Trapped in the New ‘You’re on Your Own’ World

In the NYRB, Robert Solow reviews Peter Gosselin’s High Wire: The Precarious Financial Lives of American Families:

Statistical [income] volatility is an abstract fact. Gosselin humanizes it by choosing as his basic indicator the chance that a person or family will experience a year-to-year drop in income of more than 50 percent. Sure enough, this probability almost doubled between the decades of the 1970s and the 2000s, from one in twenty to about one in eleven. (The probability of a 50+ percent rise in income also increased from about one in nine to one in seven. Volatility works both ways, but it is the bad surprises that hurt.)

Then Gosselin does an interesting thing. What sorts of contingencies would lead to such a drastic and sudden reduction in a family’s income? The obvious suspects are major unemployment, illness, retirement or disability, divorce or separation, death of a spouse, even birth of a child leading to one parent’s withdrawal from a job. Adding all these together, Gosselin finds that their combined incidence was somewhat lower in the decade between 1994 and 2003 than it had been between 1974 and 1983. If one of them happens, however, the chance that it leads to a 50 percent drop in income was much higher in the later period than in the earlier one. So it is the financial risk that has jumped, not the generic hard luck. This sounds suspiciously like the tearing of a safety net. Welcome to the world of Individual Responsibility—the approach to economic security that has been advocated by government and the private sector in recent years.