CCF Reports: Economic Woes = Family Stress

CHICAGO, June 19 /PRNewswire-USNewswire/ -- Job and income loss, spiraling gas
prices, and growing residential insecurity top the list of sources of family
stress, according to a briefing report presented today to the Council on
Contemporary Families. "Families and the Current Economic Crisis," submitted
by Evergreen State College Professor Stephanie Coontz and CCF research intern
Valerie Adrian, examines the maelstrom of financial dilemmas facing Americans
today, along with the far-reaching human impact. We know financial stress is
bound to family stress; Coontz and Adrian report what that family stress looks
like in today's economy. This detailed report is attached; it is also
available at www.contemporaryfamilies.org.

As historian Coontz comments, "shared struggles can bring families and
neighborhoods closer, but when people experience setback after setback without
a larger picture of what is going wrong or any strong confidence that society
as a whole is committed to doing something about it, family life and
neighborly solidarities can quickly deteriorate. This report is a call for
researchers and policy-makers to examine the full effect of our current
economic climate on today's families -- and on the prospects for our youth."
Highlights include:

HARD TIMES ARE HARD ON MARRIAGES
-- Job loss and sharp fluctuations of income are linked to unstable marriages.

EVICTIONS MEAN KIDS ARE UPROOTED FROM SCHOOLS
-- Two million children are already affected by the sub-prime mortgage crisis:
and there's more to come as rental properties become less stable and as
"regular mortgages" start to collapse.
-- Children subjected to eviction must often change schools, sometimes several
times: This leads to kids falling behind in school. School relocation can be a
bigger threat to teens than divorce.

DISTRESS AFFECTS PARENTING AND CAN SHIFT CHILDREN'S OUTLOOK
-- Economically distressed parents are more likely to use harsher methods of
disciplining their children. With unstable housing and the loss of
neighborhood connections, they also are less likely to have the support of
their social networks to engage in effective parenting.
-- Children living with economic uncertainty and stressed-out parents are more
vulnerable to depression -- and their expectations (and motivation) can become
lower.

MORE FOOD STAMP USE, FOOD INSECURITY, AND LOW QUALITY FOOD
-- 25 percent of American households with children that are "food insecure,"
meaning that they skip meals or cut back on portions to make their food last
all week.
-- Ironically, one consequence of food insecurity is obesity -- as consumers
substitute cheaper food that can fill them up. Junk food costs an average of
$1.76 per 1,000 calories, while unprocessed foods run $18.16 per 1,000
calories.

FEWER LOANS FOR ASPIRING STUDENTS IN HIGHER EDUCATION
-- While higher education has become a necessity for getting a "good job," one
of the unanticipated consequences of the debt crisis has been that lenders
have begun to deny student loans, not on the basis of a student's financial
profile, but on the school the student attends. Community college students in
particular are getting rejected for loans.

THAT'S NOT ALL: READ MORE ABOUT AGE, RACE, AND GENDER

The report, available below or at www.contemporaryfamilies.org, also details
the different impact that the economic crisis is having by age, race, and
gender.

The Council on Contemporary Families, based at the University of Illinois at
Chicago, is a non-profit, non-partisan association of prominent family
researchers and clinicians whose aim is to make accessible to the press and
public recent research on family formation, marriage, divorce, childhood and
family diversity. To receive periodic briefing papers and fact sheets, contact
Stephanie Coontz, Director of Research and Public Education coontzs@msn.com.

THE EFFECT OF THE ECONOMIC CRISIS ON FAMILIES
A Briefing Paper prepared for the Council on Contemporary Families by
Stephanie Coontz and Valerie Adrian, The Evergreen State College
June 19, 2008

In the following paper, we summarize the extent of the unfolding economic
crisis in America and then discuss its many effects on families, from the
direct impact of economic stress to less obvious effects such as deteriorating
schools, changes in eating habits, and even families' ability to take care of
their pets.

AMERICANS CAUGHT BETWEEN A ROCK AND A HARD PLACE:

THE HARD PLACE: OUR HOUSING CRISIS

In just 10 years, between 1996 and 2006, Americans saw the value of their
houses double. As housing prices outstripped the capacity of many people to
engage traditional home-buying practices and financing, it encouraged
recklessness in some and desperation in others. Many people became nervous
that if they didn't buy soon, they would never be able to afford a home.
Others decided they could afford to spend beyond their means, because the home
would continue to rise in value. The rule of thumb used to be that a home
should cost 2 1/2 times a person's annual salary or less, and that the
purchaser should have enough cash to put down 10-20 percent of the purchase
price. For instance, a person or couple making $100,000 could buy a $250,000
home, and put down somewhere between 25,000 and 50,000, depending on their
credit. But as home prices soared, many prospective purchasers could not buy a
decent home for even three times their annual salary. Many lenders and
borrowers turned to "creative financing," discarding the traditional
safeguards against foreclosure.

First to go was the demand for a cash down payment. In 2004, 42 percent of
first-time home buyers had no down payment at all. But lenders did not stop
there. Interest-only loans, adjustable rate mortgages, and a combination of
the two became increasingly commonplace. With an interest-only loan, a
borrower pays only the interest for a set amount of time; then the loan resets
and the principal is added onto the payment as well. With an adjustable-rate
mortgage, the borrower pays on both principle and interest, but at a low rate
that will later jump up to market value.

These strategies make sense for borrowers whose incomes are sure to go up in
the future. If a student is almost finished with school, for example, and is
guaranteed to generate significantly more income in a few years, an
interest-only loan is a good way to lock in a lower price. Unfortunately, many
people with no hope of higher incomes were also allowed to buy into these
mortgage plans. In California, for instance, 60 percent of new mortgages the
first half of 2005 were interest-only, despite the improbability that this
many people would see a significant jump in income.

Sooner or later, something had to give. In the first three months of 2008,
there was a 112 percent increase in foreclosure filings compared to the same
period in 2007. In April of this year, 243,353 homeowners received notice of
foreclosure and 80,926 had their homes foreclosed -- an increase of 12 percent
over the figures for March and a 65 percent increase compared to foreclosures
in April of last year. There are currently 1.1 million homes, 2.5% of all
loans, in foreclosure, and more than 6 percent of the remaining mortgages are
at least one payment behind. Last month was the 29th consecutive month of
increases in the foreclosure rates. One in every 483 U.S. households either
lost their home to foreclosure, received a default notice or was warned of a
pending auction. Foreclosures will account for 30 percent of national home
sales this year, driving down the sale price of all homes on the market.
During the first quarter of this year, housing prices fell 14.1 percent, the
sharpest downturn since the Standard & Poor's index's inception 20 years ago.

When a house goes into foreclosure, neighboring houses experience an immediate
decrease in value, averaging $3,000 each. As a house sits vacant and lawns
become overgrown, the entire neighborhood gets harder to keep up. Vacant homes
attract vandals, drug users, and squatters. Many middle-class homeowners in
hard-hit states now find themselves plagued with problems they once thought
were unique to the inner cities.

Renters suffer too. They may be up to date on their payments, but if the house
is foreclosed, they must leave. In Franklin County, Ohio, approximately 70
percent of foreclosure evictions are delivered to tenants. This trend may get
worse: In 2006, 42% of mortgages taken out for investment property carried
adjustable rate mortgages.

THE ROCK: SOARING PRICES

Meanwhile, oil prices have gone through the roof, causing food prices to soar.
Every piece of produce that isn't grown locally is delivered to a store by a
truck that runs on diesel, which now costs over $5 a gallon.

In terms of gas costs, city dwellers may be more fortunate than rural
families, despite having to bring their food in from further away. Nationwide,
Americans now spend about 4 percent of their take-home income on gasoline. In
rural areas of the South, New Mexico, Montana, Wyoming and North and South
Dakota, where commutes to work are especially long, the percentage of family
income that goes to gas is more than three times higher than that.

In the fall, Americans will experience yet another effect of high oil prices.
The current price for home heating oil in Maine, is $4.60 gallon, a 70 percent
increase over last year. This winter, middle-class Americans may experience
the "heat or eat" dilemma that physicians report already afflicts many poorer
Americans.

THE CRUNCH

All these factors have contributed to a fall in real wages, as rising living
costs cut into salaries, and have also caused a rise in unemployment and
underemployment In the past 5 months, 324,000 jobs have been lost, and in May,
unemployment took its biggest leap in more than 20 years. Especially hard hit
has been the construction industry, a trend that has a disproportionate impact
on Hispanic families, since construction is a prime source of work for
blue-collar Hispanic men. But the transportation and manufacturing industries,
traditionally a source of "family wage" jobs for men without a college degree,
in all racial-ethnic groups, have also suffered.

The unemployment rate does not count people who are not looking for work, even
if they would like to have a job. In March the Labor Department reported that
the jobless rate had topped 13 percent for men in the prime age group of
25-54. Only once before since World War II has the rate gotten that high. Some
of these men may be in school or have taken early retirement, but many are
"discouraged" workers, who have given up actively looking for work.

Blue collar workers who are not laid off are less likely to earn middle-class
incomes than in the past: Analyses of family budgets suggest that a wage of
$20 an hour, or $41,600 per year, is the minimum necessary to put a family
into the middle class. According to calculations by the Bureau of Labor
Statistics, the number of hourly workers in manufacturing who earn that much
is down nearly 60 percent since 1979, and it is sliding month by month, as
airlines and automotive industries create two-tier hiring structures and exact
wage concessions from employees.

Workers whose hourly pay has not been cut are often forced to take a reduction
in hours. There has been a tremendous spike in workers who have a job but
cannot get enough hours to earn a living wage. They are often expected to be
on call, which doesn't leave them time for a second job.

Employees who rely on commissions and tips are also feeling the pinch. At
least 1 out of every five American workers earns variable pay, and many of
them have seen their incomes shrink substantially. Meanwhile the 20 million
small business owners and 5 million "micro" business owners and their
employees are experiencing declines in spending and patronage by customers.

Even before the current crisis, income instability was on the rise: Nearly 10
percent of workers in the early 2000s suffered from a loss of income of 50
percent or more, compared to only 4 percent in the early 1970s.

WHAT DOES THE CRUNCH MEAN FOR FAMILIES?

Both job loss and sharp fluctuations in income are highly correlated with
marital instability. And the inability of many families to sell their homes
has also led to a growing number of couples deciding that one must follow the
job while the other holds down the house. One organization that tracks job
mobility reports a 50 percent increase over the past four years in the number
of commuter marriages, where spouses live in different cities. Such
separations, whether temporary or permanent, are hard on both adults and
children. But children face many other risks in this economy, even when their
parents manage to stay together.

EFFECTS OF THE HOUSING CRISIS ON CHILDREN AND TEENS

According to the Washington, D.C. policy group, First Focus, 2 million
children are directly affected by the sub-prime mortgage crisis. This number
does not include the children who live in rentals and will receive eviction
notices as their homeowners fail to pay the mortgage. Nor does it include
children whose parents have conventional mortgages and are facing foreclosure.
More than 130,000 children in Florida and 312,000 in California will be
evicted in 2008 and 2009.

Eviction often means that children must change schools, in many cases more
than once, as families use interim housing before finding a more permanent
place. When children change schools frequently, their work and behavior can
suffer. According to the National Assessment of Educational Progress, children
who change schools two or more times in a school year are twice as likely to
perform below grade level in reading and math as students who remain in the
same school. Frequent moves also contribute to higher drop out rates.

School relocation is particularly detrimental for teens, who rely more on
their peer groups and have a tougher time joining new ones, than younger
children. In fact, school relocation during mid-year is more highly associated
with teen delinquency than is divorce. Teens who move frequently are 77
percent more likely to have four or more behavior issues and 20 percent more
likely to exhibit violent behavior in high school than their more
residentially-stable peers.

Even when children don't switch schools, the housing crisis can hurt their
education, because school funding depends largely upon property taxes, which
fall when home values drop. Schools are also one of the few tax projects on
which voters can directly say yea or nay. With less money in their bank
accounts and more money in their gas tanks, voters are less likely to approve
tax increases for schools.

JOB LOSS AND FINANCIAL STRAIN INCREASE THE RISK OF IMPAIRED PARENTING

One of the main ways that children are hurt by unemployment and income loss,
even at levels well above the poverty line, is through the increase in stress
and depression that their parents experience. Parents with steady incomes,
secure housing, and access to community support networks are those least
likely to use punitive methods of childrearing. Conversely,
economically-distressed parents tend to use harsh or inconsistent discipline
even when they recognize and feel guilty about its effects. Parenting
practices also become harsher and less consistent when parents are
experiencing marital conflict, which is also heightened by job loss and
housing insecurity.

Most of the effect of economic loss on children is channeled through
deterioration in parenting practices, but there's a direct impact too.
Economic loss has been found to increase kids' vulnerability to peer pressure.
Children who experience economic loss often become depressed and less
motivated, and their lowered aspirations may have long-range consequences in
their lives.

In extreme cases, economic stress can trigger outright child abuse. In
Florida, for example, The Exchange Club CASTLE, a child abuse prevention
organization in Fort Pierce, reports that its May referral list for abuse and
neglect was twice the normal size. The Department of Children and Families'
hotline of Palm Beach County Florida now receives 900-plus more calls per
month than a year ago.

FOOD AND NUTRITION ISSUES

Even when parents continue to parent effectively, food insecurity is a real
threat to children in these difficult times. March 2008 saw a 1.5 million (5.7
percent) increase in the food stamp rolls from the previous year. March's
enrollment of 27.88 million people represents a 219,000 person increase from
February.

Twenty-five percent of American households with children are food insecure,
which means people in those homes cut back on portions or skip meals in order
to stretch the food out to last all day. America's Second Harvest -- The
Nation's Food Bank Network -- surveyed 180 food banks nationwide in April, and
found that 99% have seen a substantial increase in the number of people
seeking help, while donations have fallen off. Food Bank for New York City,
the number one food pantry for the city, has experienced a 47 percent drop in
food donations this year. Congress' farm bill will provide some relief to the
food insecure by giving money to food programs, including food pantries, but
help will not arrive until October. Sometimes families have to choose between
feeding themselves and feeding their pets, a problem that may seem trivial
until you have to tell your 6-year-old that the family dog must be given away.
The SPCA in Santa Cruz, CA, which runs a food bank for pets, has seen a 20
percent spike in demand over the past six months.

The need to economize in hard times also affects children's (and adults')
nutrition in other ways. One ironic consequence of economic stress tends to be
obesity, as consumers substitute cheaper food that can fill them up. Junk food
costs an average of $1.76 per 1,000 calories, while unprocessed foods run
$18.16 per 1,000 calories. A recent marketing poll found that a third of all
households had begun to substitute boxed or frozen goods for fresh ones.

COLLEGE EDUCATIONS AT RISK

One of the unanticipated consequences of the debt crisis has been that lenders
have begun to deny student loans, not on the basis of a student's financial
profile, but on the school the student attends. Some of the country's largest
banks are turning down loan applications for students planning to attend
community colleges and second- or third-tier universities. Forty percent of
America's undergraduates attend community college, and for many lower-income
students these are the only option.

DIFFERENT EFFECTS OF THE ECONOMIC CRISIS BY AGE, RACE, AND GENDER

Thirty million Americans are over age 65, and with the average social security
payment set at $1,079, there is not much of a margin to cover rising medical,
prescription, food, and gas bills. Since more than a third of retired
Americans help their children financially, according to a recent AARP poll,
their financial troubles may trickle down to their children and grandchildren
as well.

The AARP reports that the majority of baby boomers (aged 44-62) say they are
struggling to make ends meet. Sixty percent have cut back on extras and 25
percent report having trouble paying their mortgage. Young adults aged 25-35
have their own issues. Many are still paying off student loans, and 35 percent
are not saving for retirement at all.

As is so often the case, African Americans and Hispanics are at higher risk
both for job loss and foreclosure than are whites. Studies consistently show
that even where black and white families earn the same yearly income,
African-Americans have much lower levels of accumulated wealth, largely
because their mobility has been more recent and they did not inherit homes or
assets from earlier generations. More than half of all mortgages granted to
African Americans in 2006 were sub-prime. In fact, a family living in an
upper-middle class African American neighborhood is twice as likely to have a
sub-prime mortgage as a lower-middle class white family. Hispanics were also
over-represented in the sub-prime housing market. Given the continuing
residential segregation in America, foreclosures on such homes will
disproportionately affect African-American and Hispanic neighborhoods.

Finally, men and women are affected by the job market cuts differently. In the
recession of 2001-2004, women lost jobs at a higher rate than men. Today the
reverse is true. From November 2007 through April 2008, men lost 700,000 jobs,
especially in traditional "family-wage" occupations such as manufacturing and
construction. Women, by contrast, gained almost 300,000 jobs, since
female-dominated fields such as health care have remained strong. No one is
"winning" any gender battles here, though. The pay gap between men and women
had been narrowing for several years, but this past year it began to widen
again. And in families where women have become the main providers, the results
are mixed. Some families report increased respect by husbands and children for
women's economic contributions. But men who have a strong identification with
the "male breadwinner" role experience a decline in marital quality when their
wife begins to bring in a larger share of family income.

SOURCE Council on Contemporary Families

Virginia Rutter, Framingham State College Department of Sociology,
+1-206-375-4139, vrutter@gmail.com, for the Council on Contemporary Families