Planet Money: Episode 707: Brexit

http://www.npr.org/player/embed/483142244/483455346

ROBERT SMITH, HOST:

Quick warning – there is one curse word in this show.

JACOB GOLDSTEIN, HOST:

Is it blimey?

SMITH: Not a curse word – not here at least. I did not get a lot of sleep last night because all through the night, the United Kingdom was counting votes, and I stayed up to watch it. And it’s weirdly riveting, you know – Stoke-on-Trent votes leave, Trent-on-Stoke votes stay.

GOLDSTEIN: Which is not the same place.

SMITH: Not the same place. It’s weird. It’s weird. It wasn’t until around 4 in the morning their time that they called it. The citizens of the United Kingdom had voted to leave the European Union.

GOLDSTEIN: So, Robert, we came into the office this morning, and we made a call to England. We called Tim Harford. He’s an economist and an old friend of the show.

TIM HARFORD: How you doing, guys?

SMITH: We’re doing great. How’re you doing?

HARFORD: I’ve had better days. You know, I think we just need a hug.

SMITH: Oh, we would definitely give you a hug if we could.

GOLDSTEIN: Harford you’re the most huggable economist I know.

HARFORD: OK. That’s high praise, I think.

GOLDSTEIN: It’s a low bar. Let’s be honest.

HARFORD: OK.

SMITH: We talked to Tim at his house in England, but that’s not where he was when he first heard what happened.

HARFORD: I woke up this morning in Paris.

SMITH: In Paris?

HARFORD: In Paris, hey, you know, where – we haven’t left the European Union yet, so I’m allowed to be in Paris. That’s how we roll in the European Union, or at least that is how we used to roll until the referendum result.

SMITH: So Tim was rushing to catch the train back to the U.K., reading all this news about what his fellow citizens had done. And how did you feel?

HARFORD: How did I feel as an economist, or how did I feel as a human being?

SMITH: As a human being.

HARFORD: As a human being – actually, you want to know the truth? As the taxi driver dropped me off, he said, monsieur, you will always be welcome back in France. And I wanted to cry. I really did. You know, it was just that moment of – what can you do? What can you do?

SMITH: How did you feel as an economist?

HARFORD: Oh, [expletive]. This is going to be bad.

SMITH: Hello, and welcome to PLANET MONEY. I’m Robert Smith.

GOLDSTEIN: And I’m Jacob Goldstein. It was a big morning for everybody on both sides of the referendum. The tabloids in London – they called it Independence Day. The value of the British pound fell to the lowest point in, like, 30 years.

SMITH: And by the time we got up here in New York, stock markets were diving around the world. The prime minister, David Cameron, said he would resign later this year.

GOLDSTEIN: Today on the show, we talk with Tim Harford about what just happened and what’s coming next.

(SOUNDBITE OF MUSIC)

SMITH: The most amazing thing for me about the EU referendum is that it even happened at all. The U.K. almost never asks its citizens to vote on anything, but the EU referendum was designed to solve this really specific political problem for the prime minister, for David Cameron. He’s a conservative, and like the Republicans here in the United States recently, he was facing this really divided party. Some conservatives in Britain hated Europe – always had. Some thought it was good for business. Cameron – personally, he had no problem with the EU.

GOLDSTEIN: Yeah, or at least he figured the U.K. would be better off inside the EU. But he knew politically he had to get this issue – in or out of the EU – off the table. He had to unite his Conservative Party. So back in 2013, he made this big speech.

(SOUNDBITE OF ARCHIVED RECORDING)

DAVID CAMERON: We will give the British people a referendum with a very simple in-or-out choice – to stay in the European Union on these new terms or to come out all together. It will be an in-out referendum. It is time for the British people to have their say. It is time for us to settle this question about Britain and Europe.

SMITH: And it worked. For years, it worked. The conservatives stopped bickering so much, and Cameron got to stay prime minister, stay the head of his party. The conservatives won re-election. Everything was going according to plan, except for that little promise – the promise of a vote. Eventually, he was going to have to have that referendum, and Tim Harford says he thought he had a shot.

HARFORD: Our prime minister, David Cameron, likes to gamble because that’s backfired for him now.

GOLDSTEIN: Of course, this morning, David Cameron announced that he would resign later this year.

(SOUNDBITE OF ARCHIVED RECORDING)

CAMERON: I do not think it will be right for me to try to be the captain that steers our country to its next destination.

GOLDSTEIN: They do love a naval metaphor.

SMITH: What happened to going down with the ship?

GOLDSTEIN: Too far (laughter).

HARFORD: I mean, this is – this is the biggest humiliation for any British prime minister probably since the Suez crisis of the 1950s. I mean, this is a – this is big. And David Cameron has been prime minister since 2010. He’s been prime minister a long time, and he will be remembered for this and probably nothing else. And he’s got to live with that. He made the decision. He threw the dice. And he likes to gamble, but sometimes you don’t win.

SMITH: What was this vote really about?

HARFORD: I think it’s hard to say what it’s really about because the different campaigns were making very different arguments. And even the leave campaign was actually acrimoniously split down the middle – a bunch of people being pretty xenophobic and saying this is all about controlling immigration and a bunch of other people saying this is all about freeing ourselves from Brussels regulation, European Union regulation and embracing global free trade. So the – I mean, these people are not in a situation to form a government together because this is a very, very different message coming.

GOLDSTEIN: They’re almost opposite, right? One is saying like, oh, like, free trade, which typically goes with free movement of workers, which is just a variant of free trade. The other one is saying no, shut it down. That’s kind of the opposite.

HARFORD: Yeah, yeah. But – it is, but I think the thing is the European Union has come to stand for all kinds of things, rightly or wrongly. It’s come to stand for big government. It’s come to stand for regulation and interference. And we don’t get to make up our own mind. It’s come to stand for an influx of people, and we can’t control that. And I mean, the European Union maybe deserves the blame for some of that, but not for all of it. But because different people blame the European Union for different things and have a different view about what actually is the problem, if there is a problem, that – different people have voted to leave for very different reasons. And that makes this moment very uncertain because it’s not clear who is now going to gain the upper hand and what they will actually want to do.

SMITH: Has there been a moment when you were frustrated with the EU, when you were, like – I don’t know – reading a package of cheese or something and are just like – look at all – look at all the stuff in it. Contents – cheese. Or you know, that you’ve just raged against something that made your life seem bureaucratic and petty.

HARFORD: No, not really because a lot of this is entirely fictional. And we complain about European Union regulations. There’s a great meme going around about how European Union cabbage regulations are 26,000 words long.

SMITH: The regulations for cabbage.

HARFORD: It’s entirely made up. It doesn’t exist.

SMITH: I heard that they worried the EU regulations were going to slow down your tea time by making the teakettle a lower wattage and that the toasters wouldn’t toast as well.

HARFORD: I didn’t look at that one in detail. I seem to remember that it was rather overblown. That’s certainly not something that I’m concerned about. And it’s certainly not something I’m willing to leave the European Union over.

GOLDSTEIN: So you – where you live? Oxford Town or you live in some shire or something? Where do you live?

HARFORD: You could just call it Oxford if you like. It’s twee enough. You know, I pass J.R.R. Tolkien’s house every morning when I take my kids to school.

GOLDSTEIN: No, no, should…

HARFORD: So, you know, that should be plenty twee enough for you guys.

GOLDSTEIN: You live actually in a hobbit house? Or…

HARFORD: Yeah. If it makes you happier to think that, go for it.

SMITH: So how did your, like – I don’t know – neighborhood or whatever – how did they vote?

HARFORD: Oxford as a whole voted strongly for remain. I haven’t seen the breakdown of my local district, but judging by the stickers on the cars and the – in people’s front rooms, it’s remain.

GOLDSTEIN: We asked him, you know, if he knew anyone who voted to leave, and he said he didn’t really. And this actually surprised him because the way politics generally works in the U.K. is that you know a lot of people of different parties. Oh, he’s a Labour person. He’s a liberal person. He’s a conservative. But in this particular case, the referendum did not break down on political lines. It broke down on real demographic lines. He said each group didn’t even know the other one at all. It’s like they were speaking different languages, talking past each other.

HARFORD: So you had the International Monetary Fund, you had the Bank of England, the London School of Economics – all the all the economic experts saying leaving the EU is going to be really, really bad for the British economy. And then a lot of people just said, well, hang on. Weren’t you the guys who screwed up the financial crisis, so why should we believe you now? But they have a point right?

GOLDSTEIN: But, Tim, you are one of those experts. I mean, you’re an economist. Your entire life is saying here are facts. Here’s studies. This is how the world works. And essentially part of this vote is saying we don’t care about that. We don’t care what the experts say.

HARFORD: Yeah, that’s absolutely right. I fact-checked the referendum campaign for the BBC. We were just going through what all the different sides of the argument were saying. And I was struck by how little people seem to be interested in facts. And also by the fact that the the leave campaign – they were leading with a – with a alleged fact that was just demonstrably untrue about how much the EU cost the country. And we were going to spend all this money on health care instead.

And every independent expert said that’s just not true, and it didn’t matter. And that’s alarming, as well. I mean, it’s one thing to make an important decision, and I think the country’s made the wrong decision. But British politicians used to be good at misleading people without actually lying. And that particular discipline appears to have been abandoned in this campaign, which is – it’s hard to put the genie back in that bottle, either.

SMITH: Did you fact check the remain campaign, as well? And what did you find?

HARFORD: Oh, of course. And the remain campaign were big on taking economic forecasts that looked gloomy and presenting the forecasts as absolute fact.

SMITH: Is it possible that this is not a big deal? I mean, certainly this morning, it seems like a dramatic event, but these things pass.

HARFORD: I think it’s very hard to make the case that this is not a big deal, but let me try to make the case. So the EU wants to minimize problems. Most British politicians think we should have stayed. So they sit down around a table, and they figure out some kind of deal – maybe a Norway style deal.

Now, Norway has a relationship with EU which is very close. It has to accept most EU rules. It has to pay EU membership fees. It has free movement of people, just like other EU countries, but it’s not actually in the EU, so it’s a very EU-like relationship. So maybe the no-big-deal camp says, OK, everyone sits down, and we stay as close to remaining in the EU as absolutely as is possible to be, which is the Norway model. I don’t think that’s going to happen, but that the case that this is no big deal.

SMITH: But you think it is a big deal, so why? What do you think is going to happen? Or why do you think this is a big deal?

HARFORD: Purely from the point of view of the U.K., we now have political chaos. We’ve got parties in Ireland saying they want to merge with Northern Ireland. You’ve got parties in Scotland saying you want to leave the U.K. You’ve got the Spanish government saying it would like to take ownership of Gibraltar, which is a British overseas territory. The prime minister’s leaving. We don’t know who’s going to replace him. We’ve got a weak opposition. So just the politics of this is a mess.

Economically, you can just look at the markets. This morning, the pound was down 10 percent. The stock markets were down 10 percent. And a lot of international companies invest in the U.K. as a base for doing business with the rest of the European Union. It’s hard to see what a foreign investor – say, a Japanese car company wants to build a factory to make cars. Historically, the U.K. would’ve been a great place to do that – good infrastructure, political stability (laughter) and access to the European market. And now it’s not clear that they – they’re going to have access to the European market.

So most economists think this is going to be bad for the U.K. immediately – it may provoke a recession – and also bad for the U.K. economy in the long run. Opinion’s divided. Maybe it’s 4 percent of GDP. Maybe it’s 6. Maybe it’s 10 percent of GDP. But we’re likely to be poorer in the long run.

SMITH: Any chance for a do-over? Two out of three?

HARFORD: I think it’s unlikely. I’d like one, but I think it’s unlikely.

GOLDSTEIN: Good luck, Harford. Thanks for talking to us.

SMITH: Yeah, thanks.

HARFORD: Thank you very much.

SMITH: You can email us at planetmoney@npr.org at npr.org or tweet at us at @planetmoney. We cranked the show out today in just a few hours, so extra special thanks to our producers. Nick Fountain did most of the heavy lifting. He got an assist from Sally Helm and Jess Jiang.

GOLDSTEIN: Special thanks to Tim Harford. He has a regular column at The Financial Times. His latest book, like many of his books, starts with the words “Undercover Economist.” It is “The Undercover Economist Strikes Back.” If you’re looking for something else to listen to, you can try the NPR politics podcast. This week, their show also is about Brexit.

SMITH: Brexit is the thing that brings us all together.

GOLDSTEIN: I’m Jacob Goldstein.

SMITH: And I’m Robert Smith. Thanks for listening.

(SOUNDBITE OF MUSIC)

HARFORD: It’s all about the pasta.

SMITH: It’s about the what?

GOLDSTEIN: Pasta. That’s what they call – it they call it pasta in England.

SMITH: OK (laughter).

Copyright © 2016 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

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MoneySense: Spend less, eat better

One man’s quest to cut his grocery bill led him to save $1,500 a year

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by Mark Brown
May 10th, 2016

From the June 2016 issue of the magazine.
(Photograph by Liam Mogan, Food Styling by Andrew Bullis)

(Photograph by Liam Mogan, Food Styling by Andrew Bullis)

The complex where we lived until recently had only a single chute for waste. Several times a week, I would step into a pair of chewed up sneakers and make the 20-metre stroll to toss our garbage. As a family, we were diligent recyclers—cutting down boxes and bundling newspapers, which we still read—but we paid little attention to our kitchen waste. Bags filled with wrappers and plastic but also egg shells, old peppers and leftovers, were routinely pushed past the trap door and quickly forgotten.

When we moved to a new home earlier this year, our waste became harder to ignore. It now sits right outside our back door, laid bare to see. Thinking about it makes my stomach churn. Not so much the moist slop of decaying food scraps, but the value and volume of the food we carelessly throw away.

During one particularly bad stretch, my family threw out most of a carton of blueberries, a half rack of ribs, rice, baked potatoes and an unopened Costco-sized tray of chicken that had developed a pungent odor in our fridge when life interrupted our meal plans. That didn’t account for leftover scraps from our plates or the untouched dinner snubbed by an occasionally picky toddler who demanded cereal instead of roast chicken. I tallied it up: We tossed an estimated $40 worth of food in a week or so. Reading the wilting leaves in our green bin, I saw an opportunity to reduce our waste and lower our grocery bill.

I’m the resident shopper and chef in the family, so it’s mostly down to me. During weekly runs to the grocery store, I rarely bother with a list. We mostly pick up the same items each week: chicken, a couple tins of diced tomatoes, broccoli, asparagus, green beans. Our basket is consistent to the point where I can often guess the total before it gets rung through—typically $115 a week. That adds up to about $6,000 a year, for our family of four.

Apart from the sameness of our meals, this isn’t something we viewed a problem, until we tracked our waste and realized it was. In retrospect there have been too many occasions when the depths of our fridge decayed into a wasteland of half-used onions, liquefied cucumbers, petrified lemons and colourful penicillin colonies hiding half-eaten cheeses—all orphan ingredients from slapdash meals dreamed up on the fly.

We are not alone. At the University of Guelph, assistant professor Kate Parizeau was part of a research team that conducted an audit of residential food waste in the summer of 2014. They cracked open green bins to uncover the rotten truth about how much food is being tossed: The average family generated 4.5 kg of food waste every week. Of that, roughly 2.3 kg were avoidable, while another 0.5 kg were considered to be possibly avoidable. “We were picking up green bins that had been outside for between one and seven days and some of the food still looked pretty edible,” she says.

What’s equally shocking is the cost. According to research by Ralph Martin, the Loblaw Chair in Sustainable Food Production at the University of Guelph, that 4.5 kg of food is equal to about $28 every week or $1,465 a year. Given the average Canadian family of four spends roughly $140 a week on food that means about 20% of our grocery bills end up in the bin. It’s as much as many families spend annually on gas. “People are buying too much and not portioning well,” says Parizeau. “It adds up.”

Of course, inflation and the weakening loonie have also conspired to drive up supermarket bills, as have unusual price fluctuations, such as the one we saw earlier this year when the price of a single head of cauliflower jetted to $8 a head. By the end of 2016, food price increases are projected to outstrip the general inflation rate, which is alarming given how much of monthly spending is earmarked for food. The University of Guelph’s Food Institute expects the average household will spend $8,631 yearly on food, including $2,416 on restaurants. That’s up $345 from 2015, which was up $325 from 2014. That means the average family is spending $700 more on food than they were two years ago. Meats and vegetables are leading the way, up 4% and 9% respectively, and are projected to rise another 2.5% to 4.5% this year. So even if you avoid exorbitant cauliflowers (as I do), it won’t make you less immune to bill creep.
The avg household will spend $8,631 on food in 2016, up $700 since 2014
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That is not welcome news. According to a recent poll by Vancouver-based Angus Reid Institute, 57% of Canadians say it’s becoming more of a challenge to put food on the table. Moreover, Canadians are cutting back in any way they can. Almost three out of four Canadians say they’ve switched to lower-priced house brands, while 61% have cut back on meat and 42% have cut back on fruits and vegetables. But do you really have to sacrifice nutrition or the foods you enjoy to save a buck?

I consulted a number of chefs, nutritionists and food experts and, over the course of six weeks, I experimented with the best advice they had to offer. My goal: to cut my $6,000 annual grocery bill by $1,500 or 25%, by reducing waste and shopping smarter. I refused to make any nutritional sacrifices whatsoever, and insisted on continuing to plate meals my family loves eating (because I don’t know about you but I’m not about to adopt a new habit if I don’t enjoy it). I found that with a bit of planning, not only can my family eat great for less, we can eat even better.

http://c.brightcove.com/services/viewer/federated_f9?isVid=1
1. Run your kitchen like a restaurant

While the average family wastes food like no tomorrow, a 2010 Canadian study found that well-run restaurants waste no more than 5%. I wanted to know what they are doing that I am not and set out to find someone who could appreciate the need to keep costs in check but still cook a kickass meal. My search led me to Suzanne Barr, the driving force behind Saturday Dinette, a modern 35-seat restaurant in Toronto’s trendy South Riverdale neighbourhood.

For Barr, watching costs comes second only to the care she puts into prepping brunch favourites like mushroom stout ragu on toast with lavender ricotta. “Being a true mom-and-pop restaurant, we do everything ourselves here and we watch every penny that goes in and out,” she says from behind the counter.

When Barr noticed that many plates were returning with an untouched buckwheat pancake during her highly touted weekend brunch service, she quickly dropped the serving size from three to two. “It’s almost like food coming out of our mouths and money coming out of our pockets,” she says of the uneaten food that ends up in the dish pit.

Adjusting portion sizes is something that works as well at home as it does at the restaurant. Author and registered dietician Cara Rosenbloom suggests that parents serve their kids smaller portions, offering seconds if they’re still hungry. After all, few people would pack up food that’s been picked over by a toddler, but with the right portioning, leftovers can be saved for another day.

Here’s another reason way restaurants keep their waste to a minimum: They use everything. “That’s how we really keep costs down, we use every part of the vegetable,” says Amanda Cohen, the Ottawa-born chef behind Dirt Candy, hailed by the New York Times as one of the most influential vegetarian restaurants in the United States. “We find uses for them even if they are going bad; we will pickle them or dehydrate them.”

Barr operates the same way. When she gets her order of fennel she mixes it into her slaw, uses the fronds for fennel butter and incorporates the rest into three different cooking stocks she makes. “It’s about getting the most out of every single thing here,” she says.

And if the foods can’t be incorporated on the plate right away, you still have options that don’t require dusting off your grandparent’s canning equipment. “Take a loaf of bread and turn it into bread crumbs,” suggests Barr. “Challenge yourself to make something you’ve never made before.”
2. Shop more often for less stuff

Adjusting portion sizes and getting creative can help you use up stray ingredients, but it only gets you so far. Overbuying is the elephant in the refrigerator. This is a particular problem in North America where many of us take pride in our ability to snap up perceived deals by buying in bulk. All those four-litre buckets of ketchup and pickles, intended to save money, more often end up creating more waste.

A 2010 University of Arizona study looked at shoppers who stocked up on food at low-priced retailers like Walmart and Costco and found that they rarely consider the cost of what they end up discarding. In one case a participant who bought salad greens at Costco for “$3.50 or something” ended up discarding a large portion, but still felt it was a better deal than buying a more reasonably-sized container of greens for $2.50. “The modern American tendency to shop infrequently is at odds with basic human abilities to predict future food consumption needs,” was the author’s conclusion.

It comes down to knowing what you are able to consume, says Sylvain Charlebois, professor of business and economics at the University of Guelph. “We are bad inventory managers at home,” he says. “We live fast-paced lives and at times the food we buy and what happens at home gets the best of us.”

Buying perishables in bulk makes the least sense since they’re the first things that get tossed when we realize we’re too tired to cook one night. But the issue goes beyond stockpiling foods that go off. A 2000 report out of the University of Illinois, aptly titled “Cabinet Castaways,” warned of the risk of products bought for a specific recipe or occasion that never arose. It suggests that as much as 15% of our non-perishable goods are never used and eventually get tossed after gathering dust in our pantries.

Likewise, North Americans have grown accustomed to filling their fridges with so much stuff we struggle to find room for milk. I’m guilty of this. My freezer is packed with bags of ice-encrusted meats, some of which have been with us since we left the condo. Without even seeing my freezer, this frustrates Chef Barr. “What’s in there? Things in your freezer shouldn’t be there more than a month. If it’s there after a month are you really ever going to eat it?” Her rule: Open your freezer as often as you open your fridge and make sure things are coming out as often as they’re going in. Otherwise, “yeah, that freezer is going to continue to grow and grow.”

The simplest way to fight the compulsion to stockpile food: Shop more often and for less stuff.

Dirt Candy’s Amanda Cohen is a proponent of this idea. Until recently, Cohen operated out of an 18-seat restaurant where keeping costs in check was a matter of survival. “We bought our vegetables every single day. We never had leftovers at the end of the night. We always started fresh,” she says. “It really meant we were using what we were buying and that stuck with us at the new place.”
“It’s better to shop 2x a week than shop once & have a whole fridge of food go bad”
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She says that if you can’t predict more than a few days in advance, then chances are you’re buying food you have no intention of eating. “It’s better to shop twice a week than to shop once and have a whole fridge of food go bad,” says Cohen. “It’s OK to run out.”

This sounded like a logistical nightmare to me. On my first attempt, I went halfway: We did our weekly shopping trip but only bought what we needed to get us through the weekend, and then replenished throughout the week. If we got stuck, I knew we had some meat in the freezer we could chip out from under the ice. To my surprise, the bill rang up to a mere $40. The additional mid-week trip, for fresh vegetables, only added another $10 or so. In terms of food costs we saved $65 off our weekly bill—granted I managed to avoid meat purchases, but that would only add $30 or so for the week, which still put us 20% below our typical bill. If figured that if we did this once or more a month, we’d shave nearly $1,000 a year from our supermarket spending.
3. Don’t sweat the seasonal stuff

By the same token don’t feel compelled to spend extra on organic carrots. Amanda Cohen’s whole business is built on turning common vegetables into high art and she doesn’t. She happily admits she’s seasonal agnostic and has never gone out of the way to buy top-of-the-line fruits and vegetables. She prefers to work with the same produce most of us have in our home kitchens.

Cohen feels consumers get too caught up in the notion of buying locally and in-season. While Cohen says it’s great to support local farmers, the reality is most of our food comes from other parts of the globe. “Oranges are always out of season in Canada,” she offers by way of an example, adding that there’s nothing wrong with that. In a widely read New York Times column, she noted how little most grocery stores stock in the way of local foods. “The fact is, we live in a post-seasonal world,” she wrote. “The vast majority of our fruits and vegetables comes to us on trucks and planes from faraway farms, and everything is always in season somewhere. Make your peace with it.”

When to buy V3

Still I instinctively thought certain foods would be cheapest during the months they’re grown in abundance. After all, it’s when they are freshest and most plentiful. But a detailed study of the Canadian consumer price index, which measures changes in the prices Canadians experience for a fixed basket of goods, revealed otherwise. Going back over 20 years of data, I noticed some interesting patterns emerge. Citrus is cheapest during the first three months of the year, while apples are most expensive during August and September, just when they’re coming into season in Ontario. According to Kelly Ciceran, general manager with Ontario Apple Growers, that’s because demand actually outstrips supply during those months. The cheapest apples arrive in stores in January. “That’s when there are lots of promotions, both from us and our competition,” says Ciceran. “We typically sell more bagged apples at this time which can be less expensive than loose apples.”
Food myth: produce is cheaper when it’s in-season. Apples are most expensive Aug. to Sept.
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Meanwhile, you can save by buying oddly shaped fruit and vegetables at any time. Loblaws latched onto this idea last year when it launched its Naturally Imperfect line of produce, selling undersized, discoloured or misshaped onions, apples, carrots and mushrooms for up to 30% less than their runway-ready counterparts. Nutritionally and taste-wise there is no difference.
4. Work the freezer aisle

You’ve probably heard the old adage that you should shop the periphery of the store, where you find most of the fresh and perishable products, and skip the middle aisles. Nutritionist after nutritionist I spoke with urged me to take a turn down the freezer aisle, for my wallet and my health. “There are studies that show these products are just as fresh,” says Rosenbloom. In some ways, they’re even better. “Often the frozen ones have a higher nutrient content,” she explains. Think about how most produce gets to the store in the first place. It’s had a long journey and nutrients and vitamins like vitamin C break down over time. A bunch of fresh spinach could have spent a week or more in transit. Frozen produce is typically flash frozen within six to 12 hours of being picked when it’s at its peak freshness, she says.

Following Rosenberg’s advice, I picked up a two-kg bag of frozen broccoli from Costco for $10. A bit of math suggested it contained about 20 servings. And while I wondered what Chef Barr would say, I felt slightly better when, a few days later, I noticed a single stock of limp broccoli, enough for two servings, selling for $2 at my local supermarket.

In this case, frozen offered a significant savings—$10 in this scenario—over buying fresh. Using the freezer aisle as a hedge when fresh produce costs are high, or to have on hand during weeks when you don’t know if you’ll have time to cook, will cut my food waste and ultimately help lower my grocery bill. But beware that not every frozen food item is always a deal. Breaking out the calculator, I learned that strawberries are almost always a better deal fresh. It’s only after they top $4.99 per pound that it pays to buy frozen.

I’m confident that I made a wise decision with my bag of broccoli—so long as I don’t forget it’s there. It shouldn’t be a problem: It takes up half the space in my freezer.
5. Ignore best before dates

Here’s an all too common ritual: You reach into your fridge and grab a yogurt, only to notice it was “best before” yesterday. So you toss it out. At the University of Guelph, associate professor Mike von Massow argues that our fixation on these dates is misplaced. The dates printed on packages are really “sell-by” dates, when the food is at peak freshness, he explains. The food is still good, just not ideal for sale. It really comes down to a judgment call, he says, noting we’re often too quick to dispose of leftovers. “If it’s cooked properly,” he says, “you are starting with a clean slate.” If it smells fine, probably is fine. Food feature V2

I find there’s a bit of a “yuck” factor with this advice. I still have nightmares of a teenage encounter with a commercial-sized vat of OJ well past its expiration date. As such, I view expiration dates the same way I’d approach a bomb ticking down: I don’t want them to be around when they go off. For the paranoid like me, sites like Stilltasty.com can tell you everything from how long you can keep that open jar of salsa (one month) and how long you can freeze maple syrup (indefinitely) to how long that tub of yogurt should last past its sell-by date (seven to 10 days, apparently). The key is to manage your stock wisely. That means employing proper food storage and resisting the urge to crack open a fresh tub of sour cream just because the other one has already been open a few days.
6. Cut the red meat (It’s too pricey anyway)

The freezer aisle isn’t the only one consumers should hit; don’t forget the candy aisle, says Rosenbloom. Not because she wants to see consumers load up on jujubes, but because that’s where many grocers typically stock pulses—beans, lentils and seeds—which can be used to help bulk up dishes so you can use less meat. Beef in particular is one of the grocery groups that has risen the most in recent years—with the price of a sirloin steak rising by more than 15% since 2014, according to Statistics Canada.

About two cups of cooked red lentils is all I can handle. Following Rosenbloom’s advice, I added a handful to a batch of sloppy joes, as well as to a meatloaf, and still had plenty of the cooked lentils leftover. I was pleased to see it stretched our ground beef by adding at least two extra meals, even if the recipe had room for improvement. (My sloppy joes look more like chili.)

Each of those meals would have cost $1.73 per person in meat alone, but bulking up with lentils dropped the protein cost to $1.03—a 40% savings. I don’t think I could keep all of our meal prices down this much, but if I did we would save $700 a year. Not a bad return for a $6 bag of lentils.

Tofu is another food that can put a serious dent into your grocery bill, and a great substitute for recipes that call for boneless chicken breast. “For $2.99 you can feed a family of four,” says Rosenbloom. Up for the challenge I decided to take her advice a step further by combining it with another piece of advice Barr gave me when I visited her at the diner. Barr’s tip? Whether it’s meat or vegetable, utilize an ingredient in a number of ways to get the most out of it. For instance, she has beets on her menu three times. “People would never guess that it’s used in so many dishes.”

Grocery quiz embedV2

At home that meant adding bean curd to our menu for two straight days. As someone who eats meat three times a day, a meal of tofu sounded about as enticing as a plate of boiled brussels sprouts to a teen. But following some advice I cubed up some extra-firm tofu and tossed it into some caramelized butter in a sizzling frying pan. It took only minutes to throw together a simple stir fry, but it was surprisingly good and filling. A similar meal using chicken would have cost upwards of $9 in meat costs alone; this cost less than $3, and there was more than enough left over for lunch. Tofu Thursdays is now a meal we look forward to, and we used the leftover protein for a brown fried rice experiment the next day which resulted in another successful side dish.

Meats add a lot of weight to a grocery bill. Even if you don’t want to explore vegetarian options, there are other things you can do to lower this portion of your bill. Consider buying bone-in, skin-on chicken, suggests Zannat Reza, a registered dietician and founder of the food consultancy Thrive360. You can always de-bone it at home or cook it as is, she says. With boneless, you’re paying extra for convenience.

For similar reasons Reza suggests skipping lean or extra lean beef and draining the fat. “Sometimes it can be half the price,” she says. “Obviously if you are making a recipe where you can’t drain off the excess grease then go for the lean, but with a stir fry it’s no problem.” And just as with chicken, medium ground beef packs a ton of flavour.

Just as there are thousands of ways to prepare a plate of spaghetti, there are many ways to reduce your grocery bill and trim your waste. But my goal was to disrupt my own routine to find where I was wasting money. It was a challenge, but not nearly as difficult as I feared. Integrating the tips collected from Chef Barr and others into my daily routine wasn’t overly tiresome and well worth the effort. By my calculations, they have the potential to save me as much as $1,500 over the course of the year. It’s true that few households will ever be as smoothly and efficiently run as a restaurant. I for one have no plans to make homemade stock from my chicken bones and vegetable ends. Those will always end up in my green bin. But even if you only adopt a few of these tricks at home or at the grocery store, you’ll start to notice modest savings. As Barr explains, it’s all about how you utilize the products when you first pick them up. She stresses that you have to be realistic with yourself: “Am I really going to use this or should I just buy a little less?” Who knows, you might save enough to justify grilling up a few extra rib-eyes this summer.

Revealed: Saudi Arabia owns $117 billion of U.S. debt

Saudi Arabia’s tensions with U.S. magnified by cheap oil

One of the biggest mysteries in global finance was just revealed: How much U.S. debt Saudi Arabia owns.

Saudi Arabia stockpiled $116.8 billion of U.S. Treasuries as of March, the Treasury Department announced on Monday, ending four decades of keeping the figure secret.

That makes Saudi Arabia the 13th largest foreign holder of U.S. debt, though well behind the $1 trillion-plus owned by China and Japan each. The Saudi figure was first reported by Bloomberg News based on a Freedom of Information Act request.

Unlike with most other major owners of U.S. debt, the Treasury Department kept Saudi Arabia’s precise holdings secret since the 1970s. Saudi’s holdings were lumped together with that of other oil exporting nations, including Venezuela and Iraq.

But that policy ended on Monday as the Treasury Department disclosed precise holdings by specific countries that were previously grouped together. A Treasury official told CNNMoney the move was made following a review aimed at trying to provide more “comprehensive and transparent” data.

The new Treasury report also revealed that the Cayman Islands, a country of less than 60,000 people, owned $265 billion of U.S. Treasuries as of March. That’s the third-highest sum in the world and a reflection of the nation’s status as a major tax haven. The Cayman Islands does not have a corporate tax, encouraging multinational companies to store vast sums of money there to avoid taxes.

Likewise, Bermuda, another popular tax haven, is sitting on $63 billion of U.S. debt. Previously both the Cayman Islands and Bermuda were lumped together in a group of Caribbean banking center nations.

It is possible that Saudi Arabia owns even more U.S. debt than what was revealed on Monday. That’s because Saudi Arabia’s central bank listed owning $587 billion of foreign reserves as of March. Typically, central banks park the majority of their foreign reserves in U.S. Treasuries. In other words, the numbers don’t really add up.

One possibility: Saudi Arabia could be taking a page out of China’s playbook. Many analysts believe China owns U.S. debt through custodial accounts in Belgium, a relatively tiny country that listed owning over $154 billion of U.S. Treasuries as of March.

americas debt

Related: Who owns America’s debt?

The Saudi mystery had taken on greater significance in recent months. Since the end of 2014 the Saudis have burned through more than $130 billion of foreign-exchange reserves — most likely including U.S. debt — to help cope with the crash in oil prices. The Treasury Department said Saudi Arabia’s U.S. debt holdings of $116.8 billion are down from $123.6 billion in January.

Additionally, rising tensions between the U.S. and Saudi Arabia led the kingdom to make a recent shocking threat. Sources told CNN in April that Saudi Arabia threatened to sell off American assets if Congress passed a bill that would allow 9/11 victims to sue foreign governments. A Saudi source at the time told CNNMoney that the kingdom was “serious” about this threat.

Dumping a vast sum of U.S. Treasuries at once could cause the securities to tank, potentially destabilizing global financial markets. It could also severely hurt Saudi Arabia’s own finances, leading many experts to conclude the threat was empty.

U.S. problem: I work three part-time jobs

Erlinda Delacruz walmart
From full time to part time: Erlinda Delacruz has three part time jobs.

For 15 years, Erlinda Delacruz had a full-time manufacturing job in rural Winters, Texas.

It gave her health benefits and four weeks of paid vacation along with a salary that supported a good life. Then the rug was pulled from under her in 2009, when the plant closed. Since then, it’s been a battle of survival as Delacruz worked a string of part-time jobs. Last summer, she even lost her home to foreclosure.

Delacruz, 55, still works part-time. Except at three different places — Monday through Wednesday she works eight hours a day at a senior citizens center serving meals, and Thursday through Sunday Delacruz divides her time between two other jobs as a cashier at Walmart (WMT) and the Wes-T-Go convenience store.

She barely has time for herself. In all, Delacruz says she works roughly 60 hours a week between her three part-time jobs.

“There’s no such thing as a Friday,” says Delacruz. “I live paycheck to paycheck.”

In all, she typically makes $1,600 a month after taxes. It’s lesser than what she made at her manufacturing job, where she took home $2,000 a month.

Delacruz is one of 2.1 million Americans working multiple part-time jobs, matching the all-time high set in 2014. What’s unclear is how many of these workers choose to work multiple part-time jobs or feel forced to by their circumstances. The evidence suggests the latter.

Related: America’s part-time workforce is huge

americans multiple part time jobs

Part-time work has become a huge worry for experts who watch the U.S. economy. There are 6 million part-time workers who want full-time jobs. It’s well above its pre-recession average of about 4 million workers.

It’s a worry because part-timers have a much higher chance of living in poverty than full-time workers. They’re also much more likely to be unemployed, according to a study by Rebecca Glauber, a professor at the University of New Hampshire.

Federal Reserve Chair Janet Yellen has repeatedly said part-time workers are one of her biggest concerns in the economy.

Related: Coal workers become computer coders

“Many workers who are stuck now with multiple part time jobs can’t keep up with high tech skills that are in demand,” says Bernie Baumohl, chief global economist at the Economic Outlook Group, a research firm.

Baumohl adds that employers are implementing new technology — machines, software — at a faster pace now than workers can keep up with to maintain skills in demand. That’s why there’s a job skills gap in America.

The part-time problem is bleeding into mainstream America through different channels. Donna Berger is a long-time volunteer at the Quakertown food pantry in Pennsylvania. She’s seen a surge in part-time workers showing up for food.

“There’s an epidemic of part-time workers,” says Berger. “They work part-time…but that’s not enough to make ends meet.”

Erlinda Delacruz blue shirt
Erlinda Delacruz (in the middle) with her son and a colleague from work.

Related: U.S. economy adds 160,000 jobs in April

Struggling to make ends meet is tough for Delacruz, a high school graduate who attended college but never finished her degree.

When she lost her full-time job with benefits in 2009, she was stuck working two minimum wage jobs with no benefits. Each paid about $7.25 an hour.

“I went from all of that to nothing, making minimum wage, no vacation, no benefits,” says Delacruz.

She’s slowly worked up to higher wages, earning $10 an hour at Walmart, $8 an hour at the convenience store and $9.60 at the senior center. Because she’s worked at Walmart for a year, she’s been able to obtain health insurance. She’s holding out hope that Walmart (WMT) offers her a full-time position one day.

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Seven years into part-time work, Delacruz appreciates the few benefits she receives. The seniors’ center offered her 24 hours of paid leave a year. She uses the time to go for doctor appointments.

Related: America’s top 10 job-killing companies

Paid time off “is like a luxury nowadays,” she says.

After her home was foreclosed upon last summer, she moved in with her daughter, son-in-law and their kids.

Recently, Delacruz was able to get a loan from a local bank to help pay for a $35,000 house in Winters, a town she has lived her whole life. It’s not much but her voice radiates with pride when she speaks about it. She touts the patio, backyard and front porch.

But she doesn’t expect to spend much time — or money — in her new home. Between payments for the house, insurance and gas, she sees little of her paychecks. Her regret is that she doesn’t have much time left over to spend with her loved ones including her grandchildren.

“There is a drawback on having multiple jobs…I don’t have a personal life,” Delacruz says.

–Heather Long contributed to this story

Correction: A previous version of the story incorrectly stated Delacruz’s income as before taxes. It is after taxes.

America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas

The middle class lost ground in nearly nine-in-ten U.S. metropolitan areas examined

The middle class is shrinking in most U.S. metropolitan areas, and lower-and upper-income tiers are gaining share

The American middle class is losing ground in metropolitan areas across the country, affecting communities from Boston to Seattle and from Dallas to Milwaukee. From 2000 to 2014 the share of adults living in middle-income households fell in 203 of the 229 U.S. metropolitan areas examined in a new Pew Research Center analysis of government data. The decrease in the middle-class share was often substantial, measuring 6 percentage points or more in 53 metropolitan areas, compared with a 4-point drop nationally.

The shrinking of the middle class at the national level, to the point where it may no longer be the economic majority in the U.S., was documented in an earlier analysis by the Pew Research Center. The changes at the metropolitan level, the subject of this in-depth look at the American middle class, demonstrate that the national trend is the result of widespread declines in localities all around the country.

This report encompasses 229 of the 381 “metropolitan statistical areas” as defined by the federal government. That is the maximum number of areas that could be identified in the Census Bureau data used for the analysis and for which data are available for both 2000 and 2014 (an accompanying text box provides more detail). 1 Together, these areas accounted for 76% of the nation’s population in 2014.

With relatively fewer Americans in the middle-income tier, the economic tiers above and below have grown in significance over time. The share of adults in upper-income households increased in 172 of the 229 metropolitan areas, even as the share of adults in lower-income households rose in 160 metropolitan areas from 2000 to 2014. The shifting economic fortunes of localities were not an either/or proposition: Some 108 metropolitan areas experienced growth in both the lower- and upper-income tiers.

The tale of two metropolitan areas: A smaller middle class could signal a move either up or down the income ladder

The possibility that a shrinking of the middle class may signal a movement into either the lower-income tier or the upper-income tier is exemplified by the experiences of Goldsboro, NC, and Midland, TX—one community buffeted by broader economic forces and the other buttressed by them.

In Goldsboro—an old railroad junction town and home to Seymour Johnson Air Force Base—the share of adults who are middle income fell from 60% in 2000 to 48% in 2014, or by 12 percentage points. This was one of the greatest decreases among the 229 metropolitan areas analyzed. It was also an unambiguous signal of economic loss as the share of adults in lower-income households in Goldsboro increased sharply, from 27% in 2000 to 41% in 2014.

But in Midland—an energy-based economy that benefited from the rise in oil prices from 2000 to 2014—the shrinking middle class was a sign of financial gains. The share of adults in middle-income households in Midland decreased from 53% in 2000 to 43% in 2014, the fourth-largest drop in the nation. But this was accompanied by rapid growth in the share of adults in upper-income households in Midland, which doubled from 18% in 2000 to 37% in 2014. 2

Among American adults overall, including those from outside the 229 areas examined in depth, the share living in middle-income households fell from 55% in 2000 to 51% in 2014. Reflecting the accumulation of changes at the metropolitan level, the nationwide share of adults in lower-income households increased from 28% to 29% and the share in upper-income households rose from 17% to 20% during the period. 3

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Are you in the American middle class?

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The widespread erosion of the middle class took place against the backdrop of a decrease in household incomes in most U.S. metropolitan areas. Nationwide, the median income of U.S. households in 2014 stood at 8% less than in 1999, a reminder that the economy has yet to fully recover from the effects of the Great Recession of 2007-09. The decline was pervasive, with median incomes falling in 190 of 229 metropolitan areas examined. Goldsboro ranked near the bottom with a loss of 26% in median income. Midland bucked the prevailing trend with the median income there rising 37% from 1999 to 2014, the greatest increase among the areas examined. 4

The decline of the middle class is a reflection of rising income inequality in the U.S. Generally speaking, middle-class households are more prevalent in metropolitan areas where there is less of a gap between the incomes of households near the top and the bottom ends of the income distribution. Moreover, from 2000 to 2014, the middle-class share decreased more in areas with a greater increase in income inequality.

These findings emerge from a new Pew Research Center analysis of the latest available 2014 American Community Survey (ACS) data from the U.S. Census Bureau in conjunction with the 2000 decennial census data. The focus of the study is on the relative size and economic well-being of the middle class in U.S. metropolitan statistical areas. These areas consist of an urban core and surrounding localities with social and economic ties to the core. A metropolitan area may cross state boundaries, such as the New York-Newark-Jersey City, NY-NJ-PA area (see the text box for more details).

A previous report from the Pew Research Center, released on Dec. 9, 2015, focused on national trends in the size and economic well-being of the American middle class from 1971 to 2015. That report demonstrated that the share of American adults in middle-income households shrank from 61% in 1971 to 50% in 2015. The national level estimates presented in the earlier report were derived from Current Population Survey (CPS) data. Thus, they differ slightly from the estimates in this report.

The current and future status of the American middle class continues to be a central issue in the 2016 presidential campaign. Moreover, new economic research suggests that a struggling middle class could be holding back the potential for future economic growth. 5 The national trend is clear—the middle class is losing ground as a share of the population, and its share of aggregate U.S. household income is also declining. 6 But, as the trends in Goldsboro and Midland demonstrate, similar changes in the size of the middle class could reflect very different economic circumstances and reactions at the local level.

U.S. metropolitan statistical areas

Who is middle income?

Who is 'middle income' and 'upper income' in 2014?

In this report, “middle-income” Americans are defined as adults whose annual household income is two-thirds to double the national median, after incomes have been adjusted for household size. 7 In 2014, the national middle-income range was about $42,000 to $125,000 annually for a household of three. Lower-income households have incomes less than 67% of the median and upper-income households have incomes that are more than double the median.

The income it takes to be middle income varies by household size, with smaller households requiring less to support the same lifestyle as larger households. Thus, a one-person household needed only $24,000 to $72,000 to be middle income in 2014. But a five-person household had to have an income ranging from $54,000 to $161,000 to be considered middle income.

Middle income or middle class?

The same middle-income standard is used to determine the economic status of households in all metropolitan areas after their incomes have been adjusted for the cost of living in the area. That means the incomes of households in relatively expensive areas, such as New York-Newark-Jersey City, NY-NJ-PA, are adjusted downward, and the incomes of households in relatively cheaper areas, such as McAllen-Edinburg-Mission, TX, are adjusted upward. Incomes are also adjusted for increases in the prices of goods and services over time when analyzing changes in the status of households from 2000 to 2014. 8

Metropolitan areas with the largest middle-, lower- and upper-income tiers in 2014

A distinct geographical pattern emerges with respect to which metropolitan areas had the highest shares of adults who were lower income, middle income or upper income in 2014. The 10 metropolitan areas with the greatest shares of middle-income adults are located mostly in the Midwest. Wausau, WI, where 67% of adults lived in middle-income households in 2014, had the distinction of leading the country on this basis, followed closely by Janesville-Beloit, WI (65%). Sheboygan, WI, and four other Midwest areas also placed among the top 10 middle-income areas.

Beyond a shared geography, the top 10 middle-income metropolitan areas are more rooted in manufacturing than the nation overall. Elkhart-Goshen, IN, for example, derived 56% of its gross domestic product (GDP) in 2014 from the manufacturing sector alone. Likewise, the manufacturing sector’s share was 40% in Sheboygan, WI, and more than 20% in Wausau, WI, Lebanon, PA, Ogden-Clearfield, UT, and Kankakee, IL. Overall, manufacturing accounted for only 12% of the nation’s GDP in 2014. 9

But the role of the manufacturing sector in sustaining the middle class in these Midwest localities is not clear-cut. While manufacturing jobs tend to pay more than average, the sector has been letting go of workers in recent decades. 10 Nationwide, employment in the manufacturing sector shrank 29% from 2000 to 2014. 11 The middle-class communities in the Midwest were not immune to this trend.

Metropolitan areas with the highest shares of middle-income adults in 2014 are mostly in the Midwest

Among the Midwestern areas with some of the highest shares of adults who are middle income, the areas hardest hit by the loss in manufacturing jobs were Janesville-Beloit, WI, where manufacturing employment fell 49% from 2000 to 2014, and Youngstown-Warren-Boardman, OH-PA, where it fell 42%. Although at least 6-in-10 adults were middle class in these areas in 2014, both localities experienced losses in the shares of adults who were upper income and increases in the share who were lower income from 2000 to 2014. Thus, the economic status of the middle class in some of the Midwestern localities is not necessarily on firm ground.

The remaining top 10 middle-income metropolitan areas experienced more modest losses in manufacturing jobs and other sectors stepped in to pick up the slack in several areas. For example, from 2000 to 2014, Wausau, WI, lost 3,200 manufacturing jobs but overall private sector employment increased by nearly 1,ooo. Similarly, Eau Claire, WI, had a loss of 2,300 manufacturing jobs but an overall gain of 5,700 private sector jobs. Neither of these two areas experienced much of a change in the shares of adults who were lower income, and Eau Claire witnessed a rise in the share who were upper income. Thus, at least some of these industrial communities held on to their economic standing or saw it improve despite the decay in manufacturing.

Metropolitan areas with the largest upper-income populations are mostly in the Northeast or on the California coast. Midland, TX, the exception to this rule, leads the metropolitan ranking of upper-income areas. Some 37% of the adult population in Midland was upper income in 2014, thanks to a prospering oil economy. High-tech corridors, such as Boston-Cambridge-Newton, MA-NH, and San Jose-Sunnyvale-Santa Clara, CA, are on this list, along with financial and commercial centers, such as Hartford-West Hartford-East Hartford, CT. The adult populations in most of these upper-income areas are also more likely to have a college degree than in the nation overall.

The 10 metropolitan areas with the biggest lower-income tiers are toward the Southwest, several on the southern border. Two metropolitan areas in Texas, Laredo and Brownsville-Harlingen, lead the country in this respect—in both areas 47% of the adult population lived in lower-income households in 2014. Farming communities in central California, namely Visalia-Porterville, Fresno and Merced, are also in this group of lower-income areas. With the exception of Lake Havasu City-Kingman, AZ, Hispanics accounted for more than half of the population in each of these lower-income metropolitan areas in 2014, compared with 17% nationally.

Looking across the broader swath of metropolitan areas, the share of adults who are middle income ranged from a low of 42% in Monroe, LA, to a high of 67% in Wausau, WI, in 2014. But in the majority of metropolitan areas—118 of the 229 examined—the share of adults who were middle income fell within a relatively narrow range of 50% up to 55%. These metropolitan areas are dispersed across the country, not displaying a clear geographical pattern.

In about a quarter of the metropolitan areas in 2014, middle-class adults do not constitute a clear majority of the adult population. Notably, many of the nation’s largest metropolitan areas fall into this group, including Los Angeles-Long Beach-Anaheim, CA, where 47% of adults were middle income; San Francisco-Oakland-Hayward, CA (48%); New York-Newark-Jersey City, NY-NJ-PA (48%); Boston-Cambridge-Newton, MA-NH (49%); and Houston-The Woodlands-Sugar Land, TX (49%).

In some of these metropolitan areas, such as the Boston and San Francisco regions, the relatively small share of the middle-income tier reflects the fact that the upper-income tier is larger than average. But in the Los Angeles region, the middle class is relatively small because the share of adults who are lower income is greater than average.

Perhaps unsurprisingly, the relative size of the lower-income or upper-income tier in a metropolitan area is correlated with the median income of households overall in the area. In Laredo, TX, the area with the largest lower-income tier, the median household income was 35% less than the national median income in 2014. In Midland, TX, the metropolitan area with the largest upper-income tier, the median income was 45% greater than the national median. 12

The extent of income inequality in a metropolitan area also matters. Middle-income adults account for a larger share of the adult population in metropolitan areas where there is less of a difference between the incomes of the highest-earning and lowest-earning households. Wausau, WI, Janesville-Beloit, WI, and Sheboygan, WI, the three areas with the largest middle classes, are also among the metropolitan areas that had the lowest levels of income inequality in 2014.

Changes in the economic status of metropolitan areas from 2000 to 2014

As the middle of the income distribution hollowed around the country from 2000 to 2014, the movement was more up the economic ladder than down the ladder in some metropolitan areas (winners) while in other areas there was relatively more movement down the ladder (losers).

Nationally, the share of adults in the upper-income tier increased from 17% in 2000 to 20% in 2014, a gain of 2 percentage points. 13 Meanwhile, the share of adults in the lower-income tier increased from 28% to 29%, an increase of 1 percentage point. The difference—1 percentage point—is the net gain for American adults. By this measure, the net gain in economic status varied considerably across metropolitan areas. 14

The 10 metropolitan areas that gained or lost the most in economic status from 2000 to 2014

The metropolitan areas that experienced the largest gain in economic status from 200o to 2014 are Odessa and Midland, neighboring communities in Texas with energy-based economies. The other major winners among metropolitan areas are varied in nature. New Orleans-Metairie, LA, and Baton Rouge, LA, are relatively prominent in shipping and petrochemicals, but Lafayette, LA, has more of a stake in information technology. Amarillo, TX, is principally a meat packing economy, while Barnstable Town, MA, is a leading tourist destination on Cape Cod.

The areas with the largest gains in economic status are not necessarily areas with high shares of upper-income households. Indeed, several are decidedly average, with the shares of lower-, middle- and upper-income populations closely resembling the national distribution in 2014. In Grand Junction, CO, for example, some 52% of the adult population was middle income in 2014, 28% was lower income and 20% was upper income. But Grand Junction got to the national norm by nearly doubling the share of its upper-income population from 2000 to 2014, making it one of the big winners.

Although other factors may also be at work, the 10 metropolitan areas with the greatest losses in economic status from 2000 to 2014 have one thing in common—a greater than average reliance on manufacturing. 15 Most of these areas, such as Springfield, OH, and Detroit-Warren-Dearborn, MI, are in the so-called Rust Belt. The areas not in the Rust Belt, such as Rocky Mount, NC, and Hickory-Lenoir-Morganton, NC, are also industrial communities.

These areas generally experienced a significant drop in manufacturing employment from 2000 to 2014, ranging from 23% in Fort Wayne, IN, to 51% in Hickory-Lenoir-Morganton, NC, compared with 29% nationally. The jobs lost in manufacturing were not entirely picked up elsewhere as overall private sector employment also fell from 2000 to 2014 in these 10 metropolitan areas, ranging from a decrease of 3% in Goldsboro, NC, to a decrease of 25% in Hickory-Lenoir-Morganton, NC. In contrast, private sector employment in the U.S. overall increased 5% from 2000 to 2014. 16

Across the 229 metropolitan areas analyzed, 119 were winners, moving up in economic status from 2000 to 2014, and 110 were losers. Changes in median household income are related to the likelihood that a metropolitan area proved to be a winner or a loser. Areas with higher growth in median household income from 1999 to 2014 were more likely to experience an increase in the share of adults who are upper income and a decrease in the share who are lower income. Trends in income inequality also made a difference. Areas with more of an increase in income inequality from 1999 to 2014 experienced larger losses in the middle-class share.

Households experience financial setbacks in most metropolitan areas

American households in all income tiers experienced a decline in their incomes from 1999 to 2014. Nationally, the median income of middle-income households decreased from $77,898 in 1999 to $72,919 in 2014, a loss of 6%. The median incomes of lower-income and upper-income households fell by 10% and 7%, respectively, over this period.

The decline in household incomes at the national level reflected nearly universal losses across U.S. metropolitan areas. Middle-income households lost ground financially in 222 of 229 metropolitan areas from 1999 to 2014. Meanwhile, the median income of lower-income households slipped in 221 metropolitan areas and the median for upper-income households fell in 215 areas.

Median incomes of the middle class and other tiers fell from 1999 to 2014

The trends in income point to economic pressures on the middle class, including in areas where it still holds a large share of the population. In Sheboygan, WI, where 63% of adults are middle class, the median income of the middle class fell by 17%, from $80,281 in 1999 to $66,719 in 2014. Also, middle-income households in areas such as Janesville-Beloit and Eau Claire in Wisconsin and Elkhart-Goshen in Indiana experienced at least a 10% decrease in median incomes. Thus, while these communities are still largely middle class, the financial security of middle-class households in them has deteriorated since 1999.

Looking across metropolitan areas in 2014, there is considerable variation in the median income of households. For households overall, the median income ranged from $39,752 in McAllen-Edinburg-Mission, TX, to $90,743 in Midland, TX. Also, the incomes of households within each income tier varied across metropolitan areas. Among middle-class households, the median income ranged from $64,549 in Hanford-Corcoran, CA, to $81,283 in Racine, WI, a gap of 26%. 17

Road map to the report

This report divides households in U.S. metropolitan areas into three income tiers—lower income, middle income and upper income—depending on how their incomes compare with the national median household income. Household incomes within each metropolitan area are first adjusted for the cost of living in the area relative to the national average cost of living. Incomes are also adjusted for household size and scaled to reflect a household size of three.

In drawing comparisons over time, households that were in the lower-, middle- or upper-income tier in 2014 are compared with households in those tiers in 2000. The analysis does not follow the same households over time, and some households that were middle income in 2000 may have moved to a different tier in 2014. The demographic composition of each income tier may also have changed over the period.

The first chapter of the report describes how the U.S. adult population was distributed across the three income tiers in 2000 to 2014. It also describes the impact of adjusting incomes in metropolitan areas for the local cost of living.

The report then focuses on the size and economic well-being of lower-, middle- and upper-income tiers in U.S. metropolitan areas in 2014, and on how the metropolitan areas compare in these respects. The final chapter analyzes changes in the relative size and well-being of the income tiers from 2000 to 2014 at the metropolitan level.

Appendix B contains tables with estimates of the shares of the adult populations in lower-, middle- and upper-income tiers in 229 metropolitan areas and changes in those shares from 2000 to 2014. Maps in Appendix B depict these changes pictorially. Additional data on all metropolitan areas, such as median incomes, cost of living and other economic and demographic indicators, are available online for download.

  1. The data used in the report are the Integrated Public Use Microdata Series (IPUMS) versions of the 2000 decennial census and the 2014 American Community Survey.
  2. The post-2014 plunge in oil prices may have a negative impact on the state of the Midland, TX, economy going forward. According to the U.S. Bureau of Labor Statistics, the unemployment rate in Midland increased from 2.8% in January 2015 to 3.9% in January 2016. Over the same period, the national unemployment rate fell from 6.1% to 5.3% (data are not seasonally adjusted).
  3. These estimates for the U.S. differ slightly from the estimates published in a Pew Research Center report released on Dec. 9, 2015. That is because this report is based on data from the 2014 American Community Survey (ACS)—the latest available—and the earlier report was based on data from the 2015 Current Population Survey (CPS) Annual Social and Economic Supplement. The ACS features a much larger sample size than the CPS and is needed to analyze trends in U.S. metropolitan areas.
  4. Income data collected in the 2000 decennial census pertain to 1999.
  5. See Ostry, Berg and Tsangarides (2014), Summers and Balls (2015), Dabla-Norris et al. (2015) and Cingano (2014).
  6. This is the key finding from the 2015 Pew Research Center report on the American middle class.
  7. See Methodology for the method used to adjust incomes for household size. The median income splits the income distribution into two halves—half the households earn less than the median and half the households earn more. The median is not affected by extreme highs and lows in reported incomes. It is also not affected by changes in the top codes assigned to income values in the public-use versions of the American Community Survey and decennial census data.
  8. Estimates of the cost of living in a metropolitan area, relative to the national average, are reported by the U.S. Department of Commerce, Bureau of Economic Analysis (BEA) (http://www.bea.gov/regional/index.htm). The consumer price index (CPI-U) is used to adjust for changes in prices over time. See Methodology for additional details.
  9. Among the top 10 middle-income metropolitan areas, Urban Honolulu, HI, in which the manufacturing share of output was 2%, is the only area with a share less than the national norm. Data on the manufacturing share of national and regional gross domestic product are from the U.S. Department of Commerce, Bureau of Economic Analysis (BEA) (http://www.bea.gov/index.htm).
  10. In 2014, the national annual average weekly earnings for all employees was $1,016 in manufacturing, compared with $845 in the private sector overall as per the U.S. Bureau of Labor Statistics.
  11. Data on manufacturing and private sector employment are from the U.S. Bureau of Labor Statistics.
  12. These estimates are derived after incomes in the metropolitan areas have been adjusted for the cost of living in the area relative to the national cost of living.
  13. Differences are computed before estimates are rounded.
  14. An increase in the share that is upper income or a decrease in the share that is lower income signals an improvement in economic status. A decrease in the share that is upper income or an increase in the share that is lower income signals deterioration in economic status. A 1 percentage point increase or decrease in the share that is lower income is given the same weight as a 1 percentage point increase or decrease in the share that is upper income.
  15. In 2014, the manufacturing sector’s share of GDP in these areas ranged from 17% in Springfield, OH, to 42% in Rocky Mount, NC, compared with 12% nationally, according to the Bureau of Economic Analysis (http://www.bea.gov/index.htm). In Springfield, the manufacturing share was down from 30% in 2001.
  16. Employment data are from the U.S. Bureau of Labor Statistics.
  17. It is worth recalling that middle-income households in any metropolitan earn from $41,641 to $124,924 after incomes have been adjusted for differences in the cost of living across areas and scaled to reflect a three-person household.

Should I have life insurance in retirement?

George isn’t sure if his $100 monthly insurance premiums are better off in a savings account

 

Q: I am 59 and mostly retired. My wife and I both have life insurance
policies which are costing us about $100 a month. As we are financially
secure, is there any need to continue paying the premiums or should
we just cancel the policies?

The insurance agent recommends keeping it as I will die eventually and
will cash in at that time but my thought is I can take the cash value and
save $1,200 a year now.

The policy is $33,000 for me and $17,000 for my wife.

Also, I was told that I may have to pay taxes on the cash value.

 —George

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A: I like to start any discussion about life insurance with an assessment of insurance needs, George. Insurance should be a risk management tool first and foremost and if you have beneficiaries who would be impacted negatively financially by your death, you should probably consider life insurance.

An insurance needs analysis can be conducted by an insurance agent or financial planner or at least approximated using online resources. If a shortfall exists, it should likely be addressed with life insurance.

In your case, George, you seem pretty confident that you are financially secure. Generally, a retiree may be self-insured through their savings and government pensions, meaning that life insurance is not necessary from a risk management perspective. If that’s the case, I think the decision to keep or cancel the policies becomes an investment, estate planning and tax discussion.

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When assessing an insurance policy in a situation like yours, I like to look at the expected “return” on the policy for the rest of your life. If you pay $1,200 in premiums in the coming year and die at 60, that $33,000 payout to your estate is a 2,650% return on investment. Not bad. But you need to die.

If you live until 110, you may have been better off putting your premium dollars under your mattress. Since it sounds like you own whole life policies, without knowing all the facts about how the policies are expected to grow with dividends during that time, I can’t tell you how low the return may in fact be, George.

The point is, the return on investment from an insurance policy is variable. It depends primarily on how long you live. I think you need to crunch the numbers to look at the projected annual payout to your estate (including dividends or investment growth, depending on the type of policy) and compare it to investing the $1,200 a year in premiums in stocks and bonds or GICs instead. In this way, you can figure out the annualized rate of return based on dying in any given year and then try to assess if the return looks good relative to what you think your life expectancy might be. Keeping the insurance policies may be a very good “investment” if you’re conservative GIC investors or if you think you’ll have a short life expectancy.

All that said, I think you also need to consider your estate planning objectives. If you don’t have beneficiaries or don’t care to provide for them–preferring to maximize your retirement–consider cancelling the policies. The cash value and the premium savings may put more money in your hands now if that’s your primary objective.

Finally, from a taxation perspective, cashing in a whole life insurance policy will generally result in taxation. The cash value in excess of the adjusted cost base is taxable as regular income on your tax return. The adjusted cost base is not just the premiums paid to the policy. It’s the premiums paid less the cost of insurance and may mean that a good portion of the cash value is taxable to you.

The good news for you, George, at age 59, is that your income may be lower now than after you begin CPP, OAS and RRIF withdrawals. Thus the tax implications from cancelling the policy may be modest.

Insurance can be a great tool for planning related to corporations, cottages, second marriages and so on, but some of these strategies are beyond the scope of my answer to you, George.

I can’t help but chime in on your insurance agent’s recommendation on the policies. Recommending that you keep life insurance because you will die eventually is like wearing a winter jacket in the summer because it will snow eventually. Sometimes it actually pays to be short-sighted in your financial (and your fashion) choices to avoid keeping a product you don’t need—or wearing a jacket that makes you sweat.

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Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.