AUDIE CORNISH, HOST:
This is the week that many government workers will miss their first paycheck. And as the shutdown has gone on, we've been hearing from a lot of them who say they are living from paycheck to paycheck. For some, the promise of back pay doesn't solve the problem of paying your phone bill or your mortgage or putting dinner on the table for your family today. We wanted to better understand why so many people live paycheck to paycheck in America, so we've called on Elise Gould of the Economic Policy Institute. She studies wages, poverty and inequality. Welcome to the program.
ELISE GOULD: Thank you so much.
CORNISH: So for economists, what's the definition of living paycheck to paycheck?
GOULD: That's a great question. I would say there's not a uniform understanding among economists. But one thing I would say is that there's a Federal Reserve study that asked families whether or not they could cover an unexpected expense of $400. So if all of a sudden you had to pay $400, would you have enough money to be able to cover that? And 4 in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or cover it by selling something or borrowing money, such as putting it on a credit card.
So I think the idea that they don't have enough money to cover that, that is pretty widespread. So that suggests about 40 percent of Americans have that problem.
CORNISH: We've been hearing from a lot of federal workers who are worried about missing a paycheck. And, you know, some of these people have good jobs, full-time work, long-term employment. Can you be middle class or even wealthy and still live paycheck to paycheck?
GOULD: Yes, absolutely. We know it costs a lot to get by across this country when you figure in things like housing costs, food, medical care, maybe child care, transportation. And every day, there are families that go without. But if you don't have that paycheck, that shock - it could be a paycheck, it could be a health shock, it could be a large car repair - any of those things can lead to total financial destabilization for many workers and their families. And we're not just talking about poor families. These are middle class families that could be destabilized by not having that paycheck.
CORNISH: But you have the president touting the strength of the U.S. economy, right? The unemployment rate has been at a historic low. Why are so many people still running out of money every month?
GOULD: Well, it's really harder to saving the economy today because most workers haven't seen significant increases in their pay to be able to increase their standard of living, giving them any sort of cushion to save. So yes, it's true, we have seen the economy improve. And the statistics that I cited before, those are better than they were at the depths of the Great Recession.
And so more people have jobs, and that's all great. More people are returning to the labor force. But we have seen stagnation in pay. We have seen that, you know, workers - they need both parents to support a family, right? Those are longer-term trends because we have seen stagnation in worker pay and in family incomes.
So without additional resources to draw on, families often to have to resort to suboptimal solutions such as payday lending or going without recommended medical treatment or leaving school without a degree but racking up lots of debt. So these are lots of problems that middle class families face today.
CORNISH: What's interesting about this is here we are all these years after the economic meltdown and that conversation about people needing to save and create a financial cushion, but you're saying it's actually harder to do that even if more Americans wanted to or tried?
GOULD: Yes, absolutely because people's pay is just barely enough to make ends meet, and for many people it's not enough to make ends meet. And so being able to afford child care, there's been a lot information about, you know, how expensive it is for many families. So that one expense can really make or break what it takes to, you know, put food on the table.
So I think that there are a lot of things that are happening to families today. They're being stretched incredibly thin. And losing this paycheck for these federal workers - not just the federal workers, also the federal contractors, federal contractors that are out of work because of the partial government shutdown won't be getting that backpay.
So it's not even a question of putting off getting that money. It's a question of never getting it in the first place.
CORNISH: Elise Gould is a senior economist with the Economic Policy Institute. Thank you for speaking with us.
GOULD: Thank you so much for having this important conversation. Transcript provided by NPR, Copyright NPR.
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