Recession Scars

I’m fascinated by the topic of how the recession is shaping family life. I blame recession scars for the increased pressure on teenagers to succeed and for the rise in anxiety related disorders. In a previous blog post, we started talking about about recession fears have changed behavior among professionals.

Some@one.com started the conversation:

I a[m] in my early 30s and have lots of late 20s/early 30s friends who are starting families these days. One thing that is not often remarked on in the public discussion is that people my age are very much afraid not to have two working parents. After the recession, there is a lot of worry that something might just happen to a previously good job and it never comes back, or at least it takes a long time. It’s a lot easier to downsize to 50% income loss, and so almost everyone I know wants to find a way to make two professional jobs work. How this will actually work is a hard question, but the desire to find a way is very strong.

I described my family’s response to recession anxieties:

Even us oldie’s in our 40′s are scarred by the recession. In the past five years, both Steve and I lost jobs that we thought were secure. We’ve dealt with the stress by keeping our spending to grad school levels. We don’t pay for childcare, housecleaner, or landscaper. We have no paid help. We’ve cut way back on food expenses. We cook at home as much as my sanity can handle it. We don’t do any home improvements that can’t be paid in cash. Steve logs into Quicken every line on the credit card bill, so we know exactly how much money we spend. We haven’t been on an airplane in four years.

bj said

Yes, I think everyone has been scarred by the recession. I think, in the same ways that blue collar folk were scarred by previous recessions, professionals have been scarred by this one. In the old days, there was a hard work/talent/rules based way to attaining a stable job at one institution (tenure at a university, partnership in a law firm, and, I presume some equivalent in the financial sector, and even, an engineer at an established firm like IBM). In boom times, some of those professions had to pay well, even while offering stability.

The recession accelerated the trend towards everyone being considered an at will employee, susceptible to being laid off at any time (or if not laid off, to seeing their firm collapse, as happened with many law firms and financial firms). Universities eliminated some departments, but there were also some universities that failed, and more importantly, they quietly switched to a mostly adjunct workplace.

One of the big risks of a single-earner household is the loss of 100% of the income. But, notably, I think that many of the folks who opt-out didn’t opt out of 50% of the income, and, a dual income household sustains other risks (the one that comes to my mind is the location-risk, of having to stay in one location).

I added:

Elizabeth Warren wrote in one of her books that 2 income families weren’t any more secure than 1 income families, when these emergencies happen. She argued that 2 income families never just bank 1 income. They spend all that money. They buy bigger houses, get hooked on household help, and buy more cars. So, when 1 person loses their job, they are serious screwed. In contrast, a 1 income family has smaller expenses. If a person loses their job, both people can hit the streets and try to find a job, which doubles the chance for success.

I’m not sure if that’s true or not, but it’s an interesting theory.

6 thoughts on “Recession Scars

  1. Elizabeth Warren’s comment seems kind of misguided. No one sets themselves up with 100 percent of their income going to non-discretionary spending. Everyone has room to cut back on things like vacations, restaurant meals, house maintenance (for a time), new clothes (ditto), etc. So it’s definitely easier to have your household income reduced by 50% than to have it reduced by 100%.

    Really, so much of what Elizabeth Warren says, on this or any other topic, is like the thirteenth stroke of the clock, which is not only itself doubtful, but casts doubt on all that went before.

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  2. I think that Warren takes a generalization and makes of it a universal. I know families where the second income, or at least the lion’s share, is banked or put aside in other ways. We’ve consciously lived below our means as well as the social expectations with one car, a more modest house that’s not in the “university” neighbourhood (and therefore affordable) and so on.

    To live on one income means making a conscious choice not to spend that second income every time a problem arises. That’s wearing as you’re facing constant temptation, even in the age of automatic deposit.

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  3. Warren says the second income mostly goes towards mortgages in fancier suburbs with better schools. It’s not the little temptations, as much as the desire (noble desire?) to give the kids the best shot at the future.

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  4. It’s always hard to know about the finances of those around us – really, in the US at least, financial matters are the last things to remain truly private. My girlfriends and colleagues tell me about getting Brazilians, when their children start menstruating, marriage and work problems, blah blah blah. But I haven’t a clue what any of them makes, nor do I know what proportion of their income goes to fixed expenses.

    I can only judge by my own experiences, and a few pieces of in the media. I’ve seen items about people having to spend large proportions of their income on housing and education, and I know that’s true in my family as well. And if you read Warren’s book, her whole premise is that cutting back on vacations and eating out is not going to make up for loss of half an income in most modern families. Interestingly, evidently back in the 60s or whenever if the primary breadwinner lost their job, and both parents went to work for lower wages, the family’s overall income only dropped maybe 10% – 40% of the lost wages were made back up. It was manageable. There’s no way some extra cost-cutting at home could do that.

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  5. And to Laura’s original question of recession scars, in my family one of the biggest changes is something Laura has also noted: we no longer fly. We used to fly to Denver to see grandparents. These days we drive. We even drove to Florida for Harry Potter World last year. And our vacations in general are much lower-end.

    We have neglected saving for college since 2008.

    We are still doing some work on our fixer-upper house, but at a much slower pace.

    We have taken to cleaning out closets regularly and doing “frock swap” types of events with clothing to try and make it last longer. We have stopped buying the kids higher-end shoes, especially in the summer. They pretty much get by with flip-flops and Toms these days.

    We have bailed on private music lessons.

    We are babying along our second car, which has brake problems and would have been replaced by now normally.

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