Is Your Life too Risky?
Jacob Hacker says we face too much financial uncertainty today. He'd like to fix that.
By Interview By Pat Regnier

(MONEY Magazine) – If you want to know what the Democrats might try to do now that they've won Congress, check out Jacob Hacker's new book, The Great Risk Shift. A 35-year-old Yale political scientist described in the conservative Weekly Standard as one of today's "smartest liberal voices," Hacker argues that America has gone too far in forcing the middle class to bear financial risk once carried by corporations and government. Some of this you know: Health insurance is harder to find; traditional pensions are waning. But Hacker also points out how shockingly insecure our paychecks have become.

Q You've said that incomes are more volatile today. Can you put some numbers on that?

A Sure. Back in the 1970s, an average working-age American had a 7% chance of experiencing a drop of 50% or more in family income. Now he or she has a 17% chance of such a decline.

Q Does a college education protect you?

A As you move up in education level, you are less likely to see wild income swings. Even so, Americans who went to college now experience income instability similar to what high school dropouts faced in the '70s. Unemployment used to be cyclical: People would leave work for a short time and re-enter with a similar job. Now you see big drops in pay and hours, with people spending more time unemployed.

Q What can I do to shield myself against income instability?

A Use the fact that incomes are jumping up and down to your advantage. When you have a windfall, put it away and call it your "sunny day" fund. And save regularly. A major reason personal debt is so high is that we tend to spend as if the high end of our income cycles is going to last forever.

Q You're in favor of a greater federal role in retirement and health care. Don't voters prefer choice over big government?

A Remember that Social Security is quite popular. And even Republican plans for privatizing it still force you to save. There are some modest limits on freedom almost everyone can accept. If all Americans had to make a contribution to a health plan that would move with them from job to job, they could get on with their lives and focus on more important things like work and family.

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