Being middle class, I feel like you're really justin between a rock and a hard place. So there are certain kinds of assumptions aroundbeing a middle class person that have sort of shattered. And wages, really in some ways, are a reflectionof the productivity and skills of American workers. Four in ten Americans say that money affects themnegatively and the state of their mental health. The consumers that have a whole lot of debt reallyare struggling to survive. The middle class was once a symbol of the Americandream. But the American middle class today paints quitea different picture.
Being middle class, I feel like you're really justin between a rock and a hard place, you know. You're in a spot where everyone's like, Hey,you're doing better than, you know, low class. You're doing great. You should be fine. And you're underneath the people who are actuallydoing fine. It was at least a secure category. Your kids would go to a school that you felt atleast okay about. You probably owned a car or two and you ownedyour own home and you could pay for your kids' college educations. So there were certain kinds of assumptions aroundbeing a middle class person that have sort of.
Shattered. A survey in 2018 found that a third ofmiddle income adults don't have $400 to cover an unexpected expense. In polls, when people are asked about being middleclass, they frequently are less likely to say so. And more people now urge the pollsters to suggestthat they're working class. So I think that many people who maybe in prioryears would have thought of themselves as middle class now no longer think of themselves that way. So when we think about economic status, we thinkabout it as some static, you know, state of the world. That you are either poor or not poor,you're middle class or you're not. But in fact, the reality is that many middleclass families will experience one or a few years.
In poverty. In fact, most American families willhave years where they'll be poor or near poor. That precarity, that uncertainty, that is now afeature of the middle class experience for most U.S. families. So what exactly happened to the American middleclass? A study by the Pew Research Center discoveredthat the middle class, which was once comprised of the majority of Americans, has steadily shrunksince the 1970s. About 61% of American adults were consideredmiddle class in 1971, compared to just 51% in 2019. However, the issue still remains widely debated.
When people think about the state of the middleclass and whether or not it's shrinking, it really is a difficult question, and I think the reasonwhy is that as a nation, we've not actually established a formal definition of middle class. I was at a seminar recently where somebodyliterally said, there is no middle class anymore. The middle class is gone. And I thought, oh, dear, you know, that'spolitical rhetoric. And I understand that it's a sort of a standardfor saying that folks in the middle are hurting, but it's just really not accurate. We looked at the size of the middle class inthese 16 rich countries in 1985 and again in 2016.
And one of the things that surprised me was thesize of the middle class in the United States did not change. It was about 59% in 1985, and it was59% in 2016. Experts instead prefer the term “squeezed” todescribe what's happening to the middle class today. Even if the middle class hasn't statisticallyshrunk, I do think that the middle class faces more in the way of pressures to maintain or evenbuild upon their position. What it takes to actually live a middle classlife, to have quality of life, in many American cities is not what it once was. They're not necessarily able to pay their renteasily.
They can't own a property. If they're in their thirties, they may not feelcomfortable having kids because they realize that having a child would be too expensive. And forget about medical care. If you have one thing happen to you physically, often people don't have good enough medical care, they don't have any insurance. This all goes into making somebody part of thesqueezed middle class. As the middle class lifestyle grows more expensiveand uncertain, it's also moving farther beyond the reach of younger generations.
In 2019, just 60% of millennials were part ofmiddle income households in their twenties, compared with almost 70% of baby boomers. Meet Chantal Jacob. Chantal lives in suburban Texas with her husbandand one child. And while a household income of just over 100,000should put her family in the middle income tier, she says that her family is still strugglingtoward financial stability. Sounds great. Six figures. But once we got married, the taxes that come outof my check before I even get any money, before all of my benefits, $500 come out of my checkautomatically.
And then you add in insurance, life insurance formy spouse, myself and my son. And I also have money going aside for my son'scollege fund. It's not a lot because I can't do that much, but Iwant to have something for him. You know, my check that starts off at about $3000goes down to $2200 before I even get to touch it. Our rent's about $1700. Electricity is about $150. Phone bill's about $280. Internet's $60. We both have vehicles.
Those are about $800. Insurance on those vehicles is about $400. On food, $400 to $500 a month, but that'sincreasing. We budget down to the dollar. And sometimes it's very disheartening to work allweek and have people tell you like, Oh, you're so lucky, you have a great job. And you're like, Hmm, I don't know about that. There are several reasons why the middle class isfeeling squeezed. The first reason is stagnated income.
Between 1970 and 2018, the middle class share ofaggregate income fell by 19% in the U.S. In comparison, the share of aggregate incomefor upper income households saw a rise of 19%. Another study by the Brookings Institutefound that income in the middle class has grown half as fast compared to both the bottom 20% andthe top 20% of income tiers once taxes and transfers were taken into account. If a stay at a company for a while, my incomebecomes stagnant. You know, it increases by a couple thousand. I generally have to job hop to have increases inmy income, which in itself is not security.
Middle class workers over the last 40 years havenot been able to adequately benefit from the productivity growth, the expansion of the pie, inthe economy. We've measured this and found that the typicalworker has fallen 43 percentage points behind the growth of productivity. What that means is that the middle class workercould have earned one percentage point more per year in compensation growth over the last 40years, and they didn't get it because there was an erosion of labor share of overall income andbecause of rising inequality such that the top 10%, particularly the top 1%, and even more sothe top 0.1%, took in much of the gains from the growth of the economy.
While incomes stagnate, the cost of living hasrisen dramatically over the years. To put it into perspective, the average householdincome in the U.S. saw just a 16% increase over the last 50 years. In comparison, housing costs increased by 190%and college tuition shot up by nearly 264% in the same time period. I first moved in over here in these apartments Ilive in five years ago. My income, my rent was like $1100. It's now $1700. That's $600 increase happened.
I did not have a $600 increase, like my incomedid not increase at the same rate. Rising expenditures, rising prices, in health,housing and education are very real and they've put a tremendous amount of pressure on householdsin the middle whose income simply doesn't go as far as it used to. The situation is even worse in cities where thecost of living is already higher. An analysis in 2018 found that raising a familyand a middle class lifestyle in expensive coastal cities like San Francisco or New York needs anincome of at least $300,000 a year. For reference, just 10% of all households made$200,000 or over in 2020. I'd recently saw an apartment next to thebuilding I work in in Plano, and I was like, It'd.
Be great to walk across the street to work. And it was like $2,400 for an efficiency. And I'm like, That's insane. And then it's like for what I have, they call atownhome, three bed, two bath, $5,500. I'm like, Well, absolutely not. Like I'm going to pay $5,500 and I don't own it, it's not mine? It's just getting worse. And everyone is like, Ifeel like native people are being pushed out into the suburbs and then people from out of state cancome in and enjoy the beautiful fruits of Dallas and have fun and be close to the restaurants.
And, you know, I have to live out here and, youknow, it's not bad, but it's not Dallas. I'm from Dallas. I grew up there. That's where I want to be. But how it is now, youknow, it's just not affordable. Policy making might be both the fault and thesolution of the middle class squeeze. There is no help whatsoever. There is no policy in place to assist people, andI feel like as soon as you get a job or as soon as you're working, they're just like, Oh, that's allyou need is a job. You got it. You know, go forth and have at it. The stagnation of wages and paychecks for peoplestarted in the seventies when productivity started.
Growing more slowly, but really accelerated after1979 and 80 when there was a huge growth of inequality, when the top 1% took off, when thestock market grew, but people's paychecks didn't. And that has to do with issues of deregulation, excessive unemployment, the weakening of unions, the failure to raise the minimum wage,globalization with low wage countries that really put the kibosh on blue collar job opportunitiesin many places. The point is that it's not that the economy gotworse. It was that there were policy decisions made sothat the economic growth did not filter down to the vast majority. The country wasn't built by Wall Street bankers,CEOs and hedge fund managers.
It was built by you. It was built by the great American middle class. In response, the Biden administration came intooffice in 2021 with a promise to revitalize the middle class. The $1 trillion bipartisan infrastructure billfrom November 2021 and the upcoming Build Back Better Act both include provisions aimed atfinancially supporting middle income families. But as Congress continues to find itself instalemate. Only time will tell whether these bills wouldreally have an impact on the survival of middle income households.
I don't see any change effects. My friends that were struggling are stillstruggling. I'm still budgeting down to every dollar tryingto get things done. So I just feel like if the changes are happening,they're not trickling down fast enough for us to see the effects of it. I think that overall, the team with the Bidenadministration has done quite well. At the same time, they're up against reallystrong headwinds. We're talking about a global pandemic thatpersists. We're talking about historic levels of inflationand labor shortages that are leading to these.
Sorts of supply chain gaps worldwide. So I think that both things are true. They've done a good job, but they also have a lotof work to do. The fate of the middle class could determine thefuture of the American dream. I just think we do need to be concerned becausethis has an effect on how people perceive the American experiment working for them. And there are expectations that there should bethis upward growth and mobility. But I think we do have an increasingly precariouslabor market for many Americans. And so it's important to note that this is also afeature of inequality.
It's a shame that we have as much or more povertynow than we did 40 years ago, that the middle class is earning somewhat higher wages, but notin proportion to what they've increased their productivity over that time. And what this does is it adds to division. It hurts our democracy. It hurts the upward mobility of the children ofthese families. That whole middle class of people is liketeetering on the brink of ruin. One emergency, one catastrophe. And you can see, even COVID showed you howquickly people who were doing good can just fall.
Off and have nothing. That should have been a wake up call that we needto change some things. In June 2020, American workers made an average of$27.45 per hour. In 1972, the same workers earned an average of$3.88 per hour. A chart like this might make it seem like Americahas come a long way in terms of wage growth. But when adjusted for inflation, wages haveremained virtually unchanged over the last 50 years, with workers today earning just $0.12 morethan they did in 1972. When the average American is not seeing his or herliving standards increase over a period of decades, that's something that should concern usall.
With inflation at its highest since 1981,Americans are feeling the pain of slow wage growth. Two thirds of American workers said thatinflation has outpaced any salary gains made in the past year. Now, because of the inflation, I can't even makethe monthly payments. So I had to pick extra hours with my elderly carejob. But some economists argue that the concept ismerely a myth that politicians use to promote their careers. Politicians win elections by promising to fixsomething that is supposedly wrong in people's lives.
And so I think there is a bit of a politicalcynicism and calculus involved in the wage stagnation debate and promises to fix thesupposed problem. So just how real is wage stagnation in Americatoday? And what does it mean for American workers? Wages in America have stagnated since the early1970s, but it was 1979 when the gap between workers' productivity and wage began tosubstantially increase. Between 1979 and 2020, workers wages grew by17.5%, while productivity grew over three times as fast at 61.8%. It's not true that wages haven't grown at all.
They have, but they haven't grown as quickly asthey had in the past. Since the eighties, the economy has changed alot. We've gone really from an industrial era to atech era. When you have these big changes to the economy, sometimes the gains are not equally felt, but it really has an impact on everyone's lifestyle andeveryone's wages. Wage stagnation is worse for lower and middleincome earners. The bottom 90% of American workers saw theirannual wages increase by 28.2% from 1979 to 2020, while wages for the top 1% increased by179.3%. Meanwhile, the top 0.1% saw an astonishing growthof 389.1%.
Real wages, which means after adjusting forinflation, has not risen that much since the late 1970s. We know that, on the other hand,inequality did rise over most of this period. I've been working about since the nineties when Icame here. That's about 30 years on and off. And there was very little raise for domesticworkers in general. Now, after 2020, with the inflation, I feel likethe incomes stayed the same. People lost some of the jobs, like in myexperience, and we have to.
Struggle to find different or secondary jobs orsecond part time jobs just to maintain the monthly expenses of our dailyliving. It's very hard. Despite causing severe disruption to the U.S. labor market, the COVID pandemic has led tosurprising wage gains across industries. COVID has actually seen a significant accelerationin wage growth, particularly for for low wage earners. This reflects a really serious tightness in thelabor market due to excessive U.S. demand, whether it's through the FederalReserve or through fiscal stimulus payments, but.
Also restrictions on labor supply, immigrationrestrictions, early retirements and of course, illness or deaths. So that has driven substantial wage gains. It's hard to tell whether that's the new reality,and that's why I want to be cautious. Did it change our life forever and maybe for thebetter in terms of labor market and wages? We have to wait and see. Automation is one explanation for wage stagnationin America. The McKinsey Global Institute predicts that 45.3million workers will lose their jobs due to advancements in technology by 2030.
Automation has been a really big factor so far inespecially manufacturing jobs. So before you build a car, you use machines. But there was a lot of sort of hands on work withit. Now much more of that is done with machines andyou have to be a lot more skilled to use those machines, which means that a lot of the routinejobs have disappeared or they're very poorly paid. Over the next two or three decades, a lot ofeconomists believe that there's going to be a lot of disruption in the labor market because of newautomation. Even college-educated workers, that financialassistance and accounting and even some parts of medical diagnoses, will be done by machines withartificial intelligence.
So a lot more of us might be facing thatcompetition from these machines. Globalization is another reason for wagestagnation, forcing domestic workers to compete against unfair competition. In a lot of countries, workers are paid a lotless. So now, particularly if you don't have a lot ofvery specialized skills, you're competing in that market. And that means that a lot of sort ofroutine office work and sort of manufacturing work is going to go overseas. But that isn't all bad news for Americans. It's important to remember that meant goods got alot cheaper.
It's one of the reasons we've had such lowinflation since the eighties and everyone benefitted from that. But that said, I thinkeconomists like me were a little cavalier, that we saw the economy growing and people doing better,about the people who were hurt. And we still don't really have good solutions tohelp people like that. Economists suggest that labor dynamism also playeda bigger role than expected. American workers today are changing jobs lessfrequently than before, even though job switching leads to strong take home pay growth. While some Americans don't switch their jobs outof a desire for stability, others can't because there is nowhere else to go.
In many local markets, companies use the lack ofcompetition to suppress their workers' wages. The notion of monopsony power is that you have alocal labor market. Let's say that you live in a particular city or aparticular town, and in that town there is one employer. And given that there is only oneemployer there, then they set the wages in a way that's lower than what you would otherwise expectthem to pay. This was a fully competitive market. 60% of U.S. labor markets are considered highly concentrated,meaning a few employers are competing for local workers. Just 10% more workers in an area canlead to about a 1% reduction in posted wages.
I've asked a couple families over the years, thatwas still before Corona, for a $10 raise and they just declined. They said they'll find somebody cheaper and wepractically lost the job. In case after case, you see that governmentpolicies were implemented to discourage labor dynamism and to discourage workers from moving toa better job or moving to a better town or city to improve their job prospects. And this inevitably will weigh on wage growthover time. Companies can also play a direct role in stiflingthe competition with methods like non-compete agreements. Roughly half of private sector U.S.
Businesses that responded to the EPI survey saidat least some of their employees are in non-compete agreements, meaning some 36 to 60million private sector workers in America are subject to non-compete agreements. The non-compete clause would lead you to stay withyour current employer, not to move, because the consequences would be that it would be moredifficult for you to find employment. And if you are less likely to leave the job,you'll be tied in or locked in to the current employer, which means that the likelihood thatthat employee would keep getting his or her lower earning is much higher. The rationale for it at the very high end of the income distribution, of the skill set, but I.
Don't see much of a reason to have it for rankand file employees. Meanwhile, unions that originally fought forhigher compensation have drastically lost its power over the years. Union membership in the U.S. fell from 20% of American workers in 1983 to just10.3% in 2021. Workers in unions typically earn higher wages,about 10.2% more compared to similar nonunion workers, thanks to methods such as collectivebargaining. It's in those industries where unionization stayedsomewhat high, the effect of market power, monopsony, of the employer on wages was muted, sothe unions were able to bargain on behalf of the.
Employees even when they were dealing with largeemployers. So wages were less stagnant or didn't decline asmuch. But some suggest that wage stagnation is an issueblown way out of proportion. The issue we have in the wage stagnation debate isthat a lot of researchers have been using a certain inflation metric, the consumer priceindex, that really dramatically overstates inflation over time. So if you look at two periods, you see that thoseexpenses per CPI have gone up far more than they actually have. That means it makes it seem like your wageincrease is much smaller than it really actually.
Is. You're actually able to buy a lot more withyour nominal wage than these researchers say you can. So that's why most researchers, includingthe Federal Reserve, like to use a different measure of inflation. The personal consumption expenditures, or PCE. The PCE shows a much more moderate inflation overthe last several decades. When you apply PCE to nominal wage growth, youdiscover much higher wage growth for middle income workers. In other words, no wage stagnation at all. And in fact, a pretty nice gain over the last 30years.
Focusing on broad national data over individualexperiences can create another issue. They see the percentage of low wage professionshas increased, therefore we have wage stagnation or decline. What they don't do, is they don'tactually look at the people in those professions and what their wages have done over time. So, for example, you can have someone who is ajanitor who works for 30 years and actually made substantial increases in wages and earnings overthat time. That would be lost if you just look at janitorsoverall. I think it is technically a myth, and I think itis overblown to say that people aren't better off than they were in the seventies.
It's just patently absurd. I think everything about our lifestyle and ourliving standards are higher and even our real wages are technically higher. But I think there is something to the fact thatwe just aren't growing as fast as they used to for most people. So people don't feel like they'reequally sharing the same prosperity. And I think that that is a problem that's leadingto a lot of social unrest. Legislation could help solve some of the biggestissues causing wage stagnation in America. There is a limited amount that we can do throughpolicy. When you have big changes in technology,globalization, forces like that.
But policy can matter a lot. For instance, things like those non-competes. I think that's adding to wage stagnation. And you know, you shouldn't have such non-competes, particularly for low-skilled jobs. We could pass legislation to make it easier forworkers to unionize. There is a bill called the PRO Act, Protect ourRight to Organize, that the House of Representatives has already passed. It's dead in the water in the Senate. I think we also really need to embrace more of thegig market, which so far I feel like we're trying.
To sort of pretend doesn't exist and making itsort of a lower tier part of the labor market. But is it if we sort of allow those platforms tooffer health insurance, then I think it could become better quality jobs that are more dynamicand let people get more of the upside risk and not just the downsides. The rise of remote work could also be beneficialto wage growth in local markets. I mean, employers are very happy to have theiremployees working remotely. In a way, if you can work remotely, at least, youknow, when you think about monopsony power, you are diminishing the monopsony power of anemployer. Because if you are a talented person, even if youare in a small town where there's only one or two.
Large employers, you can work for a global firmthat can be based in any other part of the world or the U.S. and work remotely and earn a higher wage. Achieving a fair wage for all Americans is vitalin ensuring the success of the American economy. There's a basic, not just a basic sense offairness. There is something historically we have calledthe American dream. It attracts immigrants to our shores. It motivates all kinds of people to innovate andmake the economy productive. And wages really, in some ways, are a reflectionof the productivity and skills of the American.
Workers. So if wages are stagnating for a wholebunch of people, that means that we are not becoming as productive a country as we can be. That means the whole economy is not working aswell as it can be. $16.15 trillion. That is how much debt American households owed bythe second quarter of 2020. A staggering 41.79% increase from $11.39 trillionjust ten years prior. The consumers that have a whole lot of debt reallyare struggling to survive. They're struggling to meet rent or mortgagepayments, repay college loans, to repay loans for a car.
They're struggling because they've got enormouscredit card debt. 60% of American adults surveyed cited their levelof debt as their main reason for financial anxiety. Debt is rising every single day, and it issomething that I can say is debilitating. For me, even with a master's degree and havingexperience out in the field for over ten years, I've had to have at least three jobs in order tonot live paycheck to paycheck. But with inflation at its 40 year high, debt inAmerica will likely grow. 43% of Americans are expected to add even moredebt within the next six months. Debt is financing asset purchases such as a home,such as a car.
And when the price of these goods goes up, thenit gets reflected in the loans that get taken out. And it's that juggling effect, right. Do I pay off this debt or do I go get groceriesor go get gas, the things that I need to actually live. So why are so many Americans in debt today andwhat impact does it have on the U.S. economy? The COVID pandemic gave many Americans achance to improve their finances. The total personal savings rate sincethe pandemic averaged 12.6%, compared to just 7.25% between the Great Recession and February2020. Americans also paid off a record $83 billion incredit card debt in 2020.
To help people weather this historic crisis, allsorts of supports were extended. They offered forbearance on mortgages, on studentloans, other types of debt. When one set of my student loan payments werepaused, I was able to breathe. So even with that $300 that was paused,specifically in loan payments, that was enough to be able to allow for me to pay off my old car. That was enough for me to be able to save asubstantial amount of money in order to put a deposit down for this beautiful place that Icohabitate every single day. So all this support led to actually a veryhistorically good period in the terms of the serious delinquency rate on student loans,on mortgage debt, on auto debt, across all these.
Different debt types. But concerns over household debt are rising again. Government did a whole lot of things to helphouseholds and help households in debt during COVID. Now, unfortunately, those are all gone. Interest rates are starting to rise again. Federal Reserve has already increased interestrates a good deal. They've said they're going to increase interestrates more. I will tell you how much debt I do owe. Student debt from getting my bachelor's as well asmy master's degree.
And then I also have debt that I just startedaccruing in '22. Purchasing a car, that was unexpected. I have debt there, about $10,000 worth of that. And then obviously my mortgage. I owe a little under $200k on my condo. Most of the debt held by Americans is related tohousing, accounting for 72.5% of the total balance. Nearly half of all Americans today saythat the availability of affordable housing is a significant problem. We've seen phenomenal house price growth duringthe pandemic, and some of that's driven by just.
Supply-side constraints. Not enough homes to go around. We also went through a decade where you had tohave a 700 plus credit score to qualify for a mortgage. That means that people whose credit scores werenot in that strong, strong position were competing for lending dollars that were not easilyavailable and for homes that were not easily available either. So prices just climbed andclimbed. Meanwhile, student and auto loans comprise most ofthe non-housing debt, accounting for 35.7% and 33.7% of the total balance.
College tuition for public four year institutionsrose by 179.2% between 2000 and 2020, with an average increase of 9% each year. With college education going up and up and up andup and up, it's the difference between spending a few thousand dollars, right, for your tuition andborrowing a few thousand dollars, and a few tens of thousands of dollars. You get a law degree. You get a doctor's degree. You get an MBA. You get a PhD.
Now, the debt levels are even larger. When it comes to just living and actuallythriving. It's hard for me to say that it was worth itbecause almost every single day the stress of money and actually being able to pay off studentloans seems so out of reach. On August 24th, President Biden announced thecancellation of $10,000 in federal student loans for borrowers making under $125,000 annually. Student debt has received a lot of attentionbecause the rate of serious delinquency, that's 90 plus days past due, has risen to the highest ofthe debt types tracked by Equifax. So it surpassed credit card debt in thepast about ten years.
A close majority of people paying student loansare only paying interest, so they're not actually chipping away at thatprincipal. And it means that the amount just builds up andbuilds up over time. That drives a lot of increases. For new vehicles, the monthly payment for autoloans climbed past $700 for the first time in August 2022. Median car loan term got a lot longer over thelast ten years. The idea of a five year term is not really thestandard anymore. Six year often is what a lender will offer.
And that means that people are paying more ininterest over the life of their loan. And those balances are just higher. Right now, I owe under $10,000 for just my carpayment and it truly does weigh on me. It feels very challenging just on the day to dayof, okay, well, I can start paying off towards my principal and pay off my car quicker or I can,you know that wrestling of the question, or should I put that money into savings. While inflation pushes up the price of goods andservices, most Americans feel that their wages aren't keeping up with inflation.
The average real hourly earnings for allemployees dropped by about 3% over the last year, while inflation increased by 8.5% during the sameperiod. I wouldn't want to say that wages are notincreasing at all, but given the cost of living that Americans are experiencing, it's not risingfast enough. Wages start to flatline and people go, Well, Ishould have a better standard of living. All of a sudden it's I can't get it out of mywages or my income, so what do I do? Well, let's put a little bit of money on a creditcard or let's buy a better car and have a little bit more car debt and we'll just pay it off overa longer period of time. Even just at my age, I want to be able to embraceand do all the things that I want to do in life.
And it's constantly in the back of my head of, okay, should I pay off debt today or should I go embrace and enjoy the things that my beautifulcity has to offer? No person should have to have that go throughtheir head on a daily basis. It's not fair. For the American economy. Household debt acts as a double-edged sword. On one hand, it boosts consumer spending, whichcontributes almost 70% of the total United States GDP. In order for the economy to keep growing,everything has to be bought.
If stuff doesn't get bought, what's going tohappen? Businesses will see their inventories pile up. They're going to cut back production. They're going to lay off workers. There's also good debt that can help build anindividual's wealth over time, such as student loans, mortgages or business loans. I think that some amount of consumer debt is anecessity in our economy. It makes sense in a lot of situations for peopleearlier in their life cycles to do more borrowing for things like higher education.
But household debt that's out of control iscorrelated with a recession. Historically, rising household debt has beenassociated with lower GDP growth. The fact that households are going into debt inorder to keep the economy going means that the ratio of their debt to their income is going upand that makes them struggle more and more to be able to repay that debt. And if they can't repay that debt, sometimes theyreach a point where they've got to cut back because nobody will lend them more money. And that's when economies go into recessions. And if the debt to income level gets too great,then the.
Problems for the economy can be enormous. Living with debt doesn't impact folks equally. We know that the lower income folks also havehigher debt burdens because of that structural discrimination and historical discrimination thatmakes it so that they're not having the same access to financial products in the first place. The ratio measuring people's debt to theirphysical assets is heavily dependent on the race of the borrower. The ratio is 115.5% for blacks,65.8% for Latinos, and 98% for other races, compared to just 49.3% forwhites. The lower end of the income spectrum, the lowerend of the credit score spectrum, we find that.
Borrowers have a very hard time accessingtraditional credit like credit cards or a mortgage loan. And the credit that they do have availablecan be at higher interest rates and more costly. Some of it can be alternative financial services,such as a payday loan or a title loan. And these types of credit, though they serve thecredit needs of these communities to some degree, they can be quite expensive. In a lot of cases, the real problems are thefamilies who are downwardly mobile, the families who were middle class, whohad sort of accumulated debt based on the expectations that they would remain middle classand then something happens in the economy. You lose your job, but you've still got yourmortgage and your car payments and your college.
Loans. Those become almost impossible to finance. And it's almost impossible for you to keep yourhead above water. Despite its record breaking amount, there's noreason yet to panic about the state of household debt in America. We shouldn't be panicked about the level ofhousehold debt right now. We should keep an eye on it. We should be concerned about it. And I think it's particularly important forpolicy leaders and leaders in the financial world to pay attention to who and where we start seeinggreater challenges.
Based on what I'm seeing at the Federal ReserveSystem's reporting and more broadly than that, is that there are no major warning signs ofdisruptions like we saw during the housing crash and thesubsequent financial crisis. Policy plays a vital role in keeping householddebt in check. Experts say outdated procedures such as wagegarnishment, where an individual's earnings are withheld for the payment of a debt, are in direneed of a policy update. A survey found that about 7% of workers inAmerica had their wages garnished in 2016. For folks who have high debt loads, they'reactually getting their wages garnished or seized at really high rates.
Currently, at the federal level, only $217.50 isprotected in someone's weekly paycheck. And that bill hasn't been updated sincethe late sixties. And so what we're proposing is to protect atleast $1,000 in people's paychecks every week so that they have enough in their weekly paycheck tosupport their family and pay their bills while managing their debts responsibly. Bringing back the child tax credit program couldalso help reduce household debt in America. Child tax credits were expanded under theAmerican Rescue Plan of 2021 as a response to the COVID pandemic. A survey found that more than 77.8% of child taxcredits were either spent or went to paying down.
Household debt. And that had a huge impact on household finances. If you're behind a couple of hundred dollarsevery month and going into debt and now the government is giving you a couple of hundreddollars because you have children, now you're whole again. You can pay all your bills for a couple of months and if you can pay all your bills for a couple of months, you can maybe even reduce some of yourprior debts. The government can also play a potential role inreducing certain kinds of debt, such as medical debt that are owed by roughly 23 millionAmericans today.
Medical debt is one in particular where thegovernment, both federal government and state governments, have potential roles to play inhelping households that are really at that individual level struggling with that. There's been a lag in the south eastern states ofexpanding Medicaid. Right? And so we know that medical debt is goingto be increasing. But if there's a way to expand Medicaid so thatfolks are better supported in terms of their medical expenses, that's going to be a way toalleviate that burden. Advocates say whether the U.S. can keep the household debt in check depends onhow quickly policymakers can respond to the issue.
We really need interventions to help Americansbring down that debt load and so that they can be able to spend responsibly, save responsibly,and have those long term goals met of perhaps buying a home or building their wealth and beingable to invest. Americans seem more stressed about money than everbefore. 87% of Americans said that inflation and therising costs of everyday goods is what's driving their stress. And that's one of the highestnumbers of stress that we have seen in the Stress in America survey. Four in ten Americans say that money affects themnegatively and the state of their mental health. Money is a universal stressor, regardless of yourfinancial standing.
Poor mental health not only takes a toll on aperson's overall well-being, but it's also bad for the economy. Workers experiencing even one poormental health day a month could lead to $53 billion less in total income each year in theUnited States. Money touches every part of our lives, and it'smodern day survival. I felt hopeless. I was feeling that depression andI didn't really know what to do. It's affecting some Americans more than others. Statistics say that 75% of Latinos are stressedabout money. One of the biggest anxieties that we face is howare we going to build generational wealth? So why is money so stressful in the United States?.
And what can Americans do to alleviate thepressure? With the cost of living skyrocketing, manyAmericans are experiencing financial stress on a daily basis. Something that comes up time and time again whenwe query Americans about their personal finances, essentially, it is the expenses that surprise themon an ongoing basis. So trying to pay for everyday items, not havingemergency savings and debt. Those three issues are at the top of their listof concerns. Tawnya Schultz and Lea Landaverde became moneycoaches after they experienced their own financial struggles.
I was in debt off and on all of my twenties andearly thirties and around when I was 34 is when I had about $20,000 in debt. Even someone who has a masters degree in financehas their own personal finance issues. I was still figuring out how to adult as well ashow to be in this corporate world, make an income which for sure led to overspending, you know,lifestyle creep. I was in this debt cycle of trying to get out ofdebt, paying off debt, getting back into it. And I was just tired of feeling like I couldnever get out of it or feeling like I was always going to have debt. More than 80% of Americans ages 18 to 43 saidmoney is a significant source of stress for them.
Certain individuals are struggling more when itcomes to concerns about inflation and money. Between men and women, there were differences inthe way they processed it. We had more women tell us that it was negativelyaffecting their mental health, yet men told us that it affects their mental health more often. I felt like I was at a low point because for myage and where I wanted to be, where I thought I should be in life, I felt like behind. I didn't have any savings. I was living paycheck to paycheck. In a lot of ways, money is a safety net or asource of stability, and without it, people feel.
Vulnerable and anxious about the future. Latino and black adults were more likely to saythat money was a significant stressor more frequently than white and Asian respondents. Especially coming from my experience as a firstgen, my parents didn't know how to navigate this financial system. That's why I even myselfentered finance because I saw the stress my parents faced, so then I could learn and helpprotect them as well as protect the community and providing them education about finances that aretransparent. Many Americans don't feel hopeful about theirfinancial future, with 41% saying it's, quote, going to take a miracle to be ready forretirement.
I think the problem in recent years has been thatthere has been this so-called risk shift, whereas the risk of being responsible for things has beenshifted from others onto the individual. What can you put on that list? The cost of obtaining a college education. Previously in the public realm borne by taxpayers. We know where that's been going. The burden of saving for retirement was oftenmore heavily owned by employers when they provided pension benefits. That was shifted to individuals with the changesin 401Ks.
Health care has become increasingly expensive. That's responsible for one fifth of the Americaneconomy, and consumers and employers bear that burden. Americans say they're feeling pressure to cut backon spending. More than 50% of adults say they've already cutback on dining out and will consider reducing their spending more if inflation continues torise. More than 75% of adults said they're worriedhigher prices will force them to rethink their financial choices. Even higher income Americans making at least$100,000 per year say they either have or are.
Considering cutting back on spending. People need to have a sense of hope. And so when the economy is working for them,there's a greater likelihood that people will have hope that they can accomplish theirbasic personal financial objectives. Americans are making a connection between theirfinancial stress and worsening mental health. 42% of U.S. adults say that money negatively impacts theirmental health, with 28% saying they worry about their finances daily. Many Americans tell us that some of their sourcesof financial stress are as simple as looking at.
Their bank accounts or making purchases ortalking about money. Thinking about money or your finances. It can feel unavoidable with the approachingsummer and travel plans, holidays, gift buying, all these things are really stressful and cantrigger concerns about finances. Sometimes dealing with stress can worsen someone'sfinancial problems. An April 2020 Credit Karma survey found that 35%of respondents said that stress from the pandemic made them impulse buy. I was sad, so I would shop and that led to meaccumulating over $30,000 of credit card debt. And I had to figure out how the heck I was goingto pay that off.
Things are getting way more expensive and we wantto experience things and we want to live. And so in order to provide some sort ofhappiness, I was getting serotonin through shopping. I started drinking more and I feel likeeating more and spending more. So, like, you start doing those coping mechanismsbecause you're stressed about money or stressed in life somehow. And so it was leading me down aroad that I didn't want to be on, but I didn't know. I felt stuck. I felt trapped. Mental health issues can have serious consequencesfor a person's overall well-being. There is clear evidence that mental illnessaffects your physical health.
We typically see stress manifest in two ways. One are physical symptoms, so things like teethgrinding, headaches, stomach discomfort, muscle tension. The second is emotional responses. So that can look like anxiety and stress,difficulty sleeping, changes in your eating patterns. And so when those come together andthey are unmanaged, that's where we see really negative, physical and emotional consequences. Many people struggle with the shame of theirfinancial difficulties, and it's often a burden that's carried alone in silence. And in turn people go to great lengths to hidetheir financial difficulties, which further.
Entrenches them in their isolation. And that isolation and burden can become so greatthat people facing these difficulties are more likely to experience suicidal thoughts and evenmake suicide attempts as a way to escape from their problems. While there are many forces at play that areoutside of people's control, such as the rising cost of living, there are steps Americans cantake on their own to help themselves feel more financially secure. Experts say the first step is examining yourmindset around money. I was constantly looking for like, how can I findhope in this situation?.
Because you can have fear and scarcity,especially nowadays it's so easy with the economy and inflation. We're bombarded by it every day. I'm like, There's not enough money. There's not enough money. So it keeps us in ascarcity mindset and that like fear around money. I faced financial anxieties myself and I had allthe resources to actually take action on my debt or not even get into debt. But yet, because of my mental health, because ofthe environment I was in, and because I didn't want to take ownership of my finances, I had toface the realness of my debt.
There are experts such as therapists or moneycoaches who can help people deal with overwhelming feelings as well as make a financial plan. A money coach essentially is a partner in crimethat you have someone by your side that helps you hold yourself accountable and provides youfinancial education at the same time with guided, actionable steps forward to reaching yourfinancial goals. I think the biggest reason there is shame tied tofinances is because so much of our self-worth is tied to what we have in a tangible way. So people tend to relate their job or theseexternal markers of success, numbers in their bank account, with their worth as a person, which iswhy it can be so difficult to deal with financial.
Issues and especially seek out help for them. It's also important to monitor your physicalhealth. What is happening to us mentally, it affects usphysically also. If you're not treating your depression and anxietywell, you are probably not doing a great job managing blood pressure and diabetes and otherchronic conditions. I always kind of go back to the basics, which isto make sure you're eating healthy, that you're getting enough sleep, that you're staying active,and that you're staying socially connected. The concept in mental health recovery is that afirst step is building hope. We need to see that there's a path to recoveryand that things will.
Get better. And they usually do.
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People are now paying for a govt that has deficit spent itself true into a 31-trillion buck gap. At any time when the governmentmakes up for the finances deficits by having the Federal Reserve print up money to rob treasuries they’re rising inflation. It's finest going to score worse as international appetite for US denominated debt abates moreover as the BRICs pivoting away from the buck as the reserve currency. As soon as the US kicked Russia out of SWIFT, the reduction of the enviornment took search that the US will employ the buck as a weapon in the event you cease up on the other pause of their international coverage.
Because we’re thanks Joe Biden
Abet balloting for Democrats…that can resolve the ache.