The Growing Threat to Middle Class Families

Abstract

This year more children will live through their parents' bankruptcy than their parents' divorce. The signs of economic distress for families with children are everywhere. Foreclosures have more than trebled in the past two decades, and families with children are now about 40 percent more likely to lose their homes to foreclosure than their childless counterparts. A family with minor children is nearly three times more likely to file for bankruptcy. These data are particularly shocking because the number of two-income households has soared as millions of mothers have poured into the workplace. Moreover, women raising children alone are now better equipped for financial independence than ever before in history.

The reasons for their failure offer critical insights into how structural changes in the economy and families' efforts to cope with those changes have left millions of middle class households at risk for financial collapse. Using both national data and original data from the 2001 Consumer Bankruptcy Project, it is possible to explore the increasing vulnerability of middle class households. Families have tried to build their own safety nets, sending all adults into the workforce, but, as these data show, they have not succeeded in outrunning the growing risks of job loss, medical problems, and divorce. Their financial failures illustrate how today's social safety net offers inadequate protection to many hard-working, middle-class families. Identifying the problem is a necessary first step in any discussion about how to improve legal and economic systems.