 And that is the left side, 1972, 00:12:32.070 --> 00:12:35.270 the family, blue, is saving 11% 00:12:35.269 --> 00:12:37.932 and carrying debt about 1.4%. 00:12:39.029 --> 00:12:42.360 By the year 2005, is carrying credit card debt 00:12:42.360 --> 00:12:47.039 equal to one in every seven dollars that it earns, 15.6%, 00:12:47.039 --> 00:12:50.649 and its savings rate is negative, eight tenths of a percent. 00:12:50.649 --> 00:12:55.649 So think about what that means. 00:12:55.870 --> 00:12:59.970 That means, over the last 30 years, in terms of a shift, 00:12:59.970 --> 00:13:03.759 the family spent everything that mom's income 00:13:03.759 --> 00:13:06.059 added to the family fisc, 00:13:06.059 --> 00:13:08.759 spent everything they used to save, 00:13:08.759 --> 00:13:12.000 that 11% that they used to put away, 00:13:12.000 --> 00:13:16.700 and went into debt another 15% of income on top of that. 00:13:16.700 --> 00:13:18.843 They spent it all. 00:13:20.049 --> 00:13:22.399 Now, whoops, I'll do it a little faster, 00:13:22.399 --> 00:13:24.459 what did they spend it on? 00:13:24.460 --> 00:13:26.580 This was the question that really drove me 00:13:26.580 --> 00:13:29.446 in my research over the last few years. 00:13:29.446 --> 00:13:30.980 Where do they spend the money? 00:13:30.980 --> 00:13:34.039 Because what's interesting here is that 00:13:34.039 --> 00:13:35.709 everybody has an answer on this one. 00:13:35.710 --> 00:13:38.080 People can tell me exactly what they spent it on, 00:13:38.080 --> 00:13:43.080 people are sure, and so I started to find out. 00:13:43.389 --> 00:13:46.490 The federal government has actually been keeping data 00:13:46.490 --> 00:13:49.539 on how Americans spend their money. 00:13:49.539 --> 00:13:51.480 This is done through the Commerce Department, 00:13:51.480 --> 00:13:52.312 large parts of this, 00:13:52.312 --> 00:13:54.009 and some of it's due to the Labor Department, 00:13:54.009 --> 00:13:56.529 they've been keeping this for more than a century 00:13:56.529 --> 00:14:01.529 so that you can look at data on canned meat consumption 00:14:02.480 --> 00:14:06.519 going back to the late 1800s and early 1900s. 00:14:06.519 --> 00:14:08.829 You can check out alcohol consumption, 00:14:08.830 --> 00:14:11.129 you can check out cracker consumption, 00:14:11.129 --> 00:14:12.370 it's not all about food, 00:14:12.370 --> 00:14:15.440 it's about cars and rugs and furniture 00:14:15.440 --> 00:14:17.170 and all sorts of things that the government has been 00:14:17.169 --> 00:14:18.370 collecting data on. 00:14:18.370 --> 00:14:21.909 So I found this source for all the data, 00:14:21.909 --> 00:14:23.709 right down the bottom in that list, 00:14:23.710 --> 00:14:26.973 I don't know what the type is called, like .01 type, 00:14:27.990 --> 00:14:29.870 it tells what the government office is 00:14:29.870 --> 00:14:32.779 that's responsible for this and if you have any questions, 00:14:32.779 --> 00:14:36.023 what you're looking for, so glory be to the internet, 00:14:36.023 --> 00:14:40.080 found a phone number and found a live human being who, 00:14:40.080 --> 00:14:41.560 and I started trying to ask about 00:14:41.559 --> 00:14:42.949 how you could stabilize this stuff, 00:14:42.950 --> 00:14:43.810 and look at it over time, 00:14:43.809 --> 00:14:46.089 we all understand how you could do inflation adjustment, 00:14:46.090 --> 00:14:48.767 he said something about, I said something that, 00:14:48.767 --> 00:14:51.987 "Can you disaggregate this so that you can look at families 00:14:51.986 --> 00:14:54.469 "matched for family size?" 00:14:54.470 --> 00:14:56.279 That's really the question here. 00:14:56.279 --> 00:14:59.896 And the guy said, "Well", he said, 00:14:59.897 --> 00:15:03.867 "I guess if you cared, I could run the data." 00:15:04.809 --> 00:15:09.309 And, all of a sudden, my little heart starts beating faster 00:15:09.309 --> 00:15:11.616 and I'm panting into the phone and I said, 00:15:11.616 --> 00:15:13.230 "You can actually run the data?" 00:15:13.230 --> 00:15:14.062 And he said, "Yeah." 00:15:14.062 --> 00:15:16.120 He said, "What kind of family do you want to look at?" 00:15:16.120 --> 00:15:19.259 And I said, "I want to look at a mom, dad and two kids", 00:15:19.259 --> 00:15:20.639 because we have such variations, 00:15:20.639 --> 00:15:23.643 there's so many more one person family households now 00:15:23.643 --> 00:15:26.970 and variations, "I want to look at a mom, dad and two kids." 00:15:26.970 --> 00:15:29.048 That will help me stabilize both on age 00:15:29.048 --> 00:15:31.376 and family composition. 00:15:31.376 --> 00:15:34.956 "I want to look at a mom, dad and two kids in the 1970s, 00:15:34.956 --> 00:15:39.826 "1970, 1971, and I want to look at a mom, dad and two kids 00:15:39.826 --> 00:15:42.759 "in 2003", and I'm trying to gather these data, 00:15:42.759 --> 00:15:44.759 and I want to compare them. 00:15:44.759 --> 00:15:46.669 We lump together some expenses, 00:15:46.669 --> 00:15:48.120 and I want to be able to compare them over time, 00:15:48.120 --> 00:15:49.220 we'll adjust for inflation, 00:15:49.220 --> 00:15:51.040 and figure out how much more people are spending. 00:15:51.039 --> 00:15:52.049 He said, "Great." 00:15:52.049 --> 00:15:53.416 So he said, "What's the first one you want to do? 00:15:53.417 --> 00:15:54.250 "What's the first run?" 00:15:54.250 --> 00:15:55.110 Because you gotta test this stuff out see 00:15:55.110 --> 00:15:57.517 to see if you're getting it right, and I said, "Clothes, 00:15:57.517 --> 00:15:59.480 "how much money are people spending on clothes today?" 00:15:59.480 --> 00:16:03.603 Because all I ever hear about our designer toddler outfits, 00:16:04.816 --> 00:16:09.598 the Gap, $200 sneakers, 00:16:09.597 --> 00:16:12.009 all of the fancy things that people are 00:16:12.009 --> 00:16:13.909 spending on themselves and their children in terms of, 00:16:13.909 --> 00:16:16.230 we have a closet full, and look, 00:16:16.230 --> 00:16:17.730 I think this is probably why. 00:16:17.730 --> 00:16:19.710 I can't get a parking place at the mall. 00:16:19.710 --> 00:16:22.470 All the dressing rooms are always full. 00:16:22.470 --> 00:16:25.980 So it must be that we're spending too much on clothing. 00:16:25.980 --> 00:16:29.879 So he calls me back when he gets the first data runs 00:16:29.879 --> 00:16:31.909 and emails them and he says, "Okay", 00:16:31.909 --> 00:16:33.240 he said, "I've got your number." 00:16:33.240 --> 00:16:35.350 And I said, "Good, what's the number?" 00:16:35.350 --> 00:16:37.680 And he said, "32%." 00:16:37.679 --> 00:16:39.799 And I said, "So they're spending 32% more?" 00:16:39.799 --> 00:16:42.856 And he said, "No, they're spending 32% less today 00:16:42.856 --> 00:16:44.809 "than they spent a generation ago", 00:16:44.809 --> 00:16:46.489 in inflation adjusted dollars. 00:16:46.490 --> 00:16:48.769 And of course, it's like one of these things, 00:16:48.769 --> 00:16:51.539 the first, I have to tell you, this is really awful, 00:16:51.539 --> 00:16:53.429 the first eight times I talked with him 00:16:53.429 --> 00:16:56.269 after he gave me this one, I knew he had the numbers wrong. 00:16:56.269 --> 00:16:58.720 Finally, we ran this six different ways 'til Christmas, 00:16:58.720 --> 00:17:01.180 I finally believe that the numbers were right, 00:17:01.179 --> 00:17:02.549 and then we start to thinking, 00:17:02.549 --> 00:17:03.939 well, you know, it makes sense. 00:17:03.940 --> 00:17:06.080 Everybody shops at discount today, 00:17:06.079 --> 00:17:08.259 nobody pays full price in a department store, 00:17:08.259 --> 00:17:11.079 we import a lot more of our clothes than we used to, 00:17:11.079 --> 00:17:13.779 men don't wear expensive suits, except for my husband, 00:17:15.069 --> 00:17:17.519 people don't wear leather shoes, 00:17:17.519 --> 00:17:20.359 little children wear sandals and go barefoot a lot, 00:17:20.359 --> 00:17:21.869 on and on and on. 00:17:21.869 --> 00:17:26.057 And so the numbers hold that clothing expenses for a family 00:17:26.057 --> 00:17:26.891 climbed up to 32%. 00:17:26.891 --> 00:17:29.120 So, okay, food, let's do food, 00:17:29.119 --> 00:17:31.839 and let's be sure to put in eating out, 00:17:31.839 --> 00:17:34.809 because we all know with mom not at home anymore, 00:17:34.809 --> 00:17:36.849 it's gotta be that families are spending a fortune 00:17:36.849 --> 00:17:38.689 on eating out, and besides that, 00:17:38.690 --> 00:17:41.145 in 1972, nobody ate kiwis, 00:17:41.145 --> 00:17:43.829 and nobody paid for water, right? 00:17:43.829 --> 00:17:47.247 And my grandparents would be appalled by this, right? 00:17:47.248 --> 00:17:51.269 So how much more is today's family spending on food 00:17:51.269 --> 00:17:52.710 than they spent a generation ago? 00:17:52.710 --> 00:17:54.700 Same sort of matching, including eating out, 00:17:54.700 --> 00:17:58.950 and the answer is they're spending 18% less on food 00:17:58.950 --> 00:18:01.253 than they spent a generation ago. 00:18:02.630 --> 00:18:07.183 And once again, welcome to the world of big-box stores 00:18:08.089 --> 00:18:10.009 where people are buying on very thin margins, 00:18:10.009 --> 00:18:12.690 supermarkets, people eat a lot more pasta 00:18:12.690 --> 00:18:15.410 and they eat a lot less meat than they used to, 00:18:15.410 --> 00:18:18.750 there are lots of reasons that it's actually gone down 00:18:18.750 --> 00:18:21.220 in terms of what we spend on food. 00:18:21.220 --> 00:18:23.569 Okay, so, I'm beginning to get the hang of this, 00:18:23.569 --> 00:18:26.356 I said, "Appliances, nobody had an espresso machine 00:18:26.356 --> 00:18:28.817 "a generation ago, nobody had a separate popcorn popper, 00:18:28.817 --> 00:18:30.019 "no one had a microwave oven." 00:18:30.019 --> 00:18:32.730 And by the way, for each of these, 00:18:32.730 --> 00:18:35.069 one of the fun parts of being able to do research, 00:18:35.069 --> 00:18:36.029 can't do this in a lecture, 00:18:36.029 --> 00:18:37.809 you can't burden the lecture with this, 00:18:37.809 --> 00:18:39.863 but it's to get all the quotes, 00:18:40.700 --> 00:18:43.809 to get Robert Frank and Julie Scherer and all these people 00:18:43.809 --> 00:18:45.079 who are explaining why Americans 00:18:45.079 --> 00:18:46.629 are in so much financial trouble, 00:18:46.630 --> 00:18:48.390 and each time of course they're explaining about 00:18:48.390 --> 00:18:49.940 how much we spend on clothing, 00:18:49.940 --> 00:18:51.519 how much we're spending on food, 00:18:51.519 --> 00:18:53.069 and how much we're spending on appliances. 00:18:53.069 --> 00:18:56.230 So yeah, just in your own mind, pack all those in. 00:18:56.230 --> 00:18:58.049 And of course, you know where I'm going. 00:18:58.049 --> 00:19:03.049 52% less on appliances than they spent a generation ago. 00:19:03.400 --> 00:19:05.700 And you get the rest of the pattern. 00:19:05.700 --> 00:19:09.778 Per car average, yeah, we can talk about SUVs, 00:19:09.778 --> 00:19:14.579 the size of a living room and Corinthian leather 00:19:14.579 --> 00:19:16.236 or whatever it is you think, 00:19:17.140 --> 00:19:19.160 with televisions in the back, 00:19:19.160 --> 00:19:23.810 the reality is the per car cost of owning a car in America 00:19:23.809 --> 00:19:26.659 has gone down 24% in 30 years. 00:19:26.660 --> 00:19:28.100 Principle reason for it, 00:19:28.099 --> 00:19:30.829 Americans today keep a car more than two years longer 00:19:30.829 --> 00:19:33.250 than they kept it 30 years ago, 00:19:33.250 --> 00:19:36.000 and repair costs have dropped significantly. 00:19:36.000 --> 00:19:39.319 So the per car, this is what people really spend, 00:19:39.319 --> 00:19:42.230 not what they projected might have spent, 00:19:42.230 --> 00:19:43.799 have gone down dramatically. 00:19:43.799 --> 00:19:45.899 Whoop, I'm getting a little fast here. 00:19:45.900 --> 00:19:47.603 So the question is, 00:19:47.603 --> 00:19:49.670 it's a little trigger-happy with this thing, 00:19:49.670 --> 00:19:53.580 so the question is if all those things went down, 00:19:53.579 --> 00:19:57.000 if clothing and food and appliances and cars went down, 00:19:57.000 --> 00:19:58.329 and by the way, I could and a lot of this 00:19:58.329 --> 00:19:59.819 with a lot more consumer goods, 00:19:59.819 --> 00:20:04.819 electronics went up, surprise, surprise, 300 bucks, okay? 00:20:04.819 --> 00:20:08.453 Dog food went up, baby food went down, 00:20:08.453 --> 00:20:12.859 cigarettes went down, liquor went up, we should watch that, 00:20:12.859 --> 00:20:15.479 dry cleaning went down. 00:20:15.480 --> 00:20:20.339 The point is there's either wash or a negative 00:20:20.339 --> 00:20:22.939 in terms of kind of ordinary consumption, 00:20:22.940 --> 00:20:25.830 the idea that we are an over-consuming society, 00:20:25.829 --> 00:20:28.669 what most people talk about when they're consuming. 00:20:28.670 --> 00:20:31.480 So where is the family spending more money 00:20:31.480 --> 00:20:32.890 than they spent a generation ago? 00:20:32.890 --> 00:20:36.200 Well, let's start with a three-bedroom, one-bath house, 00:20:36.200 --> 00:20:39.283 that the median income family is paying for. 00:20:40.170 --> 00:20:43.300 And there it is, inflation adjusted dollars, 00:20:43.299 --> 00:20:48.299 a 76% increase in what a family spends on a mortgage. 00:20:49.220 --> 00:20:51.576 That's the mortgage payment, month in, month out. 00:20:51.576 --> 00:20:52.950 Now think about that. 00:20:52.950 --> 00:20:57.080 We have much lower mortgage rates than we had 30 years ago, 00:20:57.079 --> 00:20:59.139 for those of you who are old enough to remember, 00:20:59.140 --> 00:21:01.520 but the difference is when you take out a mortgage 00:21:01.519 --> 00:21:05.129 for much more money, the low interest rate 00:21:05.130 --> 00:21:08.210 will not make up for that difference. 00:21:08.210 --> 00:21:10.610 And I want to emphasize here, 00:21:10.609 --> 00:21:14.819 the median sized house that we're talking about here 00:21:14.819 --> 00:21:17.279 did grow slightly in this period. 00:21:17.279 --> 00:21:22.279 It grew from 5.8 rooms to 6.1 rooms. 00:21:22.410 --> 00:21:25.300 So this is not about, and on average, 00:21:25.299 --> 00:21:28.869 this family, this median family either 00:21:28.869 --> 00:21:32.029 picked up a second bathroom or a third bedroom, 00:21:32.029 --> 00:21:33.113 but not both. 00:21:34.079 --> 00:21:35.486 So for those of you who want to say, 00:21:35.487 --> 00:21:38.200 "Oh but I've driven by the McMansions", 00:21:38.200 --> 00:21:42.007 "everybody has to have granite countertops and spa bathrooms 00:21:42.007 --> 00:21:43.547 "and media rooms, I've seen them, 00:21:43.547 --> 00:21:44.950 "I've seen them, I've seen them", 00:21:44.950 --> 00:21:47.370 and compare that with Levittown, 00:21:47.369 --> 00:21:49.119 which is more than 30 years ago, 00:21:49.119 --> 00:21:52.079 but to give the idea, all that tells us 00:21:52.079 --> 00:21:55.129 is that the new housing market has shifted 00:21:55.130 --> 00:21:57.000 from the entry level house, 00:21:57.000 --> 00:22:01.069 which is what was being built in the 1950s and 1960s to, 00:22:01.069 --> 00:22:03.490 on average, when you buy a new house today, 00:22:03.490 --> 00:22:06.400 it is your third to fourth house purchase, 00:22:06.400 --> 00:22:08.080 that is, you've moved up and moved up 00:22:08.079 --> 00:22:10.049 until you can afford this bigger house, 00:22:10.049 --> 00:22:12.036 in other words, housing is not being built 00:22:12.036 --> 00:22:14.330 for 70% of American families, 00:22:14.329 --> 00:22:17.199 it's being built for the top 20% of American families, 00:22:17.200 --> 00:22:18.309 that's what we see when we see 00:22:18.309 --> 00:22:20.319 the new construction that's underway. 00:22:20.319 --> 00:22:23.039 For the average family today, 00:22:23.039 --> 00:22:25.680 they are about 50% more likely to be in a house 00:22:25.680 --> 00:22:27.570 more than 25 years old 00:22:27.569 --> 00:22:31.099 and have all of the attendant expenses for maintenance, 00:22:31.099 --> 00:22:35.649 but just looking at the mortgage, 76% more for a mortgage 00:22:35.650 --> 00:22:37.790 than they had a generation ago. 00:22:37.789 --> 00:22:40.649 Okay, well what's the next one they spent money on? 00:22:40.650 --> 00:22:42.040 Health insurance. 00:22:42.039 --> 00:22:44.133 This is my family that's healthy. 00:22:44.980 --> 00:22:49.160 And my family, because I've loaded the dice here, 00:22:49.160 --> 00:22:52.519 that's lucky enough to have an employer 00:22:52.519 --> 00:22:54.250 who sponsors health insurance, 00:22:54.250 --> 00:22:57.220 so I'm gonna make an apples-to-apples comparison 00:22:57.220 --> 00:23:00.759 of employer-sponsored health insurance, 00:23:00.759 --> 00:23:03.349 how much more two does today's family pay? 00:23:03.349 --> 00:23:08.119 And the answer is they pay 74% in inflation adjusted dollars 00:23:08.119 --> 00:23:10.939 more than they did a generation ago. 00:23:10.940 --> 00:23:13.920 Third one, cars, increase of 52%. 00:23:13.920 --> 00:23:15.480 Okay, Warren, how did you get cars 00:23:15.480 --> 00:23:17.120 both above the line and below the line? 00:23:17.119 --> 00:23:22.032 Well, I teach commercial law, but the answer is, 00:23:22.032 --> 00:23:25.509 the median family with two people in the workforce 00:23:25.509 --> 00:23:27.400 has moved from being a one-car family 00:23:27.400 --> 00:23:29.230 to being a two-car family. 00:23:29.230 --> 00:23:30.589 Families living out in the suburbs, 00:23:30.589 --> 00:23:32.310 even if they keep a parent at home 00:23:32.310 --> 00:23:34.826 can't get by on one car much of the time, 00:23:34.826 --> 00:23:36.569 they've got to have two cars 00:23:36.569 --> 00:23:38.579 in order to be able to get to the doctor, 00:23:38.579 --> 00:23:40.579 to be able to get to the grocery store. 00:23:40.579 --> 00:23:43.730 So families spend more because they have more cars 00:23:43.730 --> 00:23:45.640 than they used to have. 00:23:45.640 --> 00:23:49.020 Fourth-biggest, remember, I've got my mom, dad and two kids 00:23:49.019 --> 00:23:50.460 and of course the big difference was 00:23:50.460 --> 00:23:52.069 mom was at home a generation ago, 00:23:52.069 --> 00:23:56.099 today she is out in the workforce is childcare. 00:23:56.099 --> 00:23:59.109 Now I put childcare at a 100% increase. 00:23:59.109 --> 00:24:01.919 In fact, you may remember from third grade 00:24:01.920 --> 00:24:03.730 that you can't divide by zero, 00:24:03.730 --> 00:24:06.390 so I could have picked 1,000% or 1%, 00:24:06.390 --> 00:24:07.759 or whatever I wanted to pick here, 00:24:07.759 --> 00:24:10.839 it is a new expense picked up by the two-income family 00:24:10.839 --> 00:24:13.709 that was simply not there for the one-income family. 00:24:13.710 --> 00:24:17.890 And we have one more expense, and it's taxes. 00:24:17.890 --> 00:24:21.990 What's happened with taxes is that progressive tax system, 00:24:21.990 --> 00:24:24.849 as mildly progressive as it is, 00:24:24.849 --> 00:24:28.559 the first dollar that the second earner earns is taxed 00:24:28.559 --> 00:24:31.240 after the last dollar of the first earner, 00:24:31.240 --> 00:24:34.710 so it means that the tax rate for this economic unit 00:24:34.710 --> 00:24:39.380 has gone out by about 25% in this period of time. 00:24:39.380 --> 00:24:43.040 Okay, so there it is, downs and ups. 00:24:43.039 --> 00:24:44.990 And I hope there are two things you notice about 00:24:44.990 --> 00:24:46.470 the downs and ups. 00:24:46.470 --> 00:24:50.950 The first one is the downs frankly are all smaller purchases 00:24:50.950 --> 00:24:54.090 than the ups are, and that's bad news. 00:24:54.089 --> 00:24:58.279 And the second is the downs are all flexible purchases, 00:24:58.279 --> 00:25:01.009 that is, lose your job, get sick, 00:25:01.009 --> 00:25:04.475 have a tough month with various expenses, 00:25:04.476 --> 00:25:06.070 you cut back on the downs, 00:25:06.069 --> 00:25:07.850 don't buy appliances this month, 00:25:07.851 --> 00:25:10.470 cut back on food, it's not that you quit eating, 00:25:10.470 --> 00:25:11.740 but you know, there's a difference between 00:25:11.740 --> 00:25:13.640 macaroni and cheese and steak. 00:25:13.640 --> 00:25:16.960 Families have flexibility in all the things that shrunk, 00:25:16.960 --> 00:25:19.900 they shrunk the things where flexibility is, 00:25:19.900 --> 00:25:21.220 but look at those other expenses, 00:25:21.220 --> 00:25:24.600 those other expenses are big, fixed, relentless expenses. 00:25:24.599 --> 00:25:27.240 And so this gets to what I think of 00:25:27.240 --> 00:25:32.240 as the heart of what my research is about up to this point 00:25:32.950 --> 00:25:35.870 and that is what these families look like, 00:25:35.869 --> 00:25:38.364 and I do look at this the way a commercial lawyer does, 00:25:38.365 --> 00:25:40.549 if this were a little business, 00:25:40.549 --> 00:25:42.490 what these families look at. 00:25:42.490 --> 00:25:47.370 The single income family back in the early 1970s 00:25:47.369 --> 00:25:48.599 earned less money, 00:25:48.599 --> 00:25:50.369 that's the first thing you'll notice here, right? 00:25:50.369 --> 00:25:52.812 They're making about $32,000. 00:25:52.813 --> 00:25:56.070 This is all inflation adjusted dollars again. 00:25:56.069 --> 00:25:57.549 And you notice, of course, 00:25:57.549 --> 00:25:59.430 they're making a whole lot more money, 00:25:59.430 --> 00:26:01.701 making about $63,000, 00:26:01.701 --> 00:26:04.303 about $73,000 in the early 2000s. 00:26:06.779 --> 00:26:09.649 But notice those five expenses that I gave you 00:26:09.650 --> 00:26:13.560 on the preceding chart, that's the part that's in red. 00:26:13.559 --> 00:26:18.539 The early family is spending right at half its income 00:26:18.539 --> 00:26:20.269 on these big fixed expenses, 00:26:20.269 --> 00:26:23.349 these expenses that are very difficult to cut down, 00:26:23.349 --> 00:26:25.192 to trim back, to cope with. 00:26:26.035 --> 00:26:29.550 And that family, by the early 2000s, 00:26:29.549 --> 00:26:33.500 has committed three quarters of their income 00:26:33.500 --> 00:26:38.500 in order to meet those five basic expenses. 00:26:38.529 --> 00:26:43.529 In fact, you'll notice the math we've done here, the family, 00:26:43.869 --> 00:26:46.869 the two-income family, the mom, dad and two kids, 00:26:46.869 --> 00:26:48.669 the prototype of the family that's supposed to be 00:26:48.670 --> 00:26:50.330 working in America, 00:26:50.329 --> 00:26:52.829 the one that's supposed to be making it all, 00:26:52.829 --> 00:26:56.372 by the time they pay their five basic expenses, 00:26:57.289 --> 00:27:01.829 they have less money left over, fewer total dollars, 00:27:01.829 --> 00:27:05.072 than their one-income parents had a generation ago. 00:27:06.019 --> 00:27:08.809 And now from the point of view of a commercial law scholar, 00:27:08.809 --> 00:27:12.139 if I were simply looking at them and these were businesses, 00:27:12.140 --> 00:27:14.830 this is, Business A is on the the far side 00:27:14.829 --> 00:27:17.500 and Business B is on the near side, I'd say, well, 00:27:17.500 --> 00:27:20.049 Business B is gonna go broke a lot more often 00:27:20.049 --> 00:27:24.970 than Business A because they have so much less flexibility, 00:27:24.970 --> 00:27:28.495 so much more debt, they're much more deeply leveraged, 00:27:28.494 --> 00:27:31.629 and they're gonna have more of a harder time economically. 00:27:31.630 --> 00:27:36.630 And in fact, that's about what's happened to these families. 00:27:36.789 --> 00:27:41.149 So there's the heart, now I want to shift this a little bit 00:27:41.150 --> 00:27:43.650 to say that's the economics of what's happened. 00:27:43.650 --> 00:27:45.019 We've seen it on the income side, 00:27:45.019 --> 00:27:46.446 we've seen what happened on the expense side, 00:27:46.446 --> 00:27:49.279 and we've seen what it did to the American budget, 00:27:49.279 --> 00:27:53.710 how it changed and made this a riskier economic unit, 00:27:53.710 --> 00:27:56.420 but now what I want to do is I want to press on how 00:27:56.420 --> 00:28:01.420 this family in the 2000s faces in fact even more risk 00:28:02.099 --> 00:28:04.409 than these numbers suggest. 00:28:04.410 --> 00:28:06.100 All right, first part, let's think about it 00:28:06.099 --> 00:28:07.669 from the income side. 00:28:07.670 --> 00:28:12.670 The family of the early 2000s now has to have two incomes 00:28:14.160 --> 00:28:16.100 in order to keep its health insurance, 00:28:16.099 --> 00:28:20.392 to make its house payment, to keep its cars on the road. 00:28:21.740 --> 00:28:24.390 That means, just statistically speaking, 00:28:24.390 --> 00:28:28.470 if the risk of losing your job had stayed exactly the same 00:28:28.470 --> 00:28:31.819 over the last generation, the family on the right 00:28:31.819 --> 00:28:35.230 has twice the risk of the family on the left 00:28:35.230 --> 00:28:37.539 of not being able to make the mortgage payment. 00:28:37.539 --> 00:28:39.819 Yes, they've diversified, they won't go to zero, 00:28:39.819 --> 00:28:40.789 but the point is, they won't have enough 00:28:40.789 --> 00:28:42.759 to make the mortgage payment. 00:28:42.759 --> 00:28:46.329 So what we've got now is we've got families 00:28:46.329 --> 00:28:49.210 who don't have to bring in 52 checks 00:28:49.210 --> 00:28:52.450 in order to be able to make the monthly mortgage payment, 00:28:52.450 --> 00:28:54.730 they got to bring in 104. 00:28:54.730 --> 00:28:59.200 And if either of them loses their job, 00:28:59.200 --> 00:29:00.430 they don't make the mortgage payment, 00:29:00.430 --> 00:29:02.269 they're flat out of luck. 00:29:02.269 --> 00:29:03.609 Let me say this another way, 00:29:03.609 --> 00:29:05.299 'cause I want to give it one more twist. 00:29:05.299 --> 00:29:09.309 The family on the left has has a hidden resource here. 00:29:09.309 --> 00:29:12.740 They have another worker, the added worker effect. 00:29:12.740 --> 00:29:16.420 If dad, and that's how it usually was, loses his job 00:29:16.420 --> 00:29:20.490 or has a heart attack and can't go to work for three months, 00:29:20.490 --> 00:29:22.519 the family on the left has somebody they can send in 00:29:22.519 --> 00:29:23.670 to the workforce. 00:29:23.670 --> 00:29:26.500 Now she doesn't make as much money as she does 00:29:26.500 --> 00:29:27.710 by the year 2000, 00:29:27.710 --> 00:29:28.890 she doesn't have as much education, 00:29:28.890 --> 00:29:31.060 she doesn't have as much on-the-job training, 00:29:31.059 --> 00:29:32.440 but, and here's the key, 00:29:32.440 --> 00:29:34.450 every dollar she earns is a new dollar. 00:29:34.450 --> 00:29:37.350 It's an unbudgeted dollar that was not part 00:29:37.349 --> 00:29:38.879 of what they originally had. 00:29:38.880 --> 00:29:40.680 So for example, the family on the left 00:29:40.680 --> 00:29:42.910 that collects unemployment insurance, 00:29:42.910 --> 00:29:47.060 combined with the additional income that mom can bring in 00:29:47.059 --> 00:29:49.339 for a temporary period of employment, 00:29:49.339 --> 00:29:51.490 they got a chance, they'll go down some, 00:29:51.490 --> 00:29:52.870 but they got a chance to pull through 00:29:52.869 --> 00:29:55.359 and come back up on the other side. 00:29:55.359 --> 00:29:58.240 The family on the right, if something goes wrong, 00:29:58.240 --> 00:29:59.089 there's no place to go, 00:29:59.089 --> 00:30:02.019 they've already got their other person not only at work 00:30:02.019 --> 00:30:03.329 but already fully budgeted, 00:30:03.329 --> 00:30:05.939 they've already given up that income fully 00:30:07.226 --> 00:30:09.100 in order to survive. 00:30:09.099 --> 00:30:11.709 But the risk of losing your job, 00:30:11.710 --> 00:30:15.400 the risk of losing income didn't stay steady 00:30:15.400 --> 00:30:18.500 between the early 1970s and today. 00:30:18.500 --> 00:30:21.690 I draw here on Jacob Hacker's work, 00:30:21.690 --> 00:30:25.680 some of you may be familiar with it, "The Great Risk Shift". 00:30:25.680 --> 00:30:29.080 What Jacob has done in this has looked at 00:30:29.079 --> 00:30:34.079 a family's chance of a 20% or greater drop in income. 00:30:34.400 --> 00:30:37.180 And he starts back in 1970, 00:30:37.180 --> 00:30:40.560 Jacob is a good friend and will stick with the same years 00:30:40.559 --> 00:30:44.409 I want to go with, and he goes up to 2003, 00:30:44.410 --> 00:30:48.080 and you notice how income volatility 00:30:48.079 --> 00:30:50.139 has gone up in this period of time. 00:30:50.140 --> 00:30:52.186 So now we've got that family, 00:30:52.185 --> 00:30:56.889 not only struggling because they got to have 104 paychecks, 00:30:56.890 --> 00:30:58.830 struggling because the odds that one of them 00:30:58.829 --> 00:31:01.109 will be laid off has gone up from where it was 00:31:01.109 --> 00:31:02.039 a generation ago. 00:31:02.039 --> 00:31:04.119 Okay, so that's where they are on the income side, 00:31:04.119 --> 00:31:05.339 in terms of risk. 00:31:05.339 --> 00:31:08.959 This is risk this little unit has to bear. 00:31:08.960 --> 00:31:10.629 Let's think about health. 00:31:10.628 --> 00:31:13.429 Okay, same argument I could make as before. 00:31:13.430 --> 00:31:14.750 They now have double the chance 00:31:14.750 --> 00:31:17.390 that someone will be in a car accident, 00:31:17.390 --> 00:31:18.520 one of their two workers, 00:31:18.519 --> 00:31:21.019 and won't be able to go to work and therefore 00:31:21.019 --> 00:31:23.599 make enough money to pay a mortgage payment, 00:31:23.599 --> 00:31:26.869 but this family now faces additional risks 00:31:26.869 --> 00:31:29.459 on the health side as well. 00:31:29.460 --> 00:31:30.990 What additional risks do they face? 00:31:30.990 --> 00:31:32.670 Well, I'll pop forward to one, 00:31:32.670 --> 00:31:35.630 and that is the increased odds 00:31:35.630 --> 00:31:37.693 that they won't have health insurance. 00:31:37.692 --> 00:31:41.299 Those odds have gone up over the past 20 years, 00:31:41.299 --> 00:31:42.970 but the ones I like to think about, 00:31:42.970 --> 00:31:43.900 I keep coming back to this one 00:31:43.900 --> 00:31:45.730 because it's my favorite slide, 00:31:45.730 --> 00:31:48.000 the ones I like to think about 00:31:48.000 --> 00:31:51.349 are that the world of healthcare has changed in 30 years. 00:31:51.349 --> 00:31:52.719 So let me just give you an example. 00:31:52.720 --> 00:31:56.450 In 1971, a woman who was healthy 00:31:56.450 --> 00:31:58.299 and gave birth to a healthy baby, 00:31:58.299 --> 00:32:00.193 ordinary delivery, non-cesarean, 00:32:00.193 --> 00:32:02.985 stayed in the hospital for five days 00:32:02.986 --> 00:32:05.280 after the day the baby was born, 00:32:05.279 --> 00:32:06.410 that's what insurance paid for, 00:32:06.410 --> 00:32:07.790 that's what the hospital expected. 00:32:07.789 --> 00:32:09.200 You could go home earlier if you wanted to 00:32:09.200 --> 00:32:11.400 but you're entitled to five days in the hospital. 00:32:11.400 --> 00:32:13.370 If you had a cesarean, 10, 00:32:13.369 --> 00:32:15.062 that you got to stay in 1971. 00:32:15.063 --> 00:32:18.580 And you know what the numbers are in 2006? 00:32:18.579 --> 00:32:20.371 24 hours, okay? 00:32:20.372 --> 00:32:23.259 24 hours, and keep in mind, in some places, 00:32:23.259 --> 00:32:25.069 that's by legislation, 00:32:25.069 --> 00:32:27.169 because they were trying to push them out faster. 00:32:27.170 --> 00:32:31.170 How have we made gains in hospital efficiency 00:32:31.170 --> 00:32:32.529 over the past 30 years? 00:32:32.529 --> 00:32:34.029 You send home the sick people. 00:32:34.980 --> 00:32:37.339 It really works, there is a policy, 00:32:37.339 --> 00:32:40.059 we never want to talk about this in the United States, 00:32:40.059 --> 00:32:42.399 it's known in the trade, in the hospital trade, 00:32:42.400 --> 00:32:44.623 is send them home quicker and sicker. 00:32:46.970 --> 00:32:51.400 They save money by letting the family provide nursing care 00:32:51.400 --> 00:32:52.480 instead of having the hospital, 00:32:52.480 --> 00:32:55.809 so you still have your surgery done at the hospital, 00:32:55.809 --> 00:32:59.549 but it's the family that will take care of you post-surgery. 00:32:59.549 --> 00:33:04.549 And so today we witness the spectacle of my mother-in-law, 00:33:06.394 --> 00:33:10.450 a woman in her 80s where someone's trying to explain to her 00:33:10.450 --> 00:33:13.490 how it is that she can wash a tube 00:33:15.099 --> 00:33:18.269 and rinse things out and give injections, 00:33:18.269 --> 00:33:19.859 my sister-in-law was just asked to do this 00:33:19.859 --> 00:33:21.979 when my brother had some surgery, 00:33:21.980 --> 00:33:25.160 we're gonna train the family to take care, 00:33:25.160 --> 00:33:27.130 only they're both at work. 00:33:27.130 --> 00:33:30.830 And the consequence of this means that for these families 00:33:30.829 --> 00:33:33.279 with everybody in the workforce, somebody gets sick, 00:33:33.279 --> 00:33:34.289 you just take off work, 00:33:34.289 --> 00:33:35.970 'cause somebody's gonna have to take care of them, 00:33:35.970 --> 00:33:37.490 somebody's gonna have to 'cause you're not gonna get 00:33:37.490 --> 00:33:39.920 this extra period of nursing care. 00:33:39.920 --> 00:33:42.350 It's just another way to give one more push. 00:33:42.349 --> 00:33:44.569 How about if a kid gets sick, a child? 00:33:44.569 --> 00:33:46.460 I mean something really serious, 00:33:46.460 --> 00:33:48.720 grandma falls and breaks a hip. 00:33:48.720 --> 00:33:51.120 A generation ago, there was someone at home 00:33:51.119 --> 00:33:52.639 to provide that nursing care, 00:33:52.640 --> 00:33:54.580 for that extra eight weeks that grandma needed 00:33:54.579 --> 00:33:56.149 some extra help. 00:33:56.150 --> 00:33:59.820 Today, the illness of a family member 00:33:59.819 --> 00:34:02.789 has a direct income impact for people 00:34:02.789 --> 00:34:04.819 who aren't lucky enough to have jobs that pay you 00:34:04.819 --> 00:34:06.450 even when you're not at work. 00:34:06.450 --> 00:34:10.300 So the consequence is we end up with these families, 00:34:10.300 --> 00:34:11.650 the child gets sick, 00:34:11.650 --> 00:34:14.710 I read these stories over and over in my bankruptcy files, 00:34:14.710 --> 00:34:16.670 the child gets sick, 00:34:16.670 --> 00:34:18.470 mom stays at the hospital with the child 00:34:18.469 --> 00:34:19.712 until she loses her job. 00:34:20.610 --> 00:34:24.360 There are income effects now from any illness 00:34:24.360 --> 00:34:26.420 anywhere in the family. 00:34:26.420 --> 00:34:31.099 So we end up with a family once again bearing more risk 00:34:31.099 --> 00:34:33.490 that someone will get sick, 00:34:33.490 --> 00:34:36.050 and we can just keep multiplying this. 00:34:36.050 --> 00:34:38.519 What are the odds of spending $10,000 00:34:38.519 --> 00:34:39.690 in an emergency room today 00:34:39.690 --> 00:34:41.860 compared to spending $10,000 in an emergency room 00:34:41.860 --> 00:34:43.454 a generation ago? 00:34:43.454 --> 00:34:45.610 One more that I just have to mention 00:34:45.610 --> 00:34:48.500 that we can't quantify yet but I'm watching it 00:34:48.500 --> 00:34:50.650 is that insurance itself has changed 00:34:50.650 --> 00:34:53.372 in terms of how much of the medical cost 00:34:53.371 --> 00:34:55.659 is actually covered. 00:34:55.659 --> 00:34:57.929 We now have floating around in America, 00:34:57.929 --> 00:34:59.269 I just, I don't know what else to call it 00:34:59.269 --> 00:35:01.009 except faux insurance, 00:35:01.010 --> 00:35:02.470 people who think they're insured 00:35:02.469 --> 00:35:05.889 until they actually get sick and need their insurance 00:35:05.889 --> 00:35:08.139 and it turns out that, well, 00:35:08.139 --> 00:35:09.029 yeah, you have insurance, 00:35:09.030 --> 00:35:12.400 I love the Utah policy that our 00:35:12.400 --> 00:35:16.750 Secretary of Health Education and Welfare 00:35:16.750 --> 00:35:19.797 comes out and says, "I got everybody in Utah insured, 00:35:19.797 --> 00:35:22.922 "except it doesn't cover hospitalization. 00:35:22.922 --> 00:35:24.257 (audience laughing) 00:35:24.257 --> 00:35:26.007 "And it doesn't cover specialists." 00:35:26.849 --> 00:35:27.967 And you call that, 00:35:27.967 --> 00:35:29.780 and of course, it doesn't cover prescription drugs, 00:35:29.780 --> 00:35:32.240 and it doesn't cover supplies and it doesn't, 00:35:32.239 --> 00:35:35.199 there's more than it doesn't cover than it does cover. 00:35:35.199 --> 00:35:39.222 So all of this is being pushed back on the family. 00:35:40.349 --> 00:35:42.009 So let me take one more twist on it, 00:35:42.010 --> 00:35:45.350 so we've got changes in jobs, changes in health insurance, 00:35:45.349 --> 00:35:46.299 changes to healthcare, 00:35:46.300 --> 00:35:48.000 what it cost to do health and care, 00:35:48.000 --> 00:35:51.260 and I just want to put one more tweak into it 00:35:51.260 --> 00:35:54.480 and that is to talk about the special risks 00:35:54.480 --> 00:35:56.570 facing families with children. 00:35:56.570 --> 00:35:58.583 I've made this my iconic family, 00:35:59.579 --> 00:36:02.592 but I want to make two points about the iconic family here, 00:36:02.592 --> 00:36:06.250 the mom, dad and two kids. 00:36:06.250 --> 00:36:08.929 This is how it works for mom, dad and two kids. 00:36:08.929 --> 00:36:12.759 Think how it works for either a mom and two kids 00:36:12.760 --> 00:36:14.523 or a dad and two kids. 00:36:15.980 --> 00:36:17.480 They are now competing, 00:36:17.480 --> 00:36:20.563 I actually met a woman, it was a wonderful exchange, 00:36:20.563 --> 00:36:23.677 I was sitting on an airplane right after the book came out, 00:36:23.677 --> 00:36:25.470 "The Two-Income Trap" and I had it on my lap 00:36:25.469 --> 00:36:27.502 and this woman next to me said, "Have you read that book?" 00:36:27.503 --> 00:36:30.500 (audience laughing) And I said, "Mm-hmm." 00:36:30.500 --> 00:36:33.820 And she said, "I'm a divorced mother", 00:36:33.820 --> 00:36:34.880 and she said, "I'm an accountant." 00:36:34.880 --> 00:36:36.336 She said, "I make a good income, 00:36:36.336 --> 00:36:39.239 "I make above a median income in the United States today." 00:36:39.239 --> 00:36:42.126 She said, "I could make it, I could support my two kids 00:36:42.126 --> 00:36:44.273 "on what I get for child support. 00:36:45.516 --> 00:36:47.936 "I could do it if I were only competing 00:36:47.936 --> 00:36:50.476 "against other one-income households, 00:36:50.476 --> 00:36:53.646 "for the basics, for housing, for healthcare, 00:36:53.646 --> 00:36:55.299 "for all the things we're buying." 00:36:55.300 --> 00:36:57.570 But she said, "I'm competing against two-income households." 00:36:57.570 --> 00:36:58.680 And she said, "I just can't do it." 00:36:58.679 --> 00:37:01.690 She said, "I can't hang on, I can't make it." 00:37:01.690 --> 00:37:03.559 So that's the first part I want you to see, 00:37:03.559 --> 00:37:06.289 the one-income family gets the lower income, 00:37:06.289 --> 00:37:09.119 still faces high expenses, still wants the house 00:37:09.119 --> 00:37:12.389 and so on and so forth, and faces all the same risks 00:37:12.389 --> 00:37:16.129 with no one to back up and provide that second income, 00:37:16.130 --> 00:37:18.930 but I want to step forward to say something else 00:37:18.929 --> 00:37:22.779 about families with children and that is 00:37:22.780 --> 00:37:24.500 this goes back to Hacker's work, 00:37:24.500 --> 00:37:28.820 percentage increase in volatility by family type 00:37:28.820 --> 00:37:31.940 from 1970 to 2003. 00:37:31.940 --> 00:37:34.650 And notice what Hacker points out here. 00:37:34.650 --> 00:37:36.180 For those of you can't read the wording 00:37:36.179 --> 00:37:37.899 all the way over to the far side, 00:37:37.900 --> 00:37:40.170 green is single without children, 00:37:40.170 --> 00:37:41.619 that's how much income volatility, 00:37:41.619 --> 00:37:43.599 and look, that's substantial income volatility 00:37:43.599 --> 00:37:47.409 that we've got there, in the high 30s. 00:37:47.409 --> 00:37:51.670 Single with children, a little above 40%. 00:37:51.670 --> 00:37:55.230 Married without children, you get about a 70% volatility. 00:37:55.230 --> 00:37:59.400 And married with children pushes up to about 95% 00:37:59.400 --> 00:38:03.300 increase in volatility over the past generation. 00:38:03.300 --> 00:38:05.400 Now, are families struggling with this? 00:38:05.400 --> 00:38:07.300 Well, let me show you some of my data. 00:38:08.579 --> 00:38:10.259 Oh, not my data, government data, 00:38:10.260 --> 00:38:12.146 I never know what the next slide is going to be, 00:38:12.146 --> 00:38:14.250 keeps me on my toes. 00:38:14.250 --> 00:38:15.980 The next one is to disaggregate 00:38:15.980 --> 00:38:17.500 a little bit more about housing, 00:38:17.500 --> 00:38:19.489 we talked just a little bit about it before. 00:38:19.489 --> 00:38:20.519 This is one of those charts, 00:38:20.519 --> 00:38:22.289 it doesn't fit perfectly with what I'm talking about 00:38:22.289 --> 00:38:24.029 because the years aren't quite right, 00:38:24.030 --> 00:38:26.360 this is some government data I found. 00:38:26.360 --> 00:38:28.599 Only goes back to 1983, 00:38:28.599 --> 00:38:33.500 but notice what it shows, that increase in housing costs, 00:38:33.500 --> 00:38:35.150 what families are paying for mortgages, 00:38:35.150 --> 00:38:36.970 not my part in general, 00:38:36.969 --> 00:38:38.639 they've done it the other way around, 00:38:38.639 --> 00:38:40.529 what they're paying for the house itself, 00:38:40.530 --> 00:38:42.360 what the cost of the house is. 00:38:42.360 --> 00:38:47.180 We saw a 50% increase among the families with no children, 00:38:47.179 --> 00:38:49.869 inflation adjusted and what housing costs, 00:38:49.869 --> 00:38:52.529 but you notice among families with children, 00:38:52.530 --> 00:38:54.230 it's 100% increase, 00:38:54.230 --> 00:38:57.929 a full 100% increase in inflation adjusted dollars 00:38:57.929 --> 00:39:00.960 for what a home costs for families with children. 00:39:00.960 --> 00:39:02.682 Now we're gonna save plenty of time here for Q and A 00:39:02.682 --> 00:39:04.210 because I think that's more fun 00:39:04.210 --> 00:39:06.780 than having to listen to a lecture, 00:39:06.780 --> 00:39:08.930 but I'll tell you at least how I read this chart. 00:39:08.929 --> 00:39:10.429 Families are going to schools. 00:39:11.409 --> 00:39:13.859 People without children don't have to buy schools, 00:39:13.860 --> 00:39:16.329 and so they buy from a wider pool of homes, 00:39:16.329 --> 00:39:19.130 they can look at a lot of homes in a lot of neighborhoods. 00:39:19.130 --> 00:39:22.099 Families with children are buying what they believe 00:39:22.099 --> 00:39:24.009 is a shrinking resource, that is, 00:39:24.010 --> 00:39:26.120 places where you can have decent public schools 00:39:26.119 --> 00:39:27.849 and send your children to public schools. 00:39:27.849 --> 00:39:31.335 And in fact, we can triangulate these data in other ways, 00:39:31.335 --> 00:39:32.985 so that you'll love this. 00:39:32.985 --> 00:39:35.759 I wonder, I was gonna it's gonna say it would happen 00:39:35.760 --> 00:39:36.970 only outside Boston, 00:39:36.969 --> 00:39:38.859 but I bet it also happens outside Berkeley, 00:39:38.860 --> 00:39:41.360 we just have the data outside Boston, 00:39:41.360 --> 00:39:46.360 a five point increase in third grade reading scores 00:39:48.440 --> 00:39:51.710 between two side-by-side municipalities 00:39:51.710 --> 00:39:55.360 in the Boston suburbs that are otherwise matched for access 00:39:55.360 --> 00:39:57.230 to public transportation and size of houses, 00:39:57.230 --> 00:39:58.360 they've measured for everything, 00:39:58.360 --> 00:40:02.410 sidewalks, crime rates, racial composition, 00:40:02.409 --> 00:40:03.440 everything you want to look at, 00:40:03.440 --> 00:40:05.970 five points in third grade reading scores 00:40:05.969 --> 00:40:09.349 translates into tens of thousands of dollars of difference 00:40:09.349 --> 00:40:10.759 in housing prices. 00:40:10.760 --> 00:40:13.053 Parents are buying schools. 00:40:14.050 --> 00:40:15.550 There was a great one out of San Diego, 00:40:15.550 --> 00:40:17.050 study out of San Diego, 00:40:17.050 --> 00:40:18.830 where they were having parents do preferences 00:40:18.829 --> 00:40:19.663 on where they buy, 00:40:19.663 --> 00:40:23.393 parents would rather live near a toxic dump 00:40:23.393 --> 00:40:25.699 than live in a place where they thought 00:40:25.699 --> 00:40:27.239 the schools were underperforming, 00:40:27.239 --> 00:40:28.639 where they thought their children would not have 00:40:28.639 --> 00:40:31.250 as good a chance in school, and I think that's what we're, 00:40:31.250 --> 00:40:33.239 that's a large part of what we're seeing here. 00:40:33.239 --> 00:40:35.646 So parents say, "I've gotta have those good schools, 00:40:35.646 --> 00:40:40.516 "I gotta get out there, I gotta push, I gotta get forward." 00:40:41.949 --> 00:40:44.919 They're spending more as we've talked about, 00:40:44.920 --> 00:40:48.590 so what happens to them when they push this hard? 00:40:48.590 --> 00:40:51.559 Well, there comes in just a little touch of 00:40:51.559 --> 00:40:54.989 what I want to talk about with the safety net. 00:40:54.989 --> 00:40:57.649 What's happened to the American safety net 00:40:57.650 --> 00:40:59.340 for these families? 00:40:59.340 --> 00:41:01.930 Well, the first part is the personal safety net, 00:41:01.929 --> 00:41:03.069 the part you build yourself. 00:41:03.070 --> 00:41:05.340 We've already looked at the data on that. 00:41:05.340 --> 00:41:07.670 Less savings, more debt, 00:41:07.670 --> 00:41:09.829 more people without health insurance 00:41:09.829 --> 00:41:11.489 than we've ever had before. 00:41:11.489 --> 00:41:13.460 And by the way, I should make a point on this, 00:41:13.460 --> 00:41:15.309 more people without health insurance, 00:41:16.480 --> 00:41:18.840 it's really been important to see here 00:41:18.840 --> 00:41:22.190 how much lack of health insurance in the 1970s, 00:41:22.190 --> 00:41:25.184 the typical modal uninsured person 00:41:25.184 --> 00:41:30.184 was an unmarried male, no children, 23 years old. 00:41:30.489 --> 00:41:35.489 Today, modal is a 35 year old married person 00:41:35.699 --> 00:41:39.599 with two children, has no health insurance, 00:41:39.599 --> 00:41:42.029 this is the largest group when you start looking 00:41:42.030 --> 00:41:44.810 at the groups who have no health insurance. 00:41:44.809 --> 00:41:47.809 In 2001, 00:41:47.809 --> 00:41:52.809 1.4 million people lost their health insurance. 00:41:53.760 --> 00:41:58.760 Of those, 800,000 earned more than $75,000 a year, 00:41:59.788 --> 00:42:03.980 that is moved from the insured to the uninsured ranks 00:42:03.980 --> 00:42:05.150 that we have data for. 00:42:05.150 --> 00:42:06.789 So what we're starting to see is 00:42:06.789 --> 00:42:08.539 people who have no health insurance, 00:42:08.539 --> 00:42:10.579 the people who've lost that part of their safety net 00:42:10.579 --> 00:42:13.815 are increasingly among in the middle class. 00:42:13.815 --> 00:42:16.989 We could pick some others that shift between 00:42:16.989 --> 00:42:21.250 the defined benefit plan and the defined contribution plan, 00:42:21.250 --> 00:42:24.980 for those of you who who keep up with the pension lingo. 00:42:24.980 --> 00:42:27.449 What it basically means is the shift 00:42:27.449 --> 00:42:32.139 so that you put in money, and you take the risk 00:42:32.139 --> 00:42:33.779 of how long you'll live, that is, 00:42:33.780 --> 00:42:35.320 whether or not you'll outlive your money 00:42:35.320 --> 00:42:38.626 versus the defined benefit plan which is 00:42:38.626 --> 00:42:41.019 you get a certain amount until you die. 00:42:41.019 --> 00:42:44.860 We've moved very much to the former from the latter, 00:42:44.860 --> 00:42:47.430 so you have a real chance to outlive. 00:42:47.429 --> 00:42:49.769 Those are on the personal side. 00:42:49.769 --> 00:42:51.829 If you take a look on the public side, 00:42:51.829 --> 00:42:55.630 we've had the same kind of erosion of the safety net, 00:42:55.630 --> 00:42:59.300 and that is unemployment benefits 00:42:59.300 --> 00:43:01.870 no longer is a proportion of income, 00:43:01.869 --> 00:43:05.239 are nearly as high as they were 30 years ago, 00:43:05.239 --> 00:43:07.689 so they're not providing the same kind of safety. 00:43:09.269 --> 00:43:12.880 I would make a pitch that what we pay for public education 00:43:12.880 --> 00:43:15.360 to launch our children into the middle class 00:43:16.239 --> 00:43:18.079 has eroded sharply. 00:43:18.079 --> 00:43:19.869 And I'll make the pitch this way, 00:43:19.869 --> 00:43:21.279 I'm giving you lots of different pieces 00:43:21.280 --> 00:43:24.263 that we can talk about here, but here's the way it goes. 00:43:25.239 --> 00:43:29.959 In 1970, it took 12 years to educate a child 00:43:29.960 --> 00:43:31.820 to go forward into the middle class. 00:43:31.820 --> 00:43:32.653 How do I know that? 00:43:32.652 --> 00:43:35.869 I know that from looking at Gallup polling data 00:43:35.869 --> 00:43:38.190 about what parents thought it took to make it 00:43:38.190 --> 00:43:39.269 in the middle class. 00:43:39.269 --> 00:43:42.170 And the answer was a high school diploma, 00:43:42.170 --> 00:43:43.269 a good work ethic, 00:43:43.269 --> 00:43:45.360 there were parents who believed in college, 00:43:45.360 --> 00:43:47.380 but they believed that you could make it 00:43:47.380 --> 00:43:49.510 in the middle class with a high school diploma 00:43:49.510 --> 00:43:51.890 and a willingness to work hard. 00:43:51.889 --> 00:43:54.239 Roll that forward to the year 2002, 00:43:56.230 --> 00:43:58.170 here's a great number for you, 00:43:58.170 --> 00:44:02.159 twice as many people in America by 2002 00:44:02.159 --> 00:44:06.092 believe that the moon shot landing was faked, 00:44:07.409 --> 00:44:10.722 and they filmed in Burbank, California, 00:44:12.239 --> 00:44:15.179 than believe you can make it into the middle class 00:44:15.179 --> 00:44:17.522 in America without a college diploma. 00:44:19.420 --> 00:44:24.420 Americans who differ on everything have adopted wholesale 00:44:24.429 --> 00:44:29.169 in a single generation that there is a single ticket 00:44:29.170 --> 00:44:32.940 to the middle class, and that is a college diploma. 00:44:32.940 --> 00:44:35.389 Now, all by itself, would I be opposed to this? 00:44:35.389 --> 00:44:36.222 Are you kidding? 00:44:36.222 --> 00:44:39.840 I'm in the education biz, I think this is fabulous. 00:44:39.840 --> 00:44:41.019 Everyone should go to college, 00:44:41.019 --> 00:44:42.724 my dog should get a college education, 00:44:42.724 --> 00:44:46.890 I'm for college educations, I think that's terrific. 00:44:46.889 --> 00:44:49.900 The difference is when you look at middle class families, 00:44:49.900 --> 00:44:54.900 if you needed 12 years back in 1970, taxpayer paid for it. 00:44:55.289 --> 00:44:56.860 You got it all for free. 00:44:56.860 --> 00:44:59.833 All you had to do was show up, live there and show up. 00:45:00.690 --> 00:45:04.700 By the year 2000, if you need a college diploma, 00:45:04.699 --> 00:45:07.189 you've gotta pay for it yourself, by and short. 00:45:07.190 --> 00:45:09.320 Berkeley, other state supported schools, 00:45:09.320 --> 00:45:12.013 I guess that means you guys are not paying any tuition? 00:45:13.050 --> 00:45:14.630 Room, board, books, right? 00:45:14.630 --> 00:45:15.910 It's not very much, 00:45:15.909 --> 00:45:18.029 I guess you borrowed maybe a dollar or two 00:45:19.150 --> 00:45:20.280 in order to do this, 00:45:20.280 --> 00:45:22.340 but notice what that means, 00:45:22.340 --> 00:45:25.530 it means the launch, what the parents have to do 00:45:25.530 --> 00:45:29.850 to get this next generation in the middle class has shifted 00:45:29.849 --> 00:45:32.029 from being something that everybody pays for, 00:45:32.030 --> 00:45:33.800 the taxpayer pays for, 00:45:33.800 --> 00:45:37.500 to something only the families with children are paying for. 00:45:37.500 --> 00:45:38.949 I'll make the same point, by the way, 00:45:38.949 --> 00:45:41.143 on the other end of the education spectrum. 00:45:42.068 --> 00:45:44.280 In 1970, I actually went back and looked at this data, 00:45:44.280 --> 00:45:46.830 it surprised me, almost no one 00:45:46.829 --> 00:45:49.212 sent their children to preschool. 00:45:50.090 --> 00:45:52.180 And in fact, if you go back and read the articles, 00:45:52.179 --> 00:45:55.399 you read Dr. Spock from the 1970s editions, 00:45:55.400 --> 00:45:57.410 1960s, 1970s editions, 00:45:57.409 --> 00:45:58.769 they can play with the neighborhood children, 00:45:58.769 --> 00:46:02.820 they'll be fine, and only a tiny fraction 00:46:02.820 --> 00:46:06.300 of American children are in preschool. 00:46:06.300 --> 00:46:08.234 Today, it's totally flipped. 00:46:08.233 --> 00:46:12.340 Basically through all the education folks, 00:46:12.340 --> 00:46:14.870 early childhood specialists, they are completely in for 00:46:14.869 --> 00:46:17.232 children under two years have preschool. 00:46:18.199 --> 00:46:22.609 And once again, who pays for the two years of preschool? 00:46:22.610 --> 00:46:24.599 It's paid for by the family. 00:46:24.599 --> 00:46:26.119 So one way you could look at this 00:46:26.119 --> 00:46:27.900 is in the space of a generation, 00:46:27.900 --> 00:46:32.280 we went from 12 years being enough to push that kid forward 00:46:32.280 --> 00:46:34.370 to adding two more years, that's 14, 00:46:34.369 --> 00:46:37.819 and four more years, that's 18 years of education 00:46:37.820 --> 00:46:39.870 in order to push those kids forward, 00:46:39.869 --> 00:46:43.259 only the difference now is the family privately 00:46:43.260 --> 00:46:45.890 pays for a third of the education themselves. 00:46:45.889 --> 00:46:47.619 And we could have some great fun 00:46:47.619 --> 00:46:49.402 with what the education costs. 00:46:51.190 --> 00:46:53.950 Recently, it's been about three years ago, 00:46:53.949 --> 00:46:58.878 Chicago, city of Chicago publicly supported 00:46:58.878 --> 00:47:03.744 preschool programs, there was already some tax dollars in it 00:47:03.744 --> 00:47:05.000 but the parents had to pay tuition. 00:47:05.000 --> 00:47:07.900 I always loved this one, the tuition was larger 00:47:07.900 --> 00:47:10.691 than the tuition at the University of Illinois. 00:47:10.690 --> 00:47:12.939 That's what the parents were supposed to come up with 00:47:12.940 --> 00:47:16.630 to put their three year old into the system 00:47:16.630 --> 00:47:18.240 that was gonna get them the education 00:47:18.239 --> 00:47:20.139 that was gonna get them ultimately launched 00:47:20.139 --> 00:47:22.072 into the middle class. 00:47:22.072 --> 00:47:26.029 So in that sense, we shrink part of what's available 00:47:26.030 --> 00:47:27.960 to support families with children 00:47:27.960 --> 00:47:29.360 so that they can move forward, 00:47:29.360 --> 00:47:31.559 so they can launch this next generation. 00:47:31.559 --> 00:47:33.409 So how have families responded to this? 00:47:33.409 --> 00:47:34.909 This is where I said I'll come to 00:47:34.909 --> 00:47:36.929 at least a little bit of my data here. 00:47:36.929 --> 00:47:38.692 Let me tell you about bankruptcy. 00:47:39.614 --> 00:47:42.209 What's happened with bankruptcy? 00:47:42.210 --> 00:47:43.150 What this one's about, 00:47:43.150 --> 00:47:45.630 I'll tell you what the bright colors on here, 00:47:45.630 --> 00:47:49.390 this is about bankruptcy filing rates per thousand 00:47:49.389 --> 00:47:50.822 in the population. 00:47:51.750 --> 00:47:55.563 And this is in 200 and 2001, 00:47:55.563 --> 00:47:59.019 I love this data, it's got 2003 on these data. 00:47:59.019 --> 00:48:02.110 Married couples are the far one in the light blue, 00:48:02.110 --> 00:48:07.099 about 7.4 married couples per 1,000 married couples, 00:48:07.099 --> 00:48:09.402 so each is being within their own group, 00:48:10.239 --> 00:48:12.039 filed for bankruptcy. 00:48:12.039 --> 00:48:16.300 Unmarried men, about 6.3 per 1,000. 00:48:16.300 --> 00:48:20.650 Unmarried women, about 7.2 per 1,000. 00:48:20.650 --> 00:48:23.740 But the trick here for all three of these groups 00:48:23.739 --> 00:48:26.239 is they are all childless groups. 00:48:26.239 --> 00:48:29.109 So I've got them, all you've got them in their graphics, 00:48:29.110 --> 00:48:32.849 they're couples, men, men alone, women alone, 00:48:32.849 --> 00:48:34.440 and none of them have children. 00:48:34.440 --> 00:48:37.300 These are the bankruptcy filing rates in the United States 00:48:37.300 --> 00:48:39.220 in the early 2000s. 00:48:39.219 --> 00:48:40.592 Now let's add in children. 00:48:43.969 --> 00:48:47.019 Turquoise, again, is married couples, 00:48:47.019 --> 00:48:49.079 only this time with children. 00:48:49.079 --> 00:48:53.793 It's jumped, the filing rate has jumped to 15 per 1,000, 00:48:53.793 --> 00:48:57.410 and among women heads of household, 00:48:57.409 --> 00:48:59.079 no husband in the household, 00:48:59.079 --> 00:49:00.920 it has jumped to 23 per 1,000. 00:49:00.920 --> 00:49:03.880 You notice by the way, unmarried men with children 00:49:03.880 --> 00:49:06.140 fall out statistically because there aren't enough 00:49:06.139 --> 00:49:09.589 to be able to say something that's statistically valid 00:49:09.590 --> 00:49:11.539 about what's going on here. 00:49:11.539 --> 00:49:16.539 So what this one tells me is that families with children 00:49:17.090 --> 00:49:20.720 are under enormous financial stress. 00:49:20.719 --> 00:49:23.789 I watch them, I study them from the bankruptcy end 00:49:23.789 --> 00:49:26.179 of the spectrum which is where they end up, 00:49:26.179 --> 00:49:27.879 and let me tell you a little bit about 00:49:27.880 --> 00:49:30.240 why they file for bankruptcy. 00:49:30.239 --> 00:49:35.239 90% of those families file for one of three reasons; 00:49:36.110 --> 00:49:40.430 Job loss, medical problem in the family, 00:49:40.429 --> 00:49:42.679 sometimes the wage earner, sometimes a child, 00:49:43.829 --> 00:49:46.269 or family breakup, either a death in the family 00:49:46.269 --> 00:49:47.789 or a divorce in the family. 00:49:47.789 --> 00:49:50.099 In fact, nearly half the families 00:49:50.099 --> 00:49:52.819 have at least two of those three, 00:49:52.820 --> 00:49:57.023 and about 20% have been hit by three out of three. 00:49:59.170 --> 00:50:01.860 That's how it is that they end up in bankruptcy. 00:50:01.860 --> 00:50:05.050 Now let me give you an idea of what these numbers mean 00:50:05.050 --> 00:50:08.250 so I can put it in a little bit different context. 00:50:08.250 --> 00:50:10.159 These families that are filing for bankruptcy, 00:50:10.159 --> 00:50:15.159 families with children, more children live in homes 00:50:15.217 --> 00:50:19.610 that will file for bankruptcy this year 00:50:19.610 --> 00:50:22.623 than live in homes that will file for divorce. 00:50:23.789 --> 00:50:25.869 That is, there are more children in America, 00:50:25.869 --> 00:50:29.179 and this has been true by the way since the late 1990s, 00:50:29.179 --> 00:50:31.750 every year, more children are going through 00:50:31.750 --> 00:50:35.429 their parents' bankruptcy than are going through 00:50:35.429 --> 00:50:36.739 their parents' divorce. 00:50:36.739 --> 00:50:38.609 So let me say that to you a different way. 00:50:38.610 --> 00:50:40.300 You know anybody who got divorced any time, 00:50:40.300 --> 00:50:42.093 say in the last six or seven years, 00:50:43.079 --> 00:50:45.880 you know some children who live in homes 00:50:45.880 --> 00:50:47.733 where mom and dad have split up, 00:50:48.826 --> 00:50:52.510 then you, statistically speaking, know more, 00:50:52.510 --> 00:50:55.040 random cross-sections of America, 00:50:55.039 --> 00:50:57.659 you know more who went bankrupt. 00:50:57.659 --> 00:51:00.199 Why do you think you don't know more that went bankrupt? 00:51:00.199 --> 00:51:01.849 And that's because you can't hide divorce, 00:51:01.849 --> 00:51:03.730 but you can sure hide bankruptcy. 00:51:03.730 --> 00:51:05.652 And that's what people have done. 00:51:06.489 --> 00:51:08.219 There's an enormous stigma 00:51:08.219 --> 00:51:10.429 attached to filing for bankruptcy. 00:51:10.429 --> 00:51:13.069 When we interviewed the families 00:51:13.070 --> 00:51:16.360 who had filed for bankruptcy, quite frankly, 00:51:16.360 --> 00:51:19.640 I was shameless about this, we paid them $50 00:51:19.639 --> 00:51:23.609 if they would take extensive telephone surveys for us 00:51:23.610 --> 00:51:27.530 about bankruptcy, and so we got very high response rates, 00:51:27.530 --> 00:51:30.000 but one of the key things we learned early on 00:51:30.000 --> 00:51:33.536 is that people would say, "Don't use the word, 00:51:33.536 --> 00:51:35.676 "partly because I can't bear to hear it, 00:51:35.677 --> 00:51:37.737 "and partly because I'm afraid the child will pick up 00:51:37.737 --> 00:51:40.487 "an extension phone, or someone will walk into the room 00:51:40.487 --> 00:51:45.487 "and hear me say it, and we don't want anyone to know." 00:51:45.489 --> 00:51:49.529 About 85% of the families that were filing for bankruptcy 00:51:49.530 --> 00:51:54.100 were hiding it from their own parents, from their siblings, 00:51:54.099 --> 00:51:56.469 from their best friends, and in some cases, 00:51:56.469 --> 00:51:57.669 from their own children. 00:51:59.400 --> 00:52:01.950 Many of them said they had other stories. 00:52:01.949 --> 00:52:03.949 Yeah, they were giving up the house, 00:52:03.949 --> 00:52:06.069 and moving in with Bob's mom 00:52:06.070 --> 00:52:08.763 because Bob's mom's health was not good. 00:52:10.159 --> 00:52:12.336 Yeah, that's a story you can tell. 00:52:12.336 --> 00:52:13.617 "We're moving across country 00:52:13.617 --> 00:52:15.930 "because there are better job opportunities." 00:52:15.929 --> 00:52:18.259 Yeah, they're moving across country 00:52:18.260 --> 00:52:20.500 hoping they can get a job, 00:52:20.500 --> 00:52:24.380 but going to live in rather reduced circumstances. 00:52:24.380 --> 00:52:27.724 So those are the families who are filing for bankruptcy, 00:52:27.724 --> 00:52:31.230 in part, the reflection of what's happened 00:52:31.230 --> 00:52:32.920 to this safety net. 00:52:32.920 --> 00:52:34.260 So I just want to wrap this up 00:52:34.260 --> 00:52:36.909 and open it up for some questions and answers 00:52:37.869 --> 00:52:41.599 because I just want to make three or four big points 00:52:41.599 --> 00:52:44.179 at the end here about about what we're talking about 00:52:44.179 --> 00:52:47.699 with these families in financial trouble. 00:52:47.699 --> 00:52:50.282 First I want to make is a point about the poor. 00:52:51.469 --> 00:52:55.605 I've hammered on the middle class over and over and over, 00:52:55.605 --> 00:52:59.599 and I've done it because for everybody who cares about 00:52:59.599 --> 00:53:01.710 poor families in America, 00:53:01.710 --> 00:53:04.579 you should be riveted on these data. 00:53:04.579 --> 00:53:08.880 Middle class families under enormous economic stress 00:53:08.880 --> 00:53:10.583 have fewer resources to give 00:53:10.583 --> 00:53:12.380 when we talk about how it is 00:53:12.380 --> 00:53:14.690 that we're going to help the poor. 00:53:14.690 --> 00:53:18.579 More importantly, they frankly have less appetite to give, 00:53:18.579 --> 00:53:20.690 when they see themselves as already stretched, 00:53:20.690 --> 00:53:23.170 when they see themselves facing foreclosure notices 00:53:23.170 --> 00:53:26.670 and bill collectors, they back off. 00:53:26.670 --> 00:53:30.680 And more critically, a middle class that looks like this, 00:53:30.679 --> 00:53:34.460 a middle class where people are falling out and into poverty 00:53:34.460 --> 00:53:38.750 is a middle class that has less room to bring the poor up 00:53:38.750 --> 00:53:41.989 and provide them the opportunities to join the middle class. 00:53:41.989 --> 00:53:44.009 I think people who talk about the intractability 00:53:44.010 --> 00:53:46.870 of poverty now are absolutely right, 00:53:46.869 --> 00:53:50.230 there are social issues far beyond my expertise, 00:53:50.230 --> 00:53:53.512 but this is an element of it that no one's talking about. 00:53:53.512 --> 00:53:56.480 There's no place for the poor to go, 00:53:56.480 --> 00:53:59.460 and not much help coming from the middle class today 00:53:59.460 --> 00:54:01.443 compared with even a generation ago. 00:54:02.349 --> 00:54:03.712 The second point I want to make about 00:54:03.713 --> 00:54:06.163 what these data speak to me about 00:54:06.163 --> 00:54:10.190 is that I fear we're moving from a three class society 00:54:10.190 --> 00:54:11.813 to a two class society. 00:54:12.789 --> 00:54:16.846 America has always been sort of one of those 00:54:16.846 --> 00:54:20.900 perfect distributions, some poor, some rich, 00:54:20.900 --> 00:54:25.150 and a big, big solid middle class 00:54:25.150 --> 00:54:27.660 stuck right there in the middle. 00:54:27.659 --> 00:54:30.402 Americans identify with the middle class, 00:54:31.679 --> 00:54:33.119 it affects our democracy, 00:54:33.119 --> 00:54:35.299 it's part of what gives us our political stability, 00:54:35.300 --> 00:54:38.000 it's what affects our economy and drives our economy, 00:54:38.000 --> 00:54:39.670 it affects our self-identity, 00:54:39.670 --> 00:54:41.738 it affects who we are in this world, 00:54:41.737 --> 00:54:43.500 but I fear that what's happening 00:54:43.500 --> 00:54:45.469 and what these data are about 00:54:45.469 --> 00:54:48.949 is that we actually are gonna see a larger upper class. 00:54:48.949 --> 00:54:53.899 We're seeing, not just the rich rich, but the sort of rich, 00:54:53.900 --> 00:54:57.840 the ones who have the same jobs, bringing in two incomes, 00:54:57.840 --> 00:55:01.269 who don't get sick, who don't lose a job, 00:55:01.269 --> 00:55:03.036 who in that income volatility, 00:55:03.036 --> 00:55:05.129 and the things that go wrong in the medical world, 00:55:05.130 --> 00:55:07.940 who don't divorce, who don't have a death in the family, 00:55:07.940 --> 00:55:10.780 who don't hit any of life's bumps, 00:55:10.780 --> 00:55:12.500 they stay with the upper group. 00:55:12.500 --> 00:55:13.840 They put away some savings, 00:55:13.840 --> 00:55:17.122 they don't get deep in debt, they do okay, 00:55:17.121 --> 00:55:22.121 and then the rest is just one long trail of underclass 00:55:22.340 --> 00:55:25.610 that stays on a constant debt treadmill. 00:55:25.610 --> 00:55:26.769 Sometimes it's a little more, 00:55:26.769 --> 00:55:29.739 sometimes it's a little less, but never out of debt, 00:55:29.739 --> 00:55:32.049 never any real economic security. 00:55:32.050 --> 00:55:33.660 I could change my metaphors, 00:55:33.659 --> 00:55:35.230 people who are just costantly living 00:55:35.230 --> 00:55:36.820 on the edge of a clif, 00:55:36.820 --> 00:55:40.500 some falling over, some scratching back up a little, 00:55:40.500 --> 00:55:43.840 but never with the kind of security 00:55:43.840 --> 00:55:47.559 that for the first three quarters of a century, 00:55:47.559 --> 00:55:51.279 were associated with being middle class. 00:55:51.280 --> 00:55:53.570 I worry about what that means. 00:55:53.570 --> 00:55:56.530 I worry that the middle class, 00:55:56.530 --> 00:55:59.187 which used to mean solid and boring 00:55:59.186 --> 00:56:03.686 and not worth studying, only worth making fun of, you know, 00:56:03.686 --> 00:56:07.373 "My parents were hopelessly middle class", sort of remarks, 00:56:08.349 --> 00:56:11.920 that that's kept us from seeing a problem 00:56:11.920 --> 00:56:14.769 in the middle class that threatens 00:56:14.769 --> 00:56:18.030 not just these families with children that I've identified, 00:56:18.030 --> 00:56:22.343 but really threatens the fabric of our country. 00:56:23.190 --> 00:56:26.393 We have a middle class today that is newly weakened, 00:56:27.239 --> 00:56:31.859 and I think what this means is that it's time to realign 00:56:31.860 --> 00:56:36.860 both our academic and our political interests and alliances 00:56:37.650 --> 00:56:40.389 to talk more about what's happening to these families. 00:56:40.389 --> 00:56:41.609 So with that, I'm gonna quit, 00:56:41.610 --> 00:56:44.485 and take as many questions as people have. 00:56:44.485 --> 00:56:47.617 (audience applauding) 00:56:47.617 --> 00:56:50.450 (dramatic music)