With all the attention on Wall Street, who's looking out for the little people?
Lehman Brothers has folded, and before that, Bear Stearns. Another financial giant, Merrill Lynch, has fallen from grace. The media are having a field day with images of frenzied investors and demoralized CEOs. But what about those far removed from Wall Street, in lower-income neighborhoods or out in the suburbs? Michael Zweig, Director of the Center for Study of Working Class Life at the State University of New York at Stony Brook, brings our attention to all the working families affected by the recent turmoil.
"When the elephants fight," says Zweig, "the grass gets trampled." He asserts that working families will bear the brunt of the goings-on on Wall Street, and the focus should be on them. They, after all, have the most to lose. With each foreclosure, these families lose more than stock value. They very literally lose their homes, and -- just as hurtful -- their equity.
"While the loss of jobs on Wall Street is a blow to the economic status of tens of thousands of professionals," acknowledges Zweig, "we should not lose sight of the economic distress still unfolding in the foreclosure crisis and the impact it will have on American working families." He predicts the financial sector will unravel through the spring of 2009, and more than one million more families will face foreclosure.
Families like these are likely in the bottom quarter of the housing market. Zweig looked at this bottom quarter and applied the federal standard, which says households should not spend more than 30% of their income on housing costs. For any family that can't get out of the bottom quarter of the housing market without spending more than 30% of its income, Zweig uses the term "economically distressed." Working with U.S. Census Bureau data, he calculated that 20.9% of American households are economically distressed. This new measure is almost twice the official poverty rate.
Zweig's findings, arguing that the official poverty rate is grossly miscalculated, will be released by the Center for Study of Working Class Life on September 29. His report includes a detailed economic stimulus package that focuses on the needs of low-income families. With the market's collapse forecasting a somber future for working families, Zweig's report is especially relevant.
Let's focus more attention on the far-reaching consequences of Wall Street's breakdown and push working families higher on the agenda of any economic stimulus package.