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Financial Insecurity in America
By Jon Menaster | March 12, 2007
On my way home from work today, I happened to listen to an interview with Richard Wolff, a professor of economics with the University of Massachusetts Amherst. He was being interviewed on one of my favorite radio programs, Beneath the Surface, on KPFK 90.7 FM in Los Angeles. The interview was all about financial insecurity, and it was utterly fascinating. Wages have remained stagnant in the United States while productivity has skyrocketed. What does this mean? It means that more goods and services are being produced, but the lowly workers aren’t being compensated for this extra production. Therefore, those at the top have ever-rising profits, which leads to more wage inequality between the working class and the upper class. Ok, you may be thinking, but how does this affect me?
Well I’ll tell you! If you’re not making more money each year, you’re going to be able to purchase fewer and fewer goods and services due to inflation. Inflation eats away at money’s purchasing power, and while inflation has hovered at figures between 2 and 3 % over the past few years, it certainly is having an affect. So if you need more money to purchase needed items, but you’re not earning more money, what are you going to turn to? If you said credit cards, then you’re just like most of America.
Credit card debt has been rising astronomically, with Wolff quoting figures that say 1 in every 7 dollars goes towards paying debt. In the same show during a later interview with Naomi Prins, Naomi mentioned that consumer debt has tripled in the last 10 years. Even worse, in 2005 Congress passed a bill designed to make it harder for consumers to file for bankruptcy, called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. You can see how all of this wage stagnation and inflation can start a snowball effect that just gets worse and worse. This is a big reason why our lives are filled with so much stress and anxiety. America currently has the dubious distinction of having an extremely high divorce rate, between 40 and 50% of all marriages. One big reason could be the lack of purchasing power coupled with ever increasing debt placing undue hardship on relationships.
So what is there to do about all this rising debt, rising inflation, and not rising income. In my view, there is one solution that would dramatically help the American people: a solid financial education being made a required part of a high school curriculum. Too often, we are forced to sit through classes in high school that have absolutely no bearing on our future lives. I believe a simple one semester financial education on the basics of saving, taxes, loans, and other basic financial concepts would enormously help our children become familiar with important concepts in regards to money and not make the same mistakes we have. Simple lessons, such as don’t spend more with credit cards than you can afford to pay off each month, or it’s better to save up and buy your car outright instead of leasing it, could have a dramatic impact on the financial future of our younger generation.
Now this would obviously be hard to get approved by politicians, simply because it would be against the interests of the major credit card companies and banks, who all spend millions of dollars lobbying Congress to have their views known. Nobody said change was easy. However, in the long run, it could make a big different for a lot of people. Even if schools refused to setup this sort of class, perhaps a course could be initiated online that would be designed by the workers of America and whose children could participate for free. Maybe the next big website will be a collaborative learning center for children designed to make finance fun. What do you think?
Topics: Education, Politics, Business, Debt, Finance, Savings |
March 13th, 2007 at 2:22 pm
Here, here! Amen! (and other exhortations) I could not agree more on the necessity of financial education. “Rich Dad, Poor Dad” would be a good place to start for most people…
March 19th, 2007 at 3:57 am
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