Speaker 1: So down. Before we get started today, we just wanted
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Speaker 1: Learn more at Bloomberg dot com. Backslash lands. On the surface,
Speaker 1: America's economy is in pretty good shape. You've got an
Speaker 1: unemployment rate of four point four percent, jobless claims around
Speaker 1: the lowest in three decades, wage is US starting to rise,
Speaker 1: and g d P is growing about as fast as
Speaker 1: economists ps I can go. Right now, That's right, Dan,
Speaker 1: But underneath that veneer of a decent economy, millions of
Speaker 1: middle class Americans face a stressful reality, even if they
Speaker 1: have steady jobs. Their paychecks increasingly have pretty big swings
Speaker 1: for month to month, making it challenging to pay bills,
Speaker 1: not to mention, build up savings, to deal with unexpected expenses,
Speaker 1: and things like that. Today on Benchmark, we're going to
Speaker 1: talk with the two authors of a new book who
Speaker 1: studied the financial habits of more than two hundred families
Speaker 1: for a year. If you think that hard work is
Speaker 1: all you need to achieve the American dream, you are
Speaker 1: in for a surprise. I'm Scott Landman, an economics editor
Speaker 1: with Boomberg in Washington, and I'm Daniel Moss, executive editor
Speaker 1: for Global Economics with Bloomberg in New York. So, Dan,
Speaker 1: I think we've we've both worked at Bloomberg for a
Speaker 1: pretty long time. Uh, eighteen years for me and how
Speaker 1: many is it for you now? Twenty three? Wow? Well,
Speaker 1: I suspect we're both grateful for many of the things
Speaker 1: that Bloomberg provides. But after reading this book, I realized
Speaker 1: that I take something for granted that lots of people
Speaker 1: just don't have, and that's a steady paycheck, which really
Speaker 1: isn't what people who have hourly jobs get, or if
Speaker 1: they work on commissions or get paid by the gig,
Speaker 1: so on and so forth. But hang on, I thought
Speaker 1: the gig economy was the trendy, buzzy thing to do
Speaker 1: these days. It might be trendy and buzzy, but it
Speaker 1: doesn't necessarily help people get a steady income. It just
Speaker 1: kind of maybe works for other kinds of work. Is
Speaker 1: that another way of putting it. Well, I mean the
Speaker 1: idea that as a section of the American workforce that's
Speaker 1: not having such a great time, is that a particularly
Speaker 1: new thing, or is it that posts the global financial crisis,
Speaker 1: all of a sudden, it's getting a level of attention
Speaker 1: it didn't get before. Well, it could be both of
Speaker 1: those things, or it could really be that the situation
Speaker 1: is changing. But these kinds of issues are at the
Speaker 1: heart of the new book by our guests. It's called
Speaker 1: The Financial Diaries, How American Families Cope in a World
Speaker 1: of Uncertainty. Jonathan more Duck is a professor of public
Speaker 1: policy and economics at New York University, and Rachel Schneider
Speaker 1: is senior vice president at the Center for Financial Services
Speaker 1: Innovation in Chicago, a group that seeks to improve banking
Speaker 1: for low and middle income Americans and full disclosure get
Speaker 1: some funding from companies in the industry, including Bank of
Speaker 1: America and City Group. Jonathan and Rachel, thanks for joining
Speaker 1: us today. Thank you. You just start out and tell
Speaker 1: us a little bit of how this project came about
Speaker 1: and what you set out to accomplish. The project started,
Speaker 1: um we started thinking about around in the wake of
Speaker 1: the Great Recession, and there's a sense that something huge,
Speaker 1: of course, had happened in the American economy, but it
Speaker 1: was hard to see how the pieces were all landing,
Speaker 1: how American families were really doing after the recession, and
Speaker 1: we didn't really have data to sort it out. And
Speaker 1: we figured that the only real way to get to
Speaker 1: know how families were doing was to go out and
Speaker 1: spend a lot of time getting to know them and
Speaker 1: figuring out how families were coping after the crisis, And
Speaker 1: so the project eventually involved getting to know families. We
Speaker 1: spent a full year trying to track every single dollar
Speaker 1: that the families earned and spend and borrowed and saved,
Speaker 1: really their entire financial lives, so we could get a
Speaker 1: lens on what was really happening um to the families
Speaker 1: after the crisis. Well, what's intriguing about this is you've
Speaker 1: based your findings on hard data. I mean you've just
Speaker 1: described this excruciating process of gathering the information rather than
Speaker 1: a lot of these sorts of books which tend to
Speaker 1: be more impressionistic. Would that be a fair comment. Yeah,
Speaker 1: I think that is their right. So those field researchers
Speaker 1: who gathered the data or visiting families every few weeks
Speaker 1: and really trying to gather information about every single dollar
Speaker 1: that the families earned, spent, borrow and saved. And so
Speaker 1: while the heart of our book is really the family stories,
Speaker 1: the heart of our findings is a lot of data.
Speaker 1: And it's worth pointing out the data we gathered, UM,
Speaker 1: and the way we thought about it really changed in
Speaker 1: some ways over time, or at least for some of us.
Speaker 1: I mean, this was a complicated research project where um,
Speaker 1: of course Jonathan and I and a team of researchers
Speaker 1: were working together, but also, as you mentioned, UM, there
Speaker 1: were other funding partners in this case, the City Foundation
Speaker 1: and the Ford Foundation, and then ultimately do a MIDI
Speaker 1: our network. And I pointed out only because you know,
Speaker 1: in describing CSI, you rightly pointed out that TVs I
Speaker 1: has a focus where I work on um on financial services,
Speaker 1: and we do often get funding for financial services, and
Speaker 1: in this case we started out at cbs I anyway,
Speaker 1: and probably the City Foundation did two in their funding
Speaker 1: of this work, thinking that it would really help us
Speaker 1: to better understand what financial services people needed. The reality
Speaker 1: is that and I think Jonathan saw this from the
Speaker 1: get go, that what we were doing in fact gave
Speaker 1: us a broader lens, that it was less about financial
Speaker 1: services and more about the economic ups and downs economic
Speaker 1: lives as people in a broader way, and so we
Speaker 1: really needed the detailed data we gather it over of
Speaker 1: course the course of the year to do that piece
Speaker 1: and to understand what people were experiencing in a holistic
Speaker 1: sense in their financial lives. Tell us a little bit
Speaker 1: more about these regular financial or economic ups and downs
Speaker 1: that people are experiencing. You you write a lot in
Speaker 1: the book about how people's income would would vary a
Speaker 1: lot from month to month. Uh, you know, one month
Speaker 1: it would be above average, and then next month it
Speaker 1: could be below that by the same amount. And I
Speaker 1: found really fascinating one of the stories you tell in
Speaker 1: the book about the family where the father actually quits
Speaker 1: his job fixing trucks on commission for one that's lower
Speaker 1: paying but steady. Uh, you're providing a steady paycheck. How
Speaker 1: common is that? What kinds of forces are at work here?
Speaker 1: And you know, to go back to our broader question,
Speaker 1: is this a new phenomenon or is this just something
Speaker 1: that we're discovering more that's always been there. Yeah, our
Speaker 1: sense is said, what's been in play is a process
Speaker 1: that started around the nies with a shift in jobs.
Speaker 1: And so Jeremy, who was a truck driver in a
Speaker 1: truck mechanic in Ohio, UM, you know, used to be
Speaker 1: in a situation in the context where there were a
Speaker 1: lot of factory jobs. When he was growing up, maybe
Speaker 1: a quarter of us jobs were in manufacturing. UM. But
Speaker 1: of course union jobs and manufacturing jobs has been sliced
Speaker 1: over time. You know, today about ten percent of jobs
Speaker 1: are manufacturing. So Jeremy has fewer choices and he ends
Speaker 1: up as a truck mechanic and he's working on commission.
Speaker 1: And when we first met him, his weekly paychecks were
Speaker 1: very variable because it wasn't clear how many trucks there
Speaker 1: would be to fix, and he was bearing all of
Speaker 1: that risk. And that you're saying at the end of
Speaker 1: the year he just quit his job for a lower
Speaker 1: paying job that was more steady, And we are seeing
Speaker 1: that pretty broadly in our sample. On average, were seeing
Speaker 1: the households spent about five months of the year where
Speaker 1: their income was above their average or below their average.
Speaker 1: So economic and security in many ways, it wasn't about
Speaker 1: I'm going to lose my job. It was about how
Speaker 1: am I going to navigate the ups and downs that
Speaker 1: are going on in my given job? And how did
Speaker 1: you identify the particular families that you would study. Were
Speaker 1: you after a certain income group, a certain demographic group,
Speaker 1: a certain geographical group. Yeah, our goal was to understand
Speaker 1: a broad cross section of the American experience. So we
Speaker 1: knew that with the level of the depth of the
Speaker 1: data we wanted to collect, we couldn't do a nasting
Speaker 1: representative statistically significant sample, right um, But we could scatter
Speaker 1: our field researchers across the country, and so we gathered
Speaker 1: information from people in California along the Ohio Kentucky border,
Speaker 1: in Mississippi, and in New York. And our goal was
Speaker 1: to understand what it was like for working Americans. So
Speaker 1: about a quarter of the sample is around the area
Speaker 1: meeting income around around middle class in their region, about
Speaker 1: a quarter is close to the poverty line, and then
Speaker 1: the remaining half is in between those two. But the
Speaker 1: common threat is that when we recruited households to join
Speaker 1: the study, every household had somebody in the family who
Speaker 1: was working. And what gave you the idea to pursue
Speaker 1: this study? Well, I feel like I should ask that
Speaker 1: one sinceince it gives me a chance to um to
Speaker 1: Jonathan's horn for prior work. You know, this is really
Speaker 1: um a follow up study to work that was done
Speaker 1: internationally that was also called financial Diaries and as a
Speaker 1: resource methodology that was innovated in the developing world in
Speaker 1: India and South Africa and Bangladesh, and Jonathan and the
Speaker 1: researchers who had done that work wrote a book called
Speaker 1: Portfolios of the Poor and and what was fascinating and
Speaker 1: I first learned about that work maybe um not quite
Speaker 1: ten years ago, on a study trip to South Africa.
Speaker 1: And what was fascinating to me about it when I
Speaker 1: learned about it was that in the US we had
Speaker 1: so much data, right we collect reams and reads of
Speaker 1: financial that you rattled off some of the statistics we
Speaker 1: capture on a regular basic unemployment rate jobless um. Right.
Speaker 1: We we capture all kinds of quantitative data about spending
Speaker 1: and about earning and about savings, and yet this international
Speaker 1: work gave a deeper intuition, a more visceral understanding of
Speaker 1: what was happening in people's financial lives than we had
Speaker 1: in the US, even though we have so much more information, really,
Speaker 1: and so that was a big part of the genesis
Speaker 1: of and inspiration for this project. Our funders, we're really
Speaker 1: interested in replicating that exercise in deepening intuition, opening understanding
Speaker 1: through work that was both quantitative and qualitative. Now, when
Speaker 1: you talk about the ins and outs of people's daily
Speaker 1: monthly finances and the interplay with the broader economy, UH,
Speaker 1: you know, it brings me to think about some of
Speaker 1: the articles we've been recently recently writing I edit our
Speaker 1: u S economy coverage, and a major story for recent months,
Speaker 1: at least from an economic standpoint, has been a slowdown
Speaker 1: in consumer spending in the first quarter. And there have
Speaker 1: been various reasons given for that, but some analysts are
Speaker 1: attributing part of that slow down to UH delays in
Speaker 1: people getting their tax refunds. And it's interesting for me
Speaker 1: to read in your book exactly how important tax refunds
Speaker 1: are for so many families in terms of their annual spending.
Speaker 1: Why do people intentionally make that decision and to have
Speaker 1: that big lump of money each year instead of kind
Speaker 1: of smoothing it out so they have more stability. It's
Speaker 1: a really interesting question, and the answered the the households
Speaker 1: we met really tried to do both right. They know
Speaker 1: that their lives can be pretty rocky and that they
Speaker 1: ought to save up and borrow to smooth things out.
Speaker 1: But there are also lots of times when they need
Speaker 1: a big chunk of money or they want a big
Speaker 1: chunk of money to do some big things, and so
Speaker 1: they're these sort of competing goals. One is something that
Speaker 1: requires a spike of money and another is something that
Speaker 1: requires smoothing. And so, you know, for example, Jeremy the
Speaker 1: truck driver we were just talking about the truck mechanic UM,
Speaker 1: he over withheld his UM you know, monthly tax withholdings,
Speaker 1: so that by the time tax time came around, he
Speaker 1: got a seven thousand dollar refund, which was big, and
Speaker 1: it allowed them to pay off some debt, pay for
Speaker 1: some Christmas bills, UM and do a bunch of things
Speaker 1: for the home and for their children that wouldn't have
Speaker 1: been possible, um if they just used you know, whatever
Speaker 1: they had each month. So sometimes you need a big
Speaker 1: chunk to do some big things. This increase in income
Speaker 1: volatility that you're describing, how much of that is technology?
Speaker 1: Why do you ask? You know? Um, it's something to
Speaker 1: think this is really a result of the gig economy
Speaker 1: or that it you know, we can blame just technology
Speaker 1: or just globalization. I think it's a combination of factors.
Speaker 1: It's really a broad shift in how work functions. So
Speaker 1: some of it is definitely technology. Um, for a lot
Speaker 1: of people who work hourly, and more than half of
Speaker 1: American workers work hourly, technology makes it far easier to
Speaker 1: si as your workforce to demand for your products and services.
Speaker 1: So a retailer or a restaurant knows what demand is
Speaker 1: going to be on a Wednesday at two and can
Speaker 1: have exactly the right number of workers on site. But
Speaker 1: some of that would happen even with that Without technology,
Speaker 1: restaurants have always noticed low demand and sent waiters home.
Speaker 1: So it's not only technology, it's really a broader phenomenon.
Speaker 1: I think. Let me talk about some of the policy
Speaker 1: prescriptions here. I was struck a little bit how you're
Speaker 1: you're talking about at the beginning, Rachel, about the funding
Speaker 1: behind the project, and you know how in general your
Speaker 1: your group looks for ways to uh improve financial services
Speaker 1: for you know, kinds of lower income, middle income people.
Speaker 1: And yet you know, the people in your book struck
Speaker 1: me as being reasonably savvy about the financial services and
Speaker 1: banking services that are offered, and kind of on top
Speaker 1: of things, how how can financial services be improved for
Speaker 1: the kinds of people that were the research subjects in
Speaker 1: your book or do you think they're kind of at
Speaker 1: their you know, at a sort of optimal stage and
Speaker 1: it's really you know, the broader government policy uh prescriptions
Speaker 1: that would need to be modified somewhat to help deal
Speaker 1: with some of these situations. Yeah, I have a guess
Speaker 1: and respond to that. You know, I'm really glad that
Speaker 1: the people we wrote about seem to you like they
Speaker 1: were financially savvy. That to me says we accurately represented
Speaker 1: them because they were right. People are, especially when they
Speaker 1: have less money, really smart and thoughtful often about how
Speaker 1: to make that money stretch. But I think often the
Speaker 1: strategies they were using to make that money stretch show
Speaker 1: us gaps in how financial services are are not serving them. So,
Speaker 1: for example, we tell a story in the book about
Speaker 1: a woman we call Janice who had the savings account
Speaker 1: and a checking account, but she cut up her check
Speaker 1: book from her checking account, right, she cut up her
Speaker 1: ATM card from her savings account. She intentionally has those
Speaker 1: two accounts in different institutions, and the savings account is
Speaker 1: an hour's drive away from her home and has hours
Speaker 1: that she thinks, you know, are not so convenient relative
Speaker 1: to when she works. And she does all that on purpose.
Speaker 1: And now it would be easy to say, hey, that's
Speaker 1: a mistake. She's not using those products right. She's paying
Speaker 1: seas at check cashers and fees to get money orders
Speaker 1: to pay her bills instead of using her checking feature.
Speaker 1: So she's doing it wrong. But I think you have
Speaker 1: to look at it the other way and say, okay, well,
Speaker 1: what's broken about that product design for her? What's broken
Speaker 1: about that product design is she actually wants some wall
Speaker 1: between herself and her spending and her savings, So she
Speaker 1: actually wants it to be hard to withdraw. She actually
Speaker 1: wants it to be hard to um. She's cut up
Speaker 1: her checkbook in particular because she didn't want to have
Speaker 1: any temptation to use payday loans, but she'd had trouble
Speaker 1: within the past, and to get it paid a long
Speaker 1: you've got to turn over assigned to check, post stated
Speaker 1: signed check. So she's you know, you could say she's
Speaker 1: using their products wrong. Where you could say, all right,
Speaker 1: how do you adjust UM transactional services that are available
Speaker 1: to enable her to still pay her bills conveniently electronically
Speaker 1: but not have any risk of using payday or shaves,
Speaker 1: but not have be able to access her funds when
Speaker 1: she needs them. So how do you do how do
Speaker 1: you do that? Well? UM? One thing you could think
Speaker 1: about is UM savings products that have a commitment feature
Speaker 1: or it's harder to withdraw the money. In a funny way,
Speaker 1: UM savings products make it really easy to get your
Speaker 1: money worse of optimizing our financial products for spend, not
Speaker 1: for safe and so I've been encouraged to see if this.
Speaker 1: I in general have been encouraged by financial technology products
Speaker 1: that are more greered towards helping people to save flexibly,
Speaker 1: helping people to identify the goal they're saving for UM
Speaker 1: and walling that savings off in a creative way, so
Speaker 1: it makes it easier for people to their objectives. Yeah,
Speaker 1: there's kind of a fundamental opposition which is really interesting
Speaker 1: and difficult, and families are dealing with in different ways,
Speaker 1: and that is distension between needing structure structured financial products. Um.
Speaker 1: You know, like a savings account where all the money
Speaker 1: gets put into an account which you can't access for
Speaker 1: a long time. It's like a retirement account or a
Speaker 1: Christmas club or something like that. But at the same time,
Speaker 1: in a world of volatility and instability, you need some flexibility,
Speaker 1: and so getting the balance between flexibility and structure is
Speaker 1: really hard with the available products. And that's why Janice,
Speaker 1: you know, open this account an hour away. Um, that
Speaker 1: was her way of getting that balance, But it's hard
Speaker 1: to get that in the commercial marketplace. Now. The working class,
Speaker 1: particularly the white working class in certain geographic areas of
Speaker 1: the country, has had a lot of attention paid to
Speaker 1: it since last November. Is there or what kind of
Speaker 1: intersection did you find between the politics of the moment
Speaker 1: in the respective groups that you've studied and wage volatility.
Speaker 1: I guess what I'm asking is, does the phenomenon that
Speaker 1: you've detailed describe the Trump effect. One of the things
Speaker 1: that we see is that today workers without college degrees
Speaker 1: are struggling in lots of ways, and we see that
Speaker 1: in the labor market in terms of wages. What our
Speaker 1: data and related data are showing is that it's not
Speaker 1: just average wages. They also are facing much more instability
Speaker 1: than other workers. And so there's a group of workers
Speaker 1: out there, white, black, Hispanic black and Hispanic workers actually
Speaker 1: have a harder time, but white workers as well, um,
Speaker 1: who are living fairly precarious lives even though they have jobs.
Speaker 1: So there's economic anxiety even for people with jobs. And
Speaker 1: that's the great puzzle in America that people have been
Speaker 1: trying to sort out. I think the answer is that
Speaker 1: once you spend time and followed people a month by month,
Speaker 1: you can see exactly why there's so much anxiety in
Speaker 1: the sense that the system really isn't working for them.
Speaker 1: So I'm trying to figure out if that's a year's well,
Speaker 1: I'll take a crack at it too. I think, um,
Speaker 1: you know, there's lots of explanations for Trump. I don't
Speaker 1: think we're the best positions to explain everything that happened there.
Speaker 1: I do think what what our data suggests is that
Speaker 1: when you look at or not just suggest what our
Speaker 1: data shows you with when you look us at unemployment rates,
Speaker 1: just the GDP growth, just at big picture numbers for
Speaker 1: what's happening economically in our country, you miss a huge
Speaker 1: amount of economic insecurity that people feel. Now, is that
Speaker 1: the economic insecurity that drove people to vote for Trump?
Speaker 1: I don't know. I do know it is the kind
Speaker 1: of economic insecurity it's easy for us to miss and
Speaker 1: therefore easy to fail to address. But if the big
Speaker 1: picture is improving economically, does that reduce this kind of
Speaker 1: income volatility on the micro level that you're seeing or
Speaker 1: do we need to do more research to really determine
Speaker 1: if that's the case. I'm certain that this kind of
Speaker 1: economic insecurity deserves its own responses. So it's not going
Speaker 1: to be enough just to expect wages to rise or
Speaker 1: productivity to grow fast enough and then magically people won't
Speaker 1: have this kind of insecurity. I think that the volatility
Speaker 1: is a distinct issue on its own. Um. You know,
Speaker 1: you could argue that if incomes right to a certain level,
Speaker 1: then you don't need to worry about faltility. People will
Speaker 1: just manage it on their own, but at the pretty
Speaker 1: high income level before that's going to be the case. Yeah,
Speaker 1: I think you know, what we've seen has been a
Speaker 1: real shift in bargaining power toward management away from labor.
Speaker 1: And if that fundamental bargaining balance doesn't change, then I
Speaker 1: don't see any reason why. Yeah, this pattern would change,
Speaker 1: all right. Well, many issues that we continue to explore
Speaker 1: in our economic coverage on our Benchmark podcast. Jonathan Morduck
Speaker 1: f n y U and Rachel Schneider from the Center
Speaker 1: for Financial Services Innovation, thank you so much for coming
Speaker 1: on the program with us to discuss your book. Thank you,
Speaker 1: thank you, and we hope you'll keep coming back to
Speaker 1: describe the data that you collect. I gather this is
Speaker 1: an ongoing project, or at least you're doing more work
Speaker 1: based on the result some face. Oh, I have to say, actually, um, yes,
Speaker 1: both of us are continue to think about these issues.
Speaker 1: But the data gathering from the diaries, um is concluded
Speaker 1: for the moment. But I think there's still more learning
Speaker 1: from even the data we collected, and so yes, you
Speaker 1: will see more ideas from each of us over time. Well,
Speaker 1: look forward to the financial Diaries to the Revenge of
Speaker 1: Income Volatility. Yeah, really, thank you so much. We really
Speaker 1: appreciate the conversation. Benchmark will be back next week and
Speaker 1: until then, you can find us on the Bloomberg terminal,
Speaker 1: Bloomberg dot com, or Bloomberg App, as well as on
Speaker 1: Apple Podcasts, Podetcast, Stitcher, or wherever you prefer to listen
Speaker 1: to podcasts. While you're there, taking a minute to rate
Speaker 1: and review the show so more listeners can find us
Speaker 1: and let us know what you thought at the show.
Speaker 1: You can follow me on Twitter at Scott Landman Dan
Speaker 1: you are at Moss Underscore Echo, and our guests are
Speaker 1: at at j M O R g U c H
Speaker 1: and at Rachel Schneider. Ben Mark is produced by Sarah
Speaker 1: Patterson and the head of Bloomberg Podcast is Alec McCabe.
Speaker 1: Thanks for listening, See you next time.