Real Estate Matters: Economic turmoil spells trouble for unemployed
Q: In a recent column, it was stated that “nearly 80% of Americans were living paycheck to paycheck before the pandemic…” I want to know how you define living paycheck-to-paycheck, when that implies having no savings or residual discretionary cash to spend. Are you saying that necessary day-to-day living expenses consume each paycheck?
Also, 80% would be of the daily workforce, not those who are retired on pensions or those on some form of welfare. What government agency or otherwise provided the 80% number?
Clearly, I’m skeptical of such an amazingly high figure. If this is correct, I expect to soon see mass starvation and rioting in the streets since we have now seen 40% file for unemployment.
A: We have received a number of letters and emails like yours wondering whether the financial crisis is real and how people are surviving during this unprecedented time. Even if you have a job with health insurance and enough money to buy what you need and put food on the table, it’s difficult to imagine not being able to empathize with something as devastating as the COVID-19 pandemic.
And yet, our mail shows that some people simply don’t believe that so many people are a paycheck away from not having enough money to pay their bills. So, here’s a rundown of what we’re seeing.
There are millions of Americans currently living paycheck-to-paycheck in this country, as many surveys have shown. According to Nielsen data, the American Payroll Association, CareerBuilder and the National Endowment for Financial Education, somewhere between 50% to 78% of employees earn just enough money to pay their bills each month. Should they miss a paycheck, some of those bills would go unpaid.
In addition, almost three in 10 adults have no emergency savings at all, according to Bankrate’s July 2019 Financial Security Index, while the January 2020 Financial Security Index survey showed that only four in 10 U.S. adults would cover the cost of a $1,000 car repair or emergency room visit using savings; Nielsen data from 2015 showed that nearly 25% of families earning $150,000 a year or more lived paycheck-to-paycheck; and a Gallup poll released in December 2019 found that a record 33% of Americans say they or a family member put off treatment for a medical condition in the past year because of cost. A quarter of Americans say their untreated medical condition was serious.
In a 2019 report on the economic well-being of U.S. households, the Federal Reserve Bank determined that nearly 40% of American adults wouldn’t be able to cover a $400 emergency with cash, savings, or a credit card charge that they could quickly pay off. (This spring, Federal Reserve Chair Jerome H. Powell said that 40% of households earning $40,000 or less had lost income due to the pandemic, increasing financial stress and pressure.)
All of these studies, by the way, were done before the coronavirus pandemic, which has done nothing to ease the financial pressures so many Americans are facing and in fact has exacerbated them tremendously.
So, let’s talk about the effect of COVID-19 on the unemployment rate. To date, roughly 32 million Americans have filed for some sort of unemployment assistance. This has happened over the past 19 weeks, where the number of first-time unemployment claims has exceeded 1 million per week, an unprecedented number in American history.