Why 56% of Americans Have Under $1,000 in Savings

The conservative magazine Forbes reported last week that “one in three American families have no savings at all…56.3% of people have less than $1,000 in their checking and saving accounts combined.” Further,

…just 37% of Americans have enough savings to pay for a $500 or $1,000 emergency. The other 63% would have to resort to measures like cutting back spending in other areas (23%), charging to a credit card (15%) or borrowing funds from friends and family (15%) in order to meet the cost of the unexpected event.

Why is this? Forbes explains, “Americans are terrible savers.”

Yes, clearly the only explanation can be innate foolishness, bad choices, the irresponsibility of the poor. This follows conservative ideology neatly: the poor are seen as people with “special flaws” that those better off are “immune to,” as one homeless man, Lars Eighner, observed.

Research a bit deeper and one finds larger problems in American society that may offer a more accurate and complete explanation.

In 2013, Socialist Appeal reported very similar statistics (“40% of Americans have less than $500 in savings. 28% have a grand total $0.00 set aside in the bank for emergencies”) but felt it sensible to include that an estimated “77% of Americans say they are living ‘from paycheck to paycheck.’”

Well there’s an interesting bit of information. Might low incomes, living paycheck to paycheck, help explain empty bank accounts?

Why doesn’t Forbes mention, as CBS News noted, that 48% of Americans now live in poverty or at low income?

That’s over 145 million people, and should come as no surprise, considering in 2013 50% of all jobs in the U.S. paid $34,000 annually or less, according to the Economic Policy Institute. 40% of U.S. workers make under $15 an hour.

Though it varies slightly by state, $34,000 is about $24,000 after taxes, or about $1,980 in take-home pay a month. The cost of living also varies by state (the burden on the poor is much greater on the coasts), but the median cost of just a single-bedroom apartment in the U.S. eliminates about half that take-home pay.

And as Forbes itself reported in early 2015, rent costs are rising rapidly, about twice as fast as wages since 2000. It noted the median cost of rent in cities like Charlotte ($1,235), Denver ($1,827), Los Angeles ($2,460), New York ($2,331).     

The Center for Economic and Policy Research determined in 2012 that only 24.6% of American jobs are “good jobs,” defined as employment that pays at least $18.50 an hour, plus options for health care and retirement planning.

$18.50 hourly is about $38,000 a year (roughly $27,000 after taxes, $2,250 monthly). With exploding health care, education, housing, and other costs, it’s clear the majority of workers, those in “bad” jobs, fight an uphill battle:

20.2 million Americans spend more than half of their income on housing, a 46% rise since 2001. Electricity bills have risen faster than inflation for 5 years running, and water bills have tripled over the last 12 years… According to Bloomberg, since 1978, tuition and fees for college have risen by more than 1,000%, medical expenses by 601%, and food prices by 244%.

At the same time, since 1980, worker wages either stagnated or fell; the bottom 50% of Americans now own just 2.5% of the nation’s wealth.

Even those with a college education struggle to find good jobs: in 2014, a massive 46% of employed college graduates under 27 were working in a job that did not require a college degree, and about 15% had part-time work but wanted full-time work.

The testimonials of ordinary Americans explain the challenge of surviving in such an environment. A woman in Kansas City, Missouri making low wages, Kahtea Bobo, lived “in a rat-infested, slumlord house in the inner city” and once “passed a bad check to a store. Her choice was to pass a bad check or not feed her family.”

Those are the kind of choices too many citizens must make. That is how precariously over half the nation lives, surviving paycheck to paycheck.

Conservatives insist it is all about personal choices: just don’t be a “terrible saver” and all will be fine. This is easy to say, but ignores the all-important context of economic realities.

There are different types of choices available to different people, dependent on socioeconomic status. One choice is that of people who are not too terribly poor—choosing between buying a new car or saving for retirement, emergencies, or college.

But the other is the choice of the very poor—between paying the rent and paying the water bill, between paying for gas and paying for groceries. Impoverished and low-income Americans often don’t have the choice to save: they have to spend everything they make right away on increasingly expensive groceries, electricity, water, gas, and rent.

All this is not to say that Americans, including those in poverty or low-income, never make “unwise” choices (non-essential expenses) like “eating out at restaurants, “buying coffee from a coffee shop rather than home brewing,” or buying a new television or phone. But to focus solely on how the poor are “terrible savers,” without any explanation of American economic conditions, only vilifies and stereotypes millions of our neighbors.

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