The Unbanking of America: How the New Middle Class Survives by Lisa Servon
Taking jobs at a check cashing service in New York, and at a payday lender in California, a professor at the University of Pennsylvania (and a writer and lecturer on consumer financial services) attempts to obtain some ground truth on the plight of financially insecure Americans.
I think it comes as no surprise that a great many Americans are struggling financially. The economy isn’t what it once was. Adjusted for inflation, wages have declined since 1972. Secure jobs with benefits are relatively scarce. Although productivity has increased over the past few decades, most of the resulting benefits have filtered up to CEOs, managers, and stockholders. They no longer trickle down as pay raises or benefits for average workers. Personally, I don’t see how this situation is sustainable. Too many people are living paycheck to paycheck, saving little, and are unable to cover contingencies such as medical expenses or car repairs, let alone luxuries. What may come as a surprise to some is how pervasive economic insecurity is. It’s not just for the poor anymore. It’s now affecting the middle class. Far too many find themselves marginalized in an economy that still hinges on consumer spending. With so many consumers effectively excluded, how can the system endure?
Anyone interested in this subject has seen the statistics. The author of this book goes beyond those to the personal level, showing what the impact is on some of these excluded individuals and relating how they cope. Many have turned away from banks to alternative financial services such as check cashers and payday lenders. When you simply look at the numbers, these services may seem predatory. Paying close to 2% of the value to cash a check, or 400% annual interest on a payday loan certainly seem excessive. But for some, this turns out to actually be less expensive than similar services from traditional banks, which do not offer small, short-term, unsecured loans, and charge exorbitant fees for maintaining low balances and for overdrafts. It’s an interesting read about a subject that I think should be getting more political attention. There is a problem here that needs to be addressed.