Cold Weather and Wobbly Incomes

It’s a foggy Sunday morning in Maine, and I was struck by both the truth and the missing pieces in Ben Stein’s column in today’s New York Times. Stein points out that while the increase in gasoline prices has very little effect on him (and other members of the professional classes), it can be devastating to the “average private worker [who] now earns very roughly $600 a week, not counting fringe benefits.” His solution-which he quickly dismisses-is to balance the budget. In the meantime, he says, “the only thing for workers to do is to drive less, buy fuel-efficient cars and trucks and, above all, whip their children into a frenzy to get more education.”

Accepting that Stein was to some extent engaging in hyperbole (we’ll assume he’s not urging corporal punishment), the steps he suggests may be necessary, but they’re almost certainly not sufficient. In particular, self-help will not be sufficient.

First, up here in New England, it’s cold a good part of the year, and the dominant form of heating is oil. Home heating prices have skyrocketed over the past several years, and the upcoming winter is expected to be even worse. Both homeowners and renters are affected, some of the latter when their landlords, unable to afford high oil prices (and, frequently, an exploding mortgage), walk away from the property leaving an empty oil tank. Businesses and local governments are feeling the pain too.

Maine isn’t alone. Families across the country, especially lower-income families, are feeling the pain of higher energy costs to heat and cool their homes. The recently-released 2008 Energy Costs Survey by the Energy Programs Consortium (EPC) found that higher gasoline and home energy prices had impacted the ability of a significant proportion of families at even 350% of the poverty level to purchase basic necessities, including food and medical care.

Thus, while high and rising gasoline prices and suggestions to change car-buying and driving habits are helpful, at least as big a challenge will be to improve the manner in which we build, heat and cool our homes. We’re also going to have to do a much better job of supporting low- and moderate-income families through this period with both income supports and more effective assistance in improving the energy efficiency of their homes. Public and philanthropic efforts, such as EPC’s Weatherization, Rehab and Asset Preservation (WRAP) project and private efforts such as the Homeowners’ Energy Conservation Loan available at ShoreBank in Chicago and energy efficient mortgages available from other lenders, to improve both home energy efficiency and its financing, are a start, but obviously not enough.

Second, as Peter Gosselin points out in his new book High Wire, which he and I discussed at a New America forum on Friday, even a college education is no longer a guarantee against very significant income volatility. In the period between 1970 and today, the percentage of college-educated households whose income dropped by more than 50% over a two-year period increased from 2% to 6-8%. While this is still less volatility than those without a college education experience, it suggests that Stein’s prescription for avoiding the impact of higher energy prices may not be so simple as “more education.”

The solution will need to involve more and better jobs and incomes for a far broader spectrum of Americans as well as improvements in critical risk factors such as health care and enhanced safety nets for the times when risk overwhelms income. In short, what we’re talking about here are major policy changes, not just self-help.