Housing the Downwardly Mobile

A recurrent theme of this blog is how the recession and current environment of austerity impacts nearly everyone regardless of age, education, work experience, and social class (for the bottom 90% of us at least).  The current living arrangement in too many American regions doesn’t really allow for quick adaptation to reduced financial circumstances. The New York Time recently had an article detailing the difficulties faced by older experienced workers after experiencing layoffs and long term unemployment:

“Most have been unemployed for months or years. Time spent with them at several gatherings over many months reveals a postrecession landscape where grim frustration battles with the simple desire to find a way out.

They were once advertising executives, engineers, social workers, teachers and purchasing managers. Now they come week after week, dressed for the office, carrying binders full of résumés and leads for potential jobs. They refine what they call their “60-second commercial” — a way to pitch themselves to nearly anyone they meet. When the three-hour meetings end, they mosey over, some reluctantly, to a table packed with day-old bread donated by a supermarket.

{…}

Finding a job is particularly difficult for people like those who gather here each week. These are not unskilled workers looking for entry-level jobs. They are men and women in their 40s and 50s who were midlevel managers with salaries that made them comfortable enough to buy homes and take vacations. Nearly all have college diplomas, and some have advanced degrees.”

As noted in the article nearly 45 percent of California’s unemployed are out of work for over 27 weeks, with the auto-dependent Inland Empire region averaging 55 weeks. Most of these people will eventually be forced to take lower paying jobs well below their skill level. In many cases, they won’t make enough to cover their previous expenses. Some argue that no one is necessarily entitled to live a certain lifestyle and to a degree that’s correct. What’s troubling is that people looking to downsize their lifestyle to adjust to their new financial realities have anchors like car or home ownership weighing them down. Since cars can be useful and homes are both a place to live and a vehicle to build equity, the answer isn’t to eliminate ownership of either but rather start rethinking our consumption preferences for these products.

Single generations living in large houses far from employment center is going to be an option for the affluent. Fifty-somethings facing downward mobility will need other housing options and cities with foresight will  provide them.

Moving Backwards

Spending patterns by income bracket. Housing and transportation are the largest expenses in every category.

Two recent stories highlight some of reasoning behind the austere city thesis. Via Planet Money, the above graphic shows spending patterns by income bracket. Housing and transportation costs are highlighted. Housing accounts for at least a quarter of spending for all groups, while transportation costs range from about 15 percent for the affluent upper-middle class and around 21 percent for middle-class households making less than 70k. Regardless of income, housing and transportation costs are major expenditures.

The second story is a recent study from the Center for Economic and Policy Research that offers further evidence that solidly middle-class employment opportunities are becoming much more rare –  they find that the share of “good jobs”, (defined by the study as one that pays at least $37,000 per year, has employer-provided health insurance, and an employer-sponsored retirement plan) fell from 27.4 percent in 1979 to 24.6 percent in 2010.

“The U.S. workforce is substantially older and better educated than it was at the end of the 1970s.Given that older and better-educated workers generally receive higher pay and better benefits, we would have expected the share of good jobs to have increased in line with improvements in quality of the workforce. Instead, the share of good jobs in the U.S. economy has actually fallen. Our estimates suggest that, relative to 1979, the economy has lost about one-third (28 to 38 percent) of its capacity to generate good jobs.”

The gender gap explains a large part of the wage story – the average man makes less than his 1979 counterpart, while the average woman makes far more. In terms of the other two “good job” components, the percentage of employer-sponsored health care and retirement plans has markedly declined over the past thirty years. The study notes that despite substantial increases in the education level and quality of the workforce and a 63 percent increase in GDP per person that the share of good jobs in the economy still fell 2.8 percentage points.

In addition to this already sobering data, Richard Kirsch of the Roosevelt Institutes offers another bleak reminder:

“I want to throw one more scary statistic into this brew before drawing the implications for building an economy that will work for everyone: most of the jobs that will be created in the next decade don’t require much of an education. Of the 10 occupations expected to create the most jobs, eight of them require a high school degree or less. There will be almost four million job openings for retail clerks, home health aides, and the like compared with one million for nurses and college professors, the only two jobs in the 10 that require more than a high school degree.

These numbers foretell an economy where even workers with a good education are barely making it and most Americans don’t have a prayer of living the American Dream.”

People are earning less despite higher levels of experience and education and the bulk of the anticipated job growth will be in occupations that no one even bothers to pretend offer a route to the middle-class. As the above infographic details, housing and transportation account for nearly half of a middle-class household’s (increasingly stagnant) income, while health insurance costs rise and secure retirement options dwindle. The austere city thesis is a simple acknowledgment of these realities – the built environment must adapt to an era where prosperity is increasingly elusive. Decreasing the housing and transportation cost burdens will have to be a major priority as we re-imagine our cities.