Financial Insecurity Among High-Earning Individuals
Financial stress and insecurity
Posted Aug 17, 2013
In last month’s blog post, I described the unusually favorable financial status of a large sample of college educated women in my research sample. For example, despite being too young to be anywhere near their full earning potential in most cases, my survey respondents reported extremely high household income levels relative to the population at large. The majority (about 80%) reported that they were able to afford their lifestyles without going into debt.
Given this picture of financial health, how then do we make sense of respondents’ perception that “lack of money” has been the biggest obstacle in attaining the lifestyle they would seek? Further, given the unprecedented financial parity in these marriages, how might we make sense of the report that frequent “arguments about finances” was the third most highly ranked marital problem?
The answers to these questions are not simple, and surely there are multiple factors at play. Based on my perspective and readings on this topic, a few general notions come to mind. First, stress about financial health is widespread these days for nearly every sector of the population, regardless of gender, with the potential exception of those in the wealthiest 5% or 10% of Americans who own and control more than 75% of the resources. (With a small number of exceptions, despite having higher than average incomes, I would not characterize the women in the my study, the Lifestyle Poll, as being a part of this upper 5%–10%, at least at this point in their lives).
Financial insecurity seems to be rampant in recent days. As Miriam Peskowitz, author of The Truth Behind the Mommy Wars,[i] explains, “Generation X-ers are haunted by financial insecurity.” Finance and business editor Jill Fraser asserts that “long term financial stability has disappeared, within a business world in which layoffs and other cuts have been as rampant during periods of economic prosperity as during turndowns.”[ii] Tamara Draut, the director of the Economic Opportunity Program at Demos, a financial think tank, assessed the national situation in 2005 and characterized the economic climate (before the crash of the US economy!) as a “dog-eat-dog economy that rewards only a handful of players and leaves everybody else with scraps.”[iii]
When I reflect on these analyses, I am reminded of the famous “rat utopia” studies of NIMH researcher John Calhoun in the mid-19th century.[iv] Calhoun initially created an environment with ample space and plenty of access to the elements of the good life (as a rat would construct la dolce vita, anyway). Over time, as the rats bred freely with each other, the environment became overcrowded and resources were increasingly difficult to access predictably. The rat utopia morphed into a living nightmare for those in the once-harmonious colony. Insecure and threatened in this primal way, the rats became aggressive, organizing themselves into gangs that roved around attacking the more vulnerable members of the group.
In one sense, it might seem silly to compare the rat's nightmarish environment to the situation of citizens living in a country where most of society continues to enjoy a much higher standard of living than most people across the world. Yet, in another sense, although we do enjoy a higher standard of living in many ways, we also feel more vulnerable to a sudden and unpredictable change in our quality of life relative to people in many other countries.
Perhaps it is because we live in an age when it’s much more likely that we will “get poor quick” than that we will ever “get rich quick.” That is, we live in a country where even the wealthiest families are at risk of becoming bankrupt, for example, because of the unchecked cost of medical procedures. Many families today are one serious health condition (or one baby) away from perilous levels of financial strain. Those in all levels of corporate America can be fired or let go of at will. Like the fattened chiefs of some ancient tribal colonies who were the first to be sacrificed, those nearer the top may actually be at greater risk of losing their positions and struggling for many years without a job because of their higher salaries.
The past few years have shown us how easy it is to lose one’s job, home, and position in society. Previous social contracts between employee and employer and between individuals and lending institutions have been replaced by a “might makes right” mentality on the part of whoever is the “bigger dog” (almost always the company or lending institution). Companies are not required or even pressured in any consistent way to do right by customers or employees.
When companies merge, middle managers, fearful of their own job security, can easily be compelled to lay off multiple employees. Such layoffs are often facilitated by the lack of an existing relationship between those who come in to restructure a company and those who have been employed in that company. Restructuring consultants will often trot out the tried-and-true line “it's just business…it's not personal,” and truthfully, there is no way it could be personal, given the lack of a relationship.
The individuals doing the restructuring are somewhat like the “teachers” in Stanley Milgram’s classic study on obedience to authority who administered supposedly lethal shocks to a cardiac-compromised “learner”[v] from another room. It's basically an ideal formula for corporations to move people around on the chessboard (or take them off the board completely, in many cases) without any regard to the impact they are having on the employees and their families. As Richard Florida puts it in The Rise of the Creative Class, “There is no corporation or other large institution that will take care of us…we are truly on our own.”[vi]
In America today, it seems that if one doesn’t own a hospital or a health insurance company (or have assets to match those who wield such influence), even the more fortunate among us may live in a chronic state of potentially high financial vulnerability. Perhaps the concept of "standard of living" should not be equated to how many square feet of living space one can buy, what quality of school you can access for one’s children, or how many weeks of vacation you can afford to take, without also considering how quickly and easily you can suddenly and unpredictably lose all of these things.
[i] Peskowitz, M. (2005). The Truth Behind the Mommy Wars: Who Decides what makes a Good Mother? Emeryville, CA: Seal Press, p. 41.
[ii] Fraser, J.A. (2001). White Collar Sweatshop: The Deterioration of Work and its Rewards in Corporate America. New York, NY: W.W. Norton & Company, p. 9.
[iii] Draut, T. (2005). Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead. New York: Anchor Books (A Division of Random House), p. 209.
[iv] Calhoun, J.B. (1962). "Population density and Social Pathology." Scientific America, 206: 139–148.
[v] Milgram, S. (1974). Obedience to Authority: An Experimental View. New York: Harper Collins.
[vi] Florida, R. (2002). The Rise of the Creative Class and how it’s Transforming Work, Leisure, Community, and Everyday Life. New York, NY: Basic Books, p. 115.