Life's Basics More of a Stretch
Inflation, Stagnating Pay Squeeze Low-Wage Workers

By Michael A. Fletcher
Washington Post Staff Writer
Friday, October 17, 2008

If money were not so tight, Regino Romero would use the basement of his Lorton town home some other way. But with his former wife gone, his paycheck flat and his bills rising, he sees no option but to rent the place out.

The cash -- $400 a month -- helps, but it is not enough. So Romero recently placed an ad in a local newspaper, offering to also rent one of his home's three bedrooms for $350 a month.

Bringing tenants into the comfortable home he shares with his three school-age children is a last resort for Romero, who once saw the middle class as tantalizingly within his reach. But with the economy sputtering, inflation increasing to levels not seen in nearly two decades and his family life in flux, he is struggling to survive economically. Although he has worked full time for nearly 14 years as a cook at the Hilton Crystal City hotel, he feeds his own family with help from a local food pantry.

"It would be hard for me to work another job, because I have custody of the children," Romero said while sitting in his dining room, which is decorated with a picture of the Last Supper and blown-up photos of his parents and other family members. "If you don't take care of the kids, they are going to be on the street. So I have to be here when they are home. But I know my salary cannot pay for everything for my children and myself."

Romero's dilemma is not unlike that of many low-wage workers struggling to cope in an economy that has left them behind. A national survey by The Washington Post, Henry J. Kaiser Family Foundation and Harvard University found that large percentages of low-wage Americans struggle to pay for life's staples. Eight in 10 find it hard to pay for gasoline or save for retirement, while more than six in 10 said it was tough to afford health care. And roughly half said they were having difficulty affording food and housing.

Workers are more productive than ever, as the output per person has hit new highs in the past eight years. But rather than funding wage increases for most employees, the fruit of that new efficiency has largely bypassed all but the people in the best-paying jobs, as inflation-adjusted incomes for typical Americans edged downward from 2000 to 2007.

Now, as the global financial system strains to absorb its biggest shocks since the Great Depression, the once faraway world of Wall Street is making things worse for low-wage workers.

Even before last week's dramatic declines on Wall Street, credit markets had tightened, making borrowing more expensive -- or impossible -- for people and businesses whose credit histories are less than stellar. Already, most lenders are requiring higher down payments for mortgages and more collateral for other loans. Tighter credit means less spending and fewer jobs. Inevitably, those at the bottom of the income ladder are most vulnerable to all of those changes.

"Low-wage workers have had a difficult balancing act in terms of matching their expenses with their limited incomes," said Margaret C. Simms, director of the Urban Institute's Low-Income Working Families Project. "They are very limited in their ability to deal with an emergency."

In Romero's case, the emergency came in the form of the breakup of his family nearly two years ago. Until then, both he and his wife had worked, and the townhouse they bought in 1991 for $129,500 more than doubled in value over the years. But now, several home refinances later and with only his income to pay the rising food, gas and utility bills, he owes more than his house is worth.

More than half of those surveyed in the poll said their incomes had either gone down or stayed the same over the past few years. With their spending power falling, half said they had tapped savings or retirement accounts.

The decline in income during the past eight years, a period of generally robust economic growth and healthy business profits, is one of the most troubling mysteries of the new economy, and it has steadily eroded the standing of those not at the very top of the income ladder.

For Romero, 42, just paying for everyday items brings him to the financial brink, even though he has been steadily employed for more than two decades. Now a U.S. citizen, he started working as a dishwasher in a Capitol Hill restaurant when he arrived from El Salvador in 1985. Not long afterward, he started helping out in the kitchen and liked it.

He landed his first job as a cook a few years later, and after changing jobs a couple times in search of higher pay, he started in the kitchen at the Hilton near Reagan National Airport in 1994. Each workday, Romero wheels his 14-year-old Dodge Caravan into the hotel parking deck before sunrise. By 5 a.m. he is in the kitchen, preparing breakfast and room service orders and items for the morning buffet. Later, he makes lunch.

He enjoys the work, even though it has grown both more demanding and less financially rewarding. Romero made $9.40 an hour back in 1997. At the time, he considered that decent pay. Nearly 11 years later, his salary is just over $13 an hour, which he calls barely enough to survive. "They give you what they are going to give you, and you really have no choice," Romero said.

Despite the meager pay increases, Romero still counted himself fortunate because his job commanded benefits that are becoming increasingly unusual for low-wage workers: medical and dental coverage, sick time and vacation, as well as an employer-funded pension plan. The survey found that three out of 10 respondents lacked health insurance and a similar portion does not get paid vacations. More than four in 10 reported having no retirement plan or paid sick leave.

Romero said that if he had to pay any more than he does already for benefits, it would be disastrous for his family. Since he and his wife separated, they have been stretched nearly to the financial breaking point.

While he was married, he dipped into his home equity twice just to keep up with bills. He was forced to tap his home equity a third time last year to pay his divorce settlement, which gave him primary custody of his three children but forced him to pay $100,000 to his former wife for her share of the townhouse. Now he owes $293,000 for his home, which he estimates is about $13,000 more than its declining value.

Romero is seeking child support from his ex-wife, who worked at a supermarket deli counter before she left. (She now lives in Prince William County.) Meanwhile, the divorce has left Romero with no financial cushion and an inadequate salary. To save money, he often serves his children sandwiches or other meals that he can prepare without using the stove. "My utility bill is something like $260. That's more than half my [weekly] check," he said.

Romero finds himself constantly thinking of ways to save money, or earn more. It is a trait common among low-wage workers: The poll found that six in 10 think of money at least once a day. But as much as he focuses on ways to accumulate some money, life's demands always seem to require more spending.

He pays two college-student neighbors to alternate and get his youngest children to school on the weekday mornings he works; he has to be on the job early and his 17-year-old daughter Veronica leaves for school nearly two hours before her siblings. The squeeze had gotten so tight that Romero applied for food stamps earlier this year, the first time he has turned to the government for help. But he was rejected because his income of nearly $27,000 last year put him just beyond the income criteria. County social workers urged him to seek help from private charities, where the eligibility requirements are generally more flexible.

Surfing the Internet, Veronica learned that he could get free food from the Lorton Community Action Center, a nonprofit social service agency. So for the past several months, Romero has gone there every Tuesday, leaving each time with several bags of bread, produce and canned goods to stock his pantry. The center serves 350 families a week in the Lorton area. "The majority of the people we serve here are working," said Maryam Ulomi, the center's director of emergency services.

The financial struggles leave Romero at a loss for what lies ahead. His daughter graduates from Hayfield High School next year and wants to go to college, but Romero has no idea how he'll pay for it. Also, his mortgage rate will reset in 2012, and he doesn't know how he'll pay for that, either.

Still, he remains hopeful. He is active in Alexandria's Calvary Road Baptist Church, where Veronica works periodically as a $7 an hour babysitter and where his other children, Jason, 7, and Lezlie, 9, have attended camps free of charge. "I always believed that if you give good examples for the children, you are going to have good children," he said. "That's why I keep them in the church. I think it teaches them respect."

Lately, he has been thinking anew about taking a second job or working extra hours, as six in 10 of the poll respondents have done to make ends meet. "Maybe I can get something flexible," Romero said. "Delivering pizzas or delivering newspapers. Something that would give me some money, but allow me to get home quickly if I need to."

Polling director Jon Cohen and staff researcher Madonna Lebling contributed to this report.