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Low-Wage Jobs and Bankruptcy

The data-driven news site FiveThirtyEight.com recently ran a discouraging article on low-wage workers. To not belabor its point, workers in minimum-wage jobs are much less likely to move to higher-paying jobs than in the late 1990s, when jobs and pay raises were more common. In 1998, for instance, 20 percent of minimum-wage workers were in jobs at the same pay level one year later, but today that figure has risen to 30 percent. The peak was in 2004, 40 percent, so the data the article relies on might not be so precise, but even workers who move up the career ladder aren’t doing much better than before. About two-thirds of minimum-wage workers move to jobs that pay only 10 percent better, up from half of similar workers in the 1990s.

Alarmingly, low-income careers are normalizing. Minimum-wage workers are older, better educated, more likely to have children, and less likely to be employed to obtain supplemental household income than before. The teenager or college student trying to collect some disposable income is increasingly rare. It’s no wonder, then, that workers at McDonald’s restaurants in New York City went on strike for higher pay last year. Demands for $15-per-hour minimum wages have led to legislation in some U.S. cities, notably Seattle.

Unfortunately, it doesn’t look like low-wage work is going away, thanks to the non-recovery of the economy. As a result, it’s worthwhile to focus on how low-income work relates to debt and bankruptcy. Here are a few points.

First of all, start keeping a budget. FiveThirtyEight.com’s research indicates that once someone starts in a low-wage occupation, especially to maintain a household, he or she will be stuck in it for a while. Thus, budgeting expenses as best as possible given the time constraints to do so is crucial. Raises and significant career transfers aren’t likely, nor are promotions. It’s better to try to move to a different employer in a different field than expect a promotion within one’s current organization.

Second, stay away from payday loans and other forms of short-term credit. Because of the low-wage trap, any credit workers borrow will probably face stiff interest rates and other onerous repayment terms. Payday loans can lead to “death traps” as described by the Consumer Financial Protection Bureau.

Similarly be wary of is student loans. Aside from loans to students’ parents (Parent PLUS loans), direct loans from the government come with income-based repayment protections that students should take advantage of if their careers do not take off. Private loans do not come with such repayment plans and are more difficult to discharge in bankruptcy. The government may alter its loan programs at any time, so student debtors should not assume it will always protect them.

The FiveThirtyEight.com article can be found here.

The persistence of low-wage jobs is dispiriting, but for anyone whose incomes are too low to cover their debts, talking to an experienced New York bankruptcy lawyer can help you evaluate your options and get back on track.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced  bankruptcy attorney New York Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

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