FAIR MONEY

Face to Face with Inequality


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Good with Money

Good with Money CoverFAIR Money has just published its first report, Good with Money: Getting by in Silicon Valley. The report, which is based on interviews and a diary study with 10 people struggling to gain or hang on to firm financial footing in a booming local economy, focuses on the most striking finding: how skilled people are with money and how little their skill set overlaps with the money management skills traditionally taught in financial literacy classes.

The report’s introduction sums up the central arguments:

The “master narrative” of financial probity that dominates American culture at this historical moment makes it almost impossible to see the financial behavior of low- and middle-income Americans without a strong punitive bias. This dominant narrative focuses on living well within one’s means, using credit cards responsibly, saving for financial milestones, and managing one’s credit score. It refuses to acknowledge that wage stagnation, underemployment, and rising costs of health care and education leave vast numbers of Americans with insufficient income to cover basic expenses. When we consider financial actions and decisions from the inside out, in their full complexity and in the context of meaningful relationships and life choices, it becomes readily apparent that struggle, hard work, ingenuity, and bad luck are much more common than financial irresponsibility or ignorance.

One of the practical manifestations of this master narrative of (assumed lack of) financial probity is the financial literacy industry, both for-profit and not-for-profit. Financial literacy education makes a foundational assumption that adverse financial outcomes are due to ignorance and/or irresponsibility and that education can effectively eradicate both. This report argues that offering education as a solution to financial struggle is a fairy tale that does real harm. It obscures the massive 30-year-long redistribution of wealth to the very top of American society. It blames the victims of this redistribution for their misfortune and distorts our thinking and our judgment. In obscuring the causes of the financial struggles experienced by average Americans, financial literacy education also makes it much more difficult to think about true solutions.

Good with Money discusses particular “scripts” in the master narrative condemning people who struggle financially, and it proposes a different way to think about their choices and decisions. The report also contains the financial stories of the research participants told through a lens of empathy and historical understanding.

We look forward to your comments.

The FAIR Money Research Collective


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CFPB Takes Action?

FAIR Money came to be out of frustration with the CFPB, which initially declined to tackle payday loans. But now some new rules appear to be under consideration, according to this press release. Here’s the summary:

[CFPB] “is considering proposing rules that would end payday debt traps by requiring lenders to take steps to make sure consumers can repay their loans. The proposals under consideration would also restrict lenders from attempting to collect payment from consumers’ bank accounts in ways that tend to rack up excessive fees. The strong consumer protections being considered would apply to payday loans, vehicle title loans, deposit advance products, and certain high-cost installment loans and open-end loans.”

Better late than never. But it will be interesting to see what happens if the new rules go into effect. In all likelihood, the people who need emergency cash the most will be the least likely to be underwritten, if a means test of some sort is applied. So then what? It could create an opening for more communitarian, informal solutions to deal with cash crunches. Or it could drive more folks into the arms of the internet lenders.


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Measuring the Difference

Remember the Walmart siblings? Well, they are not the only ones who can give us a measure of how unequal things really are.

In “Off the Deep End,” Sarah Anderson of the Institute for Policy Studies calculates that Wall Street bonuses for 2014 are double the size of the total earnings of all full-time minimum-wage earners in America combined. The approximately 1 million full-time minimum wage workers in this country all together pulled down about $14 billion. The bonuses of the 167,000 people on Wall Street came to $28.5 billion.

So if you took those bonuses, Anderson points out, you could just double the minimum wage.


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FAIR Money Meetup on Inequality

FAIR Money is kicking off a monthly Meetup on Saturday March 21 in San Francisco. We’re hoping to meet other people who are interested in inequality and who are itching to do something constructive about it. Interested in joining us? Check out the Meetup page.

We’re planning to make it a movable feast and pick different locations around the Bay Area, so if you can’t make it this time, perhaps another month will work for you.

We hope to see you there!


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PAYE Stands for …?

Anna Bahr presents an analysis of the impact of Obama’s recent “Pay as You Earn” legislation, suggesting that it might really stand for PAY Extra. According to Bahr, “PAYE tends to save money only for those low-income borrowers who have incurred an unusually large federal debt.” Bahr offers a few examples of people with more usual loan amounts, who would actually pay more under PAYE than under current rules, because as they repay more slowly they will incur more interest on their outstanding loans.


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Two Questions Suffice?

According to Susan Dynarski and Judith Scott-Clayton, the FAFSA could consist of just 2 questions and more people would manage to go to college and stay there until they get their degree (The Cost of Complexity in Federal Student Aid).

I have a lot of other questions. For instance, what would happen then? Would we have more college grads with good jobs and solid prospects? Or would we have even more young adults with staggering educational debt and a hard time finding a halfway decent job? It’s instructive to consider the post-graduation realities laid out in It’s Official: The Boomerang Won’t Leave. According to that article, “more than half of recent college graduates are unemployed or underemployed, meaning that they make substandard wages, in jobs that don’t require a college degree.”

One last question: how do you fix that?

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