John Makely / NBC News
Jim Vavrek's temporary work contract was cut short when his employer switched vendors. He spoke about his career while at home with his dog, Vincent, after his last scheduled day of work.
By Allison Linn, NBC News
Jim Vavrek has experienced a lot of firsts in the last few years, and that has not been a good thing.
There was the first time he had his water shut off because he couldn’t pay the bill, and the first time he looked into applying for food stamps because he didn’t know how he could afford to eat. And there was the first time he realized that despite insurance coverage, he still owed thousands of dollars from his late wife’s short fight with cancer – bills he could not afford to pay. “It’s amazing how fast everything happens,” Vavrek, 50, mused recently, as he drove from his job in New Brunswick, N.J., to his home in Point Pleasant, N.J.
The commute was about to become a memory – Vavrek had just learned that he was going to lose the $13-an-hour contract job he’d landed about a year and a half ago. It had been a big
financial step down from when he made $70,000, plus a bonus, several years ago, but at least it was a paycheck. The recession and weak recovery of the past five years have forced many Americans to take a financial step backward, from the security of a middle class life to the struggles of living paycheck to paycheck or among the working poor. For many, a series of economic blows – a job loss, pay cut, divorce, health care bill or unexpected emergency – has played a role in pushing them down the economic ladder. Just as so many individual Americans have taken a step backward, the nation’s cumulative financial well-being also has taken a hit over the past decade. “By almost any measure of economic well-being, we haven’t made progress,” said Mark Zandi, chief economist with Moody’s Analytics. Real median household income, the midpoint of what American households earn annually, fell 6.4 percent from 2007 to 2010, to $49,445, according to the
most recent U.S. Census Bureau data available. The 2011 data will be released this week. Median
household net worth plunged nearly 39 percent over those three years, according to the Federal Reserve’s latest data. A big fact or likely was tumbling home values. Meanwhile, poverty increased. About 46.2 million Americans, or 15.1 percent of the population, were living in poverty in 2010 as determined by the Census Bureau, an increase of 2.6 percentage points from 2007. That data also will be updated this week.
The changes have meant that more people have had to turn to government aid. About 44.7 million people
participated in the SNAP program, commonly referred to as food stamps, last year, up from 26.3 million in 2007.
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Not surprisingly, many people feel worse off, and are upset about it. A study from the Pew Research Center found that four in 10 people who identify themselves as middle class say they are in worse shape financially than before the recession began in late 2007. Another Pew study released this year found that two-thirds of Americans see strong or very strong conflict between rich and poor Americans, a big increase over just a few years earlier. The nation’s economy was officially in recession from December 2007 to June 2009, but the recovery since than has been painfully slow.
“Even though we’ve started to dig ourselves out of that economic hole that we got ourselves into, we’re still a long way from getting out of it,” Zandi said.
In general, many Americans got a
better handle on their debt after the recession hit. But households in the $25,000 to $50,000 income range remain in a much more precarious situation, Zandi said.
Darrell Glaskin, deputy director of the Center for Health Disparities Solutions at Johns Hopkins University, said medical expenses can be an especially big problem for people who are already making low wages. That’s because even if you have insurance, a 20 percent co-pay for something like a broken arm can still mean you don’t have enough money to make your car payment that month.
John Makely / NBC News
Vavrek takes his dog Vincent out for his daily walk.
Meanwhile, some programs that help people with medical needs have faced budget cuts.
“Has this current recession made things worse? Yeah, in the sense that there are more people in need, and the resources to provide for them have not increased and, in fact, in some cases they have declined,” he said.
Vavrek, the New Jersey man, found out in late 2007 that his wife of five years was ill with cancer. By August 2008 she had died.
The couple had insurance, but the co-pays for treatment and medicine still added up to thousands of dollars in debt, some of which he put on credit cards. He still has at least $7,000 left to pay off, and even now he said he occasionally gets new bills addressed to his wife.
He had to borrow money from his mother to get it turned back on.
He has sold his SUV and cut out movies, eating out and trips to regular stores. Instead, he relies on a dollar store and discount grocers. He keeps the lights off when he can and even turns the coffee maker off as soon as his coffee is finished brewing to save on his electric bill.
He had already applied for food stamps before he even discovered he was going to lose his job. It’s something he never thought he would do.
The sudden change in financial circumstances has left many people living a kind of economic double life, where they still have the material things they purchased when times were better but struggle to pay other bills.
Lynne Hackaday has the exact same job as a medical transcriptionist that she’s held for years. But while she once brought home more than $70,000 a year, the same work now nets no more than $25,000 a year.
Hackaday’s reimbursement rate has plummeted as her field has become more automated and faced increased competition from workers in other countries. She’s looked at working for other companies but said the lower rate is generally the new norm for the industry now.
Although her situation is extreme, economists say it’s not uncommon to see wages stagnate or decline in such a tough economy.
Although the weak economy has made things particularly tough, for many people the struggles began years before that. Real median household income has fallen 7 percent since 1999, after rising fairly steadily for decades before that. The wealth gap between the richest and poorest Americans also widened during the recession, according to
an analysis by the Economic Policy Institute.
After Roberta Lowther, 56, lost her $50,000-a-year job as an information security analyst in 2003, she moved from Indiana back to her home state of Alabama. She had a long stint of unemployment before she finally found a job working in the state’s children’s rehabilitation program. She likes the work, but it only pays around $22,500.
In 2007, she went back to school. But even after earning a college degree, Lowther still hasn’t been able to find a better-paying job. She cashed out her 401(k) and ended up filing for bankruptcy, and she still struggles to pay her monthly bills. Luckily her husband, who is nearly 70, is getting a pension. That brings their combined income up to around $60,000. “Had he not been in my life, I don’t know what would have happened,” she said. “I often wonder about that. Would my faith have been strong enough to get me through this?”
Many people who have taken a financial step backward wonder if they will ever work their way back up the financial ladder. Zandi, the Moody’s economist, is optimistic that in the coming decade, jobs will slowly return, wages will once again rise and people will start to make up lost ground.
