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How $6 could defeat a recession

If the WCC Board of Trustees needs another reason to insist that the WCC Administration focus exclusively on creating programs that lead to high-wage, high-demand jobs, here’s one to consider. We’ve heard (probably for years now) that a recession is right around the corner. Even a broken clock is right twice a day, so at some point, this prediction will come true.

Right now – when the economy is not apparently in recession, American consumers are having trouble making ends meet. Consumers’ inability to manage their money is not a convincing recession indicator. (Some people just can’t manage money.) However, other economic data seem to suggest that consumers are struggling for a number of reasons that might – in fact – complicate their ability to recover from a recession, should one occur.

The Federal Reserve Bank of New York recently reported that household debt is nearly $18T. Household debt includes home mortgages and home equity loans; auto loans; credit card balances; educational debts; and personal loans. That’s an average debt per US household of about $137,000. About three-fourths of that debt arises from the cost of housing. Credit card debt accounts for about $1.1T of all household debt.

That’s a lot of debt to pay off, especially in a tough economy. But the stats raise some additional (and more basic) questions about American household debt.

Does revolving debt (credit card debt) indicate that people spend unrealistically? Do they simply lack financial discipline? Or are they simply not making enough money to cover their expenses, especially in an inflationary economy?

Can American households tolerate a recession right now?

A 2023 survey by found that 78% of American workers live paycheck-to-paycheck. In 2022, 72% of workers spent their entire paycheck upon receipt. Would American households be better able to weather recessions if they could afford to save money? Does the $1.1T in revolving debt represent the difference between what Americans earn and what they spend?

Credit card debt averages about $8,700 per household. The average American household seems to gross about $12,500 less than it spends each year. That’s an earnings gap of about $6 per hour. Americans could largely avoid incurring credit card debt if they could increase their household income by $6 per hour. Eliminating credit card debt would be the first step in building a more secure financial future.

If community colleges focused on high-wage, high-demand jobs, more Americans could eliminate the need to rely on credit cards and could build a personal safety net for those times when recession – which is unavoidable – occurs. It may also enable them to avoid the worst personal financial consequences of recessions – job losses, loan defaults, and foreclosures.

So, why do community colleges like WCC waste so much effort and so many resources equipping people to take low-wage jobs that can’t elevate their household incomes or keep them employed during a recession?

Photo Credit: Al, via Flickr