During Government Shutdown, Many Federal Workers Can't Afford To Miss A Paycheck

The federal government's failure to pay its workers during the shutdown has caused hardship for many. Economist Joseph Stiglitz tells NPR's Melissa Block why so many have no savings to fall back on.

MELISSA BLOCK, HOST:

During the partial government shutdown, we've been hearing the stories of federal workers who aren't getting paid and are struggling to make ends meet.

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AMY FELLOWS: I do live paycheck to paycheck, though. You know, I was able to pay for my rent and my utilities for the first of the month, but now I have nothing in my bank.

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KAMI CLARK: We've used whatever we had in our bank account to pay our last mortgage payment and our last car payment and our last utilities payment.

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LORETTE LEGENDRE: People can't survive like this - you know, to stand out here in 30-degree weather to get food. This is America? Something's wrong here.

BLOCK: We heard there from Amy Fellows, a correctional officer with the Federal Bureau of Prisons. Also, Kami Clark, whose husband works for the Justice Department, and Lorette Legendre, a contractor with the General Services Administration. We'll continue to bring you individual stories like theirs.

But now we want to zoom out to talk more broadly about what's been happening to the U.S. labor force. How many Americans are living paycheck to paycheck? Well, to answer that question, we turn to Nobel Prize-winning economist Joseph Stiglitz. He's been studying wage stagnation and income inequality for years.

Professor Stiglitz, welcome to the program.

JOSEPH STIGLITZ: Nice to be here.

BLOCK: Is there any way to put a number on that question - how many Americans live paycheck to paycheck?

STIGLITZ: Well, the way you can think about it is, what are the size of the cash reserves that Americans have? And a number that came out that was really quite startling last year was that 40 percent of Americans have less than $400. Another number that's bandied around is something like two thirds of Americans have less than a thousand dollars. So what that means is that if they miss a paycheck or two, they're in deep trouble.

BLOCK: And that would apply equally to federal employees compared to anybody in the private sector because the median salary for a federal worker is higher than the average - so the median household income overall in the U.S.

STIGLITZ: It would probably be smaller percentage for the federal employees. But remember, there are a large number of federal employees that are very poorly paid. Some of the TSA workers, you know, the airport security - they're not paid that well. We forget how poor the pay is, for instance, for people who are even in the services, in the Coast Guard. So I think that we forget that we're getting a large fraction of the labor force on the cheap.

BLOCK: And when you think about why folks have not been able to save, and you look back over time, how has that changed? I mean, have people been able to save more in the past than they've been able to save now?

STIGLITZ: One of the big - you might say shocks to the economy was the crisis in 2008. Before the crisis, many Americans thought they were setting aside money in the form of their house. House prices were going up. That was their reserve for their retirement. But, of course, we didn't manage our monetary policy well. We didn't curtail the housing bubble. And when that bubble broke, an awful lot of Americans saw their entire life savings going with that. And so that has had a significant effect on the increase in the number of Americans without reserves and with very low net worth.

BLOCK: This is now the longest shutdown on record, so this won't be a perfect comparison. But if you look back at past shutdowns in the '90s, there was the shutdown in 2013, were federal employees better able to get by then?

STIGLITZ: Well, you know, I was in the 1995 shutdown. I was chairman of the Council of Economic Advisers at the time. That was much shorter. The period of wage stagnation really began with the Bush administration in 2000. Wages actually were doing pretty well in that period of the '90s. So the stark position that so many American workers find themselves is something that is new, something that's developed in the last 18 years.

BLOCK: If you were to wave some sort of economic magic wand and say, OK. If we want to keep people from having to live paycheck to paycheck in the middle class, how would you do that?

STIGLITZ: Well, if I had a magic wand...

BLOCK: Yeah...

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STIGLITZ: ...Which I don't.

BLOCK: It's a hypothetical.

STIGLITZ: I would have done a lot more to increase equality of wages. And if I can't do that, I would have introduced what we would call more progressivity in the tax rates - in other words, lower taxes on our middle class and increase taxes on the top. That's another way of getting more equality in after-tax income. The remarkable thing about the tax bill of December 2017 was that it did just the opposite. Rather than government countering what is going on in the marketplace with this middle class facing a real challenge, what that tax bill in December 2017 did was to exacerbate the problems they already were facing.

BLOCK: I've been talking with Joseph Stiglitz, the Nobel Prize-winning economist. He's also a professor at Columbia University.

Professor Stiglitz, thanks so much.

STIGLITZ: Well, thank you.

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