How we can help low-income families better navigate uncertainty

November 10, 2021
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Rachel Schneider is the founder and CEO of Canary, a company that provides relief funds to workers in need, and the co-author of The Financial Diaries: How American Families Cope in a World of Uncertainty. Here, she shares her optimistic, realistic, and pessimistic views for the future of financial uncertainty in the American workforce.

The COVID-19 pandemic made really visible the way the nature of work and earning in America has changed: people have lots of jobs over the course of their lifetime and lots of volatility in how those jobs pay them. We have in our minds this post-war model that people have a very steady financial life. You go to school, prepare yourself for work, get a job, work steadily, earn more and more over time, save, buy a house, plan for retirement, and then retire.

There are a lot of workers who don't live in that way anymore. 

The core problem is that for many working Americans, earnings do not cover the cost of living. All the freelancers, all of the people who work retail, all the people who work in hospitality: these are just some of the jobs where people who have variability in how many hours they work from week to week, or how much they earn from week to week don't experience that kind of steady life cycle.There is volatility in work even for people who technically have what is considered a full-time job. Hospitals send nurses home if beds are unoccupied. Service workers get sent home if the shift is slow. When we wrote The Financial Diaries, we interviewed an auto mechanic who fixed long haul trucks. Even though he was technically working full-time and employed 40 hours a week, he was paid for every truck he fixed. So there are lots of people with what we traditionally think of as full-time jobs that still deal with financial uncertainty.

This leads to financial uncertainty for many low- and middle-income American families. There isn't a hard-and-fast metric for what is considered financial uncertainty, but many economists agree that when families experience 25 percent swings in income—up or down—from year-to-year, that is the type of income volatility that leads to financial uncertainty. 

And the story of financial uncertainty is, to a great extent, a story of financial shocks—losing a job, a car breaking down—and how we deal with them. Many Americans can make it through the initial financial shock, but then have difficulty playing catch up. If we can eliminate the compounding effects of these financial shocks—through cash payments or a stronger social safety net—we can help ensure that families  get back on their feet much faster; or don't get knocked down at all.

Think of it this way: the pandemic was this massive one-time shock that lasted a long time and affected everyone. The good news was, we dealt with it promptly and at the magnitude it demanded with government relief and the American Rescue Plan, which helped keep families afloat. 

Now, as we think about the long-term challenge of financial uncertainty in America, it's all about how do we keep responding with a similar sense of urgency? Because the kinds of shocks people experience in their own lives operate a lot like the pandemic did. They might not affect everybody all at once, but somebody's having their own personal pandemic every week.

The optimistic outlook: the public and private sector support workers

For me, the optimistic outlook is that we bolster work and workers from all directions. There's a whole set of things the government can do and a whole set of things companies can do. 

On the private-sector side, there are simple fixes like the nuts-and-bolts around scheduling. Simply giving people more scheduling predictability and control makes a huge difference in people's ability to manage the uncertainty in their lives. You can manage childcare, you can manage getting a second job. You can manage going to school on the side if you have more control over your schedule. That allows workers to have more control over their income and to manage budgeting month-to-month and year-to-year. Whereas being “fully employed,” but with unpredictable hours gives workers less control over their income and financial health. 

One example of what the government can do would be a huge infrastructure package that creates a whole set of good jobs as part of that infrastructure. We're not only investing in building bridges and roads, but we are saying the people who build those bridges and roads need to be paid in a certain way and have a certain amount of financial stability. That's a really important part of how we should advance investment in our country. The government does have a real role in establishing standards for what good jobs look like.

But I don't want to anchor financial uncertainty only in work itself because there's also a whole set of thinking about the safety net. Take, for example, the child tax credit. We need to make that permanent. When we think about supporting a family, there's a role for what support they'll get from their workplace and a role for what's just part of the social safety net, the fabric of our society. The child tax credit goes a long way in not only helping families, but also helping families predict their annual budgeting.

We also really need to embrace cash assistance as a general concept. If there's one takeaway we should learn from the pandemic, it's that the trillions of dollars we spent on sending checks to Americans worked. It kept millions of people out of poverty. Food insecurity was actually lower during the pandemic than it was before the pandemic, which is terrifying. The money that we sent out to people to stem the harms that they would otherwise have felt; it really did its job. And telling that over and over and over, making sure people understand that, is really important.

Middle ground: the private sector builds systems to help support communities

The work that I'm doing now is really built for the middle ground—intermediate solutions that shift risk from individuals to their communities to fill systemic gaps. Canary, which is the social enterprise I run, works with employers and other kinds of organizations to deliver emergency cash payments. 

The idea is an employer can set aside a pool of funds that employees and other stakeholders, customers, investors can all contribute to. Then, if an employee experiences their own personal pandemic, they can ask for help. And we help facilitate those grants. So to me, that's what the middle ground looks like: individual communities and individual companies putting in place the communal systems that they need on their own. 

One really important way to think about the uncertainty that people experience is that we've taken these big risks of our society, big risks of a life and put all the pressure for solving those risks onto individual families or individual workers. Our mechanism for spreading that risk across a group of people is really not what it needs to be. In the optimistic version, we spread this risk across all society through engagement from both government and employers. In the middle ground, you spread that risk across groups that feel connected with each other. That's a big piece of what our work at Canary is about. Outside of my own work, in the middle-ground, what we're going to see is individual companies or individual communities putting stopgap safety nets in place in different ways.

Pessimistic: we don't learn any lessons from the pandemic.

We just go back to the status quo, which was incredibly widening wealth inequality, widening income inequality, and no consensus or real motivation to do the work that it needs to get done to change that. Simply put: we don't come out of the pandemic stronger than we went in.

And a big piece of that really is believing that we have an opportunity to change the status quo. Globalization and automation feel to people like forces of nature, it feels like, well, the economy's just delivering jobs that look like this and do this in people's lives. And it's like a storm: we don't really know. But in fact, it actually is analogous to a storm in that they're getting worse because of human inaction. 

There's a lot that we can do to protect people from the natural outcomes of what our economy is doing. A really useful way to think about this is manufacturing jobs, which we think of as the gold standard of middle-class jobs. But during the industrial revolution those were not good jobs: dangerous conditions, long hours, poor pay. They became good jobs because people advocated for better labor conditions. Some employers offered better labor conditions and then the government followed suit. And then those became good jobs. We don't have to take it as a given that this is just what our economy delivers. That's not true. It's much more in our control than we realize. And the way we're going to get to that is understanding that we're all in it together. 

About the Author
Rachel Schneider

Rachel Schneider is the founder and CEO of Canary, a company that provides relief funds to workers in need, and the co-author of The Financial Diaries: How American Families Cope in a World of Uncertainty.

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