Back from my one week hiatus, this week I’m reviewing the book High Wire – The precarious financial lives of American Families by Peter Gosselin. 
I’ve been dying to read this book since I heard about it in the NYT. As usual leave a comment for a chance to win, and I will draw the winner next week Wednesday. This is a long book, so I’m really going to try and keep the review short and concise.
Chapter 1 – Introduction
This book is about the lifestyle of a new generations of Americans. We earn higher wages than ever, are more employed than before, yet it appears our lifestyles are more precarious than ever. Mr. Gosselin says you will read this book and be able to relate to many of the stories in here. You will think “that could be my family and me”.
Chapter 2 – Benefits
This chapter focuses on the problems that have arisen from the Employee Retirement Income Security Act (ERISA). This act was signed into action in 1974 by Gerald Ford. It was to protect employees benefits from their employers. It was to cover pensions, health care coverage, disability, life insurance, severance pay, and all other benefits your employer provided. But over time, ERISA protected companies from being sued by their employees when they mismanaged their benefits. It wasn’t until February 20, 2008, that ERISA was finally applied as intended, but only in retirement purposes. For other benefits like life insurance, health care, etc, ERISA still protected the employer from being sued. The chapter gives five examples of families who used ERISA but were actually hurt rather than helped by the law.
Chapter 3 – The Numbers
Peter Gosselin gathers evidence from the Panel Study of Income Dynamics (PSID) to examine the fluctuations of Americans income over time. This panel has been tracking 5,000 families from 1960s and has grown to around 8,000 families with 65,000 people. Mr. Gosselin specifically tried to look at people between the ages of 25 and 64 to elimiate those still in school and those older workers forced out of the work force.
He found that since the 1970s only 5% of families were likely to lose 50% of their income. By 2000s, the number had nearly doubled to 9.5%. Even when examined across age, income, and careers, those in 2000s versus 1970s were more likely to have sharp rises and dips in income by nearly doubling in all categories.
Conclusion, our incomes are no longer trending up in a steady manner. It could be due to job loss, change in career, etc. But people nowadays are no longer secure in their incomes.
Chapter 4 – Jobs
This chapter talks about the fact that in the 2000s versus the 1970s, we have much lower unemployment. There have been 45 million new jobs created in the past 25 years. Problem? Is that as unemployment rates have dropped, people have for some reason a high chance of job displacement. Or people have become more likely to get laid off or fired at nearly 2x the rate. Also people are staying unemployed longer than previously before. Thus while it’s hard to be unemployed, once you are, it’s much harder to find work again. He says it’s not that pensions are disappearing as fast as we perceive them to be, but also people are not qualifying for pensions because they jump from job to job and industry to industry. There is little loyalty to one company any more.
Chapter 5 – UnJobs
The previous chapter talked about people working in normal 9-5 jobs. Earning a paycheck, saving, surviving. But Gosselin introduces us to a new phenomenon. The UnJob. The chapter starts by talking about Bruce Meyer, a previous executive for companies such as WorldCom and Arthur Anderson. Meyer has been unemployed for 5 years. But no one had any idea he was hurting because he still lived in his nice home, drove a nice car, lunched, took meetings, etc. So how did he manage this? By piecing together lucrative short term consulting gigs, contracts, temporary work. Then using the money to survive during lean times. Apparently more and more people are turning to “unjobs” because of necessity.
Chapter 6 – The Poor
This chapter looked at how the working poor class in the US has expanded. Typically the bottom 10% of earners in the country would be considered poor. Or one in ten people. The problem? In the 1970s the bottom 10% of earner’s salaries might fluctuate by 30%. Now, the fluctuations can be up to 50%, but more importantly, more than just the bottom 10% can be considered poor. Now “lower middle class” families can easily drop into the bottom 10% of earners in one year. And it’s not just the people in the 20-30% earner’s brackets that can fall. Even people in the 90% of earners bracket can fall to the “poor”. Thus the term “Working poor”.
Chapter 7 – Housing
This chapter talks about the fact that we’ve expanded the size of our homes with McMansions. But hand in hand with the McMansions, we’ve overreached with mortgages as well. The rise of homeownership has increased 5%, which doesn’t seem like much but is 12 million people. Thus more people are owning the American Dream, but the chapter investigates whether it really should be a dream or an expense.
Homeownership use to be protection against economic misfortune. Why not now? Because people don’t actually own their homes, they are constantly refinancing them and pulling out cash instead of actually owning home. The chapter also touches on the subprime meltdown, which was occuring as the book came out.
Chapter 8 – Education
The price of an education today can be an insurance against being laid off. But with rising education outside the US, it appears that soon white collar workers will face the same challenges faced by blue collar workers with globalization. We’ll be fighting with equally educated foreigners for jobs they are willing to do for less money.
Second, the book examines the fact that education costs have skyrocked in the US. Private universities costs have gone up 8-fold in 3 decades, and public universities nearly 7-fold. But the median income of Americans has gone up only 23%. Thus affordability of a college education has dropped. So how are people going? By taking on massive student loans.
Chapter 9 – Health Care
Health care is the number worry for people in the US, not surprising because of our system in place. 62% of Americans are covered by employer provided health insurance. However, since 2000, that number has decreased from 68%, meaning 16 million people now are on their own with regards to health insurance. Retirees used to have medical insurance from their old employers, but the number has dropped in 20 years from 66% to 33%. Right now we are about to start navigating self-insuring ourselves in a society where health care is expensive and difficult to understand. The author suggests if employers stop providing insurance and assembling “risk” pools, then the government might have to step in and do so. Insurance companies are not going to want to assemble them.
Chapter 10 – Retirement
Gosselin says the most clear cut risk shift in this book from the 1960s to now is the shift away from pensions to individual retirement accounts. Traditional pensions guarantee people incomes for life, “defined benefit” plans. Individual retirement plans give no guarantee, only what you put in you get out + interest. He says the reason people haven’t fought against this shift, is they believe they can do better by investing in the stock market. Problem? People aren’t even contributing enough to get the company match let alone fund retirement to really determine if they could outperform a pension.
Thus now companies are auto-enrolling employees in 401ks. They are also auto-increasing contributions. This is because people are less likely to take the effort to unenroll. But will all these measures really succeed in people saving enough?
Chapter 11- New Orleans
Gosselin wanted to talk about how the destruction of New Orleans showed us the price our society put on a city. That the government did not automatically step in. Instead individuals worked tirelessly to solve their own problems. That and communities worked together. It wasn’t the free market that solved the problem, it was the compassion of individuals that lead the way.
Chapter 12 – Conclusion
It starts out by talking about American productivity has risen by 70% in the past 25 years, but median earnings has risen only 14%. Thus we are working harder than ever for less benefits/money. People have no loyalty to companies because companies have no loyalty to them. Health care has become an overwhelming cost and maze to navigate. Education is being unaffordable, and only those with set parental help can afford it. All together this causes us to all live in a more precarious situation than previous generations.
Seriously a very good book. A must read about the twists and turns our lives in the 21st century are taking. The fact that the families in this book could be your neighbors or even you is scary. This book looks at all the potential pitfalls we face today. With the economy in shambles, I am guessing it’s even more realistic now than when it came out in early 2008.
9 responses so far ↓
1 Jane // Feb 27, 2009 at 11:35 pm
I’m in my late 50s now and it’s sometimes difficult to understand the financial situation of those who face very different financial challenges than the ones I had and those I face today. The old rules of thumb and the implicit social contract almost all of us believed in are gone now. Thanks to insights like these maybe we can better get through the times ahead.
2 Pearl // Feb 28, 2009 at 1:02 am
I haven’t read this book, but based on your review of it, I’m skeptical about its accuracy.
You can find any number of tear-jerker anecdotes that seemingly illustrate an injustice, but finding out whether any of them really do takes a lot of work and an impartial approach that seems lacking.
For example, ERISA has always included enforcement provisions, including by plan participants to enforce their benefits and rights under their plans, and it is simply wrong to say that ERISA protects “the employer from being sued.” If the employer administers the plan and fails to provide the plan’s benefits, or fails to make the required contributions to the plan, they most certainly can be sued successfully, and they are.
I also have some doubts about some of the other claims made by the book. Especially prone to mislead is the use of the term “family” when comparing changes over time. Family composition and work patterns have changed so much since the 1970s that I don’t see how comparisons can fairly be made. The rate of participation by women of prime child-bearing years (25-34) has gone from 40% in 1970 to 75% more recently. The 1996 welfare reform also had a major effect.
Some things that are described as problems are actually just as likely to be advantages of the changing employment patterns or the result of government incentives. Longer periods of unemployment are in large part caused by the availability of longer periods of unemployment benefits combined with dual-income families. “Unjobs” are sometimes involuntary responses to unemployment, but just as often are voluntarily chosen for the freedom, family time, and other advantages they offer. (I know; in effect, my professional practice is a series of short-term contracts.)
My suspicion is that this book is just one more long whine about how sick America is. We are already getting barraged with that right now to terrify and depress us into pleading for the government to step in and “take care” of all our problems. And if you think trying to get benefits or health claims out of insurance companies is hard, just try getting them out of a government bureaucrat!
For which I offer my own anecdote, except that I don’t have the names to attach to it so maybe it won’t be as emotionally appealing as High Wire:
In England, which has socialized medicine aka universal health care, there is a body called the National Institute for Clinical Excellence. It decides what treatments will be approved for the grateful beneficiaries of its system. Its current guidelines (unless it’s changed since 2002) provide that treatment for macular degeneration (a leading cause of blindness), will be allowed only in very serious cases, only when both eyes are affected, and only in one eye. How’s that for a tear-jerker?
Anyway, this comment is now almost as long as your post, so I’d better stop.
3 Angie // Feb 28, 2009 at 2:42 pm
This sounds like an interesting read.
I would challenge the notion that it is somehow bad to have productivity increased by 70% while wages increased by only 14%. In fact, one of the greatest things about the last 25 years in my opinion is that we have gained so much knowledge that we are vastly more productive without having to work that much harder.
The health care chapter really interests me though, because I worry that we are moving closer and closer to a socialist nation and I don’t believe that the government is going to make the best health care choices for me and my family.
4 LivingAlmostLarge // Mar 1, 2009 at 10:00 pm
Pearl, please refrain from commenting on any book reviews, unless you’ve read the book. SERIOUSLY do I need to repeat myself? This is a book review.
I cannot detail every SINGLE page in the book. Go and read it yourself.
By the WAY, i know someone personally related to me with macular degeneration, and another person diabetic in Canada. With socialized medicine and they are doing great.
Do you live in UK? Have you ever LIVED in a socialized country? Well my DH has and he’s been in the situations your talking about PERSONALLY and he’s fine.
Sooo..what are you basing your “facts” on?
6 Pearl // Mar 5, 2009 at 8:33 pm
LAL, which of the facts in my comment would you like me to provide sources on? ERISA, the UK board’s rules on treatment for macular degeneration, the change in family composition? I’d be happy to get you the sources, if that’s what you meant.
That socialism basically sucks is my opinion. I don’t assert it as a fact, because others may not measure success or failure of an economic system by the same values I do, including freedom, the unique nature of individuals, innovation and creativity, which are either somewhat or very incompatible with socialism.
I had a fascinating conversation with a very bright socialist once, and we ultimately came to the conclusion that his core value was that the society was more important than the individual and therefore had the right, through the government, to sacrifice individuals to serve its needs, whereas I believed that the society was the aggregation of its individuals but had no independent existence and therefore could not decide what sacrifices were needed, while the government was simply a subset of individuals who happened to control the biggest guns; if it was a good government, it existed to serve the individuals in the society by protecting them from those who would sacrifice them, not to choose which of them to sacrifice for which others. But these are all values and opinions, not facts.
I don’t have to have lived in a socialist country to have an opinion on it, just like I don’t have to have sustained third degree burns over most of my body to be quite certain I wouldn’t like it.
I also think you missed my point about anecdotes; the point was that they are a useless way of measuring whether something works or doesn’t and a suspect way of analyzing social policy.
I suspect writers who depend heavily on them of being manipulative and deceptive. I could tell anecdotes about various Canadian relatives-by-marriage of mine, all of whom came down to the U.S. for treatment of various ailments to avoid Canada’s health care system. But your anecdotes and my anecdotes don’t really prove anything either way about how that system works. A fact that I do think proves something is that 30% of Canadians surveyed say they are somewhat or very dissatisfied with their own personal health care, compared to 10% of Americans who say they feel that way about theirs.
The point of reading a book review is to judge whether reading the book would be valuable. In that regard, your review is helpful to me (assuming you are reporting it accurately, which I do) in deciding that I wouldn’t care for it.
There was no criticism of your review intended. It did a very good job of giving me an insight into what the book is like, which was your goal, right? We don’t all have to like the same things, do we? At least, not until we’re fully socialized.
7 LAL // Mar 5, 2009 at 9:47 pm
Seriously, very rarely do I want to bitch at someone on my blog. BUT STOP POSTING ON MY DAMN BOOK REVIEW!
Pearl this is NOT open to your opinion WHEN YOU HAVEN’T READ THE DAMN BOOK. YOU ARE AN OPINIONATED person who should not be discussing a book you haven’t read.
Hey no reason for you to read it when you don’t think you will like it.
BUT STOP COMMENTING.
THIS IS A REVIEW. Meaning, it’s not my opinion, it’s a review. A biased review, because i have my own DAMN OPINIONS, but this blog is not yours nor did the book house ask you to review the book.
ENOUGH! I can stand comments on biased posts, but this is a review to give readers a chance to decide if they want to read the book.
You are about to be seriously censured on my book review permanently.
By the way 82% of americans are dissatisfied with healthcare. Where are you getting your data? http://www.medicalnewstoday.com/articles/127706.php
Versus less than 20% of Canadians. http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1174723
In fact Americans are the leading country with dissatisfaction.
http://www.bmj.com/cgi/content/extract/335/7627/956-a
Let’s talk to the new england journal of medicine. I know an editor, and I’ve asked the question, is healthcare good in the US? Answer most americans are not satisfied with healthcare. I wonder if it’s because the only people thinking it’s great is people like you Pearl.
People who BITCH the loudest. Whine the most about everything.
8 Pearl // Mar 5, 2009 at 11:35 pm
LAL, You asked where I got my data:
My statistics on people’s opinions about THEIR OWN health care (not how they feel about the health care system in general) come from two surveys:
One was by the Kaiser Family Foundation with ABC News and USA Today in late 2006, on Americans’ satisfaction with their own health care, and
The second was by the Institute for Policy Innoation and Harris Polling in early 2008, designed to mirror the Kaiser one, on Canadians’ satisfaction with their own health care.
Keep in mind, these do not speak to how people feel about their country’s health care system as a whole, but only about what they know best – their own care.
The findings show that by and large, Canadians’ level of satisfaction with THEIR OWN care is well below the level of satisfaction that insured Americans feel, and on some things not much better than how uninsured Americans feel.
Since about 90% of American citizens are insured (about 86% if you include all immigrants), it makes sense to consider what kind of sacrifice they will be asked ot make to improve the picture for the uninsured. It seems a pretty big one for limited returns:
For example, 55% of insured Americans are VERY satisfied with their ability to get a Dr’s appt. when they want one, compared to 33% of Canadians, which is barely better than how uninsured Americans (30% very satisfied) feel on that question.
50% of insured Americans are VERY satisfied with their ability to see top-quality specialists if they need one, compared to only 17% of Canadians, again barely better than uninsured Americans at 14%.
55% of insured Americans are VERY satisfied with their ability to get emergency medical care, compared to 26% of Canadians and 20% of uninsured Americans.
42% of insured Americans are VERY satisfied with their ability to get the latest, most sophisticated medical treatments, compared to 16% of Canadians and 11% of uninsured Americans.
The reason these numbers are so different from the ones you cite is simple: There’s a big difference between being asked about something you know intimately, like your own experiences, and being asked about something you know about mostly from what you are told by self-interested others.
Most Americans believe, because they’ve been told over and over, that our system is dysfunctional for MOST people, therefore they are dissatisfied with the system, although not with their own experience of it. Canadians don’t much like their own experiences, but fear (unjustifiably) that they would be much worse off if their system were like ours.
The survey data are collected in:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1286602
LAL, I’ve enjoyed your blog and always enjoy a spirited debate of ideas, but it is clear that my views touch a raw nerve with you. For that, I am truly sorry. Your blog should be a source of enjoyment for you, and not annoyance, as I seem to have made it. I may visit in the future, but I won’t trouble you again with comments. Best of luck to you.
9 LivingAlmostLarge // Mar 8, 2009 at 6:01 pm
Nope Pearl, I can respect the VIEWS, what I cannot RESPECT???? The bitchiness you have over a book review for the SECOND TIME! Stop responding to a book review, read the DAMN BOOK.
I am sick and tired of hearing an opinion over a book written by someone else. I would be okay if I wrote the book, like I wrote the post.
BUT SERIOUSLY it’s a book review. I give a biased review of my opinion of the book. NOT a detailed examination of every page. If you want that, READ THE DAMN book.
That is what upsets me over book reviews. It’s a post about a book.
NOT an opinion piece, which is fine to slander.
Besides the point you are a very rude commentor. You’ve called people Hitler when they disagree with you and I still haven’t censured you.
You’ve likened other Posters to being Nazis and I haven’t censured you. Yet these liberal posters never called you a Nazi or Hitler, when in all honesty, your behavior is closer to the Nazis and Hitler than the liberal posters.
I can’t get why conservatives are so darn touchy about everything. AND why liberals are so wimpy. But I think it’s compassion. Something conservatives seem to lack in spades.
They feel by calling others names and acting as though anyone who has a different opinion is a terrorist, makes them feel better.
My only hope is the US is going to change and soon. That soon people will stop acting as though being a liberal is Hitler, Nazi, socialism. Instead they’ll realize they should stop name calling.
But then again, perhaps it’s a lack of experience. That you haven’t walked in a poor person’s shoes in a long time.
180th Carnival of Debt Reduction - Mar 2, 2009
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