By last Christmas, the Saab and Volvo were long gone. The big clapboard house with the wraparound porch was headed for a sheriff's sale.
As the last vestiges of wealth were being stripped away, John and Kim Ryan couldn't help but be startled at how far they had fallen.
The two had risen so quickly in the world. Now in their late 40s, both were products of small-city Iowa, both the first in their families to go to college. John landed a job straight out of law school with the electric utility where his father was a unionized power-plant operator. Kim Ryan traveled the country recruiting students for a local college.
Along the way, the couple made a few mistakes. In the early 1990s, they purchased their home before selling a smaller one, saddling themselves with two mortgages for a time. Neither saved enough.
"I'm kind of embarrassed we didn't take better care of the money," Kim Ryan said.
But nowhere in the hundreds of pages of dunning notices and legal briefs on file with the U.S. Bankruptcy Court is there evidence of some wild investment or irresponsible career move. Nowhere is there a hint of unbridled spending.
"They look like you and me," said Elizabeth Warren, a Harvard Law School professor and co-author of a book on the rising rate of personal bankruptcy in America, who reviewed the Ryans' court files at The Times' request.
In fact, what happened in the Ryans' case — an economic implosion triggered by a succession of layoffs for John and a medical crisis for Kim — has become increasingly common among the nation's working families during the last 25 years.
Setbacks such as job losses and prolonged illnesses have always taken their toll, of course. But they haven't always packed the economic punch they now do.
Since the 1970s, the odds that a family will see its income chopped in half when hit by this kind of shock have nearly doubled to more than 20%, according to statistics generated by The Times in cooperation with researchers at UC Davis.
"Working families stand a good chance of sustaining big blows to their incomes even from fairly commonplace events," said UC Davis economist Marianne E. Page, who with colleague Ann Huff Stevens helped The Times with its analysis. "The odds of suffering a sizable setback have grown considerably in recent years."
Paradox of Prosperity Throughout this series, The Times has sought to make sense of an American paradox: why so many people report being less financially secure even as the nation, by many measures, has grown far more prosperous.
The answer, the newspaper has found, lies in the shifting of economic risks from the broad shoulders of business and government to the backs of working families.
Over the last quarter of a century, many safeguards that people once counted on to shield them from financial harm have been weakened or completely lost. These include formal protections such as guaranteed corporate pensions and state and federal unemployment benefits. And they include informal ones, like the loyalty that employers once showed their workers by offering secure jobs with relatively little prospect of long-term layoff. Other cushions that families like the Ryans have relied on, such as the financial stability that comes with a college education, also have eroded.
The result is that families, even well-off ones, operate with little margin for economic error. And they can pay a steep price if anything goes wrong. The price grows exponentially if, as in the Ryans' case, several things go wrong at once.
The Times has tried to gauge the effect of this risk shift over the last 25 years by tracing the rising volatility of family income.
During the early '70s, the inflation-adjusted income of most of those in the middle of the economic spectrum — making about $50,000 a year in today's terms — bounced up and down by no more than $6,500 annually. By the beginning of this decade, those fluctuations had climbed to as much as $13,500, the newspaper's figures show. At the same time, the increase in volatility has been far greater for the working poor, while even top earners haven't been immune from ever-larger income swings.
To supplement these findings on income volatility, the paper looked at specific income-rattling experiences. In conjunction with Page and Stevens at UC Davis, it explored how frequently a representative sample of families was hit by any of seven common but potentially destabilizing events. They were: divorce or separation, a decline in a spouse's work hours, death of a spouse, birth of a child, retirement or disability of the main breadwinner, unemployment and serious illness.
The Times then assessed what fraction of the families touched by any of these episodes suffered a 50% or greater decline in their annual income. For every type of setback, the size of the group that took such a huge financial hit climbed substantially between the 1970s and 2000. This occurred even though the odds of at least one of these events befalling a family over the course of a decade remained fairly constant, at about 1 in 5.
For example, among families in which the head of the household was unemployed for two months or more, 13% watched their income shrink by at least half during the '70s. But in recent years, that number surged to 27%.
Even seemingly positive events such as childbirth are more likely to have potentially threatening ramifications today — in large part because of families' increased dependence on working wives. During the 1970s, only 4.5% of sample families in which a child was born saw their yearly income fall at least by half. But by the last decade, that had jumped to more than 11%.
"Ordinary work and family events are having a larger impact on families' economic circumstances than they used to," Stevens said. "And that's causing incomes to swing around more and raising the risk of steep income declines."
The Times' calculations are based on the Panel Study of Income Dynamics, a database funded by the National Science Foundation and run by the University of Michigan. In contrast to most economic indicators, which involve taking random samples of different Americans at different points in time and comparing them, the panel study has followed the same nationally representative sample of 5,000 families and their offshoots for nearly 40 years. It is the most extensive publicly available record of family income in the world.
In using the panel-study data, the newspaper has uncovered a degree of financial instability that usually is associated with the nation's past, rather than its present.
"It turns out we don't have to look back to cataclysmic events like the Great Depression to find frequent instances of turbulence and loss," said Northwestern University economist Greg J. Duncan, who along with Cornell's Richard V. Burkhauser devised the techniques that the paper used in its most recent analysis. "Steep income decreases — and the risk that they pose to families' living standards — are significant at virtually every stage of life during the last three decades."
And they're getting more significant all the time.
Upwardly Mobile Armed with college diplomas, John and Kim Ryan aspired to lives well beyond the reach or even the imagination of their parents, who had barely finished high school.
Kim acknowledged that her status as a college grad put a distance between herself and her parents. Her father spent most of his work life as a millwright and union leader at a DuPont Co. chemical plant. Her mother worked in a shoe store. "The more education I got, the farther away I got," Kim said.
As he advanced, John kept a reminder of his past — his first car, a blue 1967 Pontiac GTO that his family had helped him buy as teenager. He vowed to restore it once he had made his fortune.
Government statistics show that at the end of the 1970s, when the Ryans got out of college, an individual with a college education started his or her work life making 25% more than a typical high school grad. (By the end of the 1980s, this "college premium" had climbed to 50%, and by 2000 it stood at almost 70%.)
In the Ryans' case, the payoff seemed to come almost instantly. Kim's student-recruiting job for Coe College, a small liberal arts school in Cedar Rapids, sent her crisscrossing the country all week. Then, she would call her new husband and meet him in Kansas City or some other place where they could have fun.
"It was heady," she remembered.
John, a $30,000-a-year labor and environmental lawyer for Iowa Electric Light & Power Co., was smitten. Asked what he would do if he won the lottery, he told a local newspaper that he'd "buy diamonds and rubies for my wife" and book a cruise.
Life only got better with the arrival of the couple's first child, Jackie, in 1984 and a 1988 offer for John to join Chambers Development Co., a fast-growing company in Pittsburgh, as assistant general counsel. With the new job, John's salary more than doubled to $70,000. It then swiftly rose to almost $100,000.
Chambers had set out to modernize the waste-hauling and landfill business. As the company's stock price took off, so did the firm's aspirations and its chief executive's charitable giving — to the Pittsburgh Opera, the Carnegie Science Center and Duquesne University. Decked out in formalwear, the Ryans were invited to society events across the region.
"We really saw the big life," Kim said.
With John working long hours and the birth of Julianna, their second daughter, Kim quit traveling and opened a shoe store called Boop, Boop de Shoe. She threw herself into fundraisers and social events in the prosperous bedroom community of Oakmont, where they had moved.
In 1991, the couple bought a six-bedroom, four-fireplace Victorian house at 1109 Pennsylvania Ave. It was only five blocks from the Oakmont Country Club and its U.S. Open Championship golf course.
John worried that the new house was a financial stretch. But with the future at Chambers looking so bright, his qualms began to fade. "It seemed like our lives would always be this — entertaining, traveling," then coming home to 1109 Pennsylvania, Kim said.
When she bought a pair of Kennedy rocking chairs, painted them green to match the awnings and placed them on the front porch, the Ryans appeared ready to tuck in for a life of affluence.
The First Blow In March 1992, 10 months after the Ryans had moved to Pennsylvania Avenue and close to the birth of their third daughter, Kelsey, Chambers announced that it had uncovered an accounting error. It would have to restate its earnings.
By the time the reckoning was over, $362 million in past profit had vanished. The company's stock price plummeted by two-thirds. Ultimately, Chambers was sold.
At first, John Ryan was confident that he would survive the turmoil. In mid-1993, he and Kim celebrated their 15th wedding anniversary with a cruise to the Bahamas. About six months later, they leased a new beige Volvo 940 sedan to go with their 1987 Saab 900. They hired a baby sitter, a house cleaner and a gardener. And they prepared to send their two oldest daughters to private school.
Slowly, though, as conditions at Chambers worsened and the possibility of layoff loomed, the Ryans began making adjustments. In September 1994, they refinanced their mortgage and used some of the money to pay off debts. The next month, they took out a second mortgage and paid off still more debts.
Kim, who had closed her shoe store, began readying herself to go back to work, taking classes to obtain a teacher's certification. But the classes cost several thousand dollars and pushed the Ryans' debts back up.
In December 1994, John's run at Chambers came to an end. The new owner cut the company's legal department by half. John's position was eliminated — a sign of an economic change that was beginning to trump the college premium.
Twenty-five years ago, college graduates not only made higher wages than less educated Americans but also enjoyed more income stability. Starting in the late 1970s, however, college-educated families began to experience increasingly large swings in their annual incomes as white-collar workers found themselves whipsawed by corporate downsizing.
The Times' statistics show that for a period in the mid-1990s — about the time that John was fired — the income volatility of college-educated families actually jumped above that of households lacking someone with a college degree.
The Ryans' income — which reached $110,000 during John's final year at Chambers — dropped 12% between 1994 and 1995. And that was only the beginning of the tumble it would take.
"A college education is still a good thing, but it's not the surefire protection against economic upheaval that it once was," said Northeastern University labor economist Paul E. Harrington, who has studied the connection between education and earnings.
For a while, John didn't worry about nailing a new job. That was, in part, because Chambers granted him eight months of severance pay — plenty of time, it seemed, to figure out what to do next. As the months passed, however, his confidence waned.
When John started to collect $300 a week in unemployment compensation, Kim made him cash the checks in another town so that the bank teller wouldn't recognize them.
It took until Thanksgiving of 1995 for John to finally find a new position, this one as a lawyer with FedEx Corp. in Memphis. The family visited Tennessee to shop for a new house. But John clashed with his boss, and after three months of commuting from Pittsburgh to the company's headquarters on 3 a.m. cargo flights, he was let go.
In 1995, the Ryans stopped making mortgage payments on 1109 Pennsylvania. By the following summer, PNC Bank went to court to foreclose on the house.
After a flurry of legal action and with nowhere else to turn, the Ryans staved off foreclosure by declaring bankruptcy.
Falling Behind Bankruptcy is one of the oldest economic safety nets that the government provides working people. It was so important in early America that the Constitution specifically authorized Congress to establish laws on the subject.
In effect, bankruptcy limits debtors' losses to the value of most or all of their current belongings, shifting the risk of any greater losses onto creditors. In this way, Abner Lipscomb, a 19th-century Texas Supreme Court justice approvingly noted, people can "commence again, Antaeus-like, with renewed energy and strength and capacity for business."
Still, for much of the post-World War II period, the process was little used. In 1980, government statistics show, only 287,570 Americans filed for personal bankruptcy. Most were young, with relatively little education and few assets.
But in the last two decades, personal bankruptcies have skyrocketed. Last year, a record 1.6 million cases were filed. (That number declined only slightly this year, to 1.58 million.) Like the Ryans, many filers were middle-aged, well-educated and — until their assets fell short of their liabilities — of considerable means.
Some financial industry executives and Bush administration officials suggest that the rise in bankruptcies reflects profligacy among Americans. They are particularly incensed about Chapter 7 bankruptcies, which let people effectively wipe out their debts after forfeiting most of their assets but not their future earnings. These critics of the law want to change it by making it harder to go bankrupt.
A Chapter 7 filer is a predatory borrower, Assistant Treasury Secretary Wayne A. Abernathy suggested in a speech last year, someone who "in a calculated way borrows as much as he can, with little thought of paying it back, or in some cases, with no intention of paying it back."
But Warren, the Harvard law professor whose Consumer Bankruptcy Project has conducted extensive surveys of bankrupt families, believes that fundamental economic change — rather than moral laxness — is behind the increase in filings.
"People's jobs have grown more unstable," she said. In many communities, "the basics of middle-class life — a good house in a good neighborhood with good schools — have gotten so much more expensive. That's what is knocking families off their financial blocks."
Warren said that, in interviews for her project, people described the extraordinary lengths to which they would go to avoid filing for bankruptcy.
"For the overwhelming majority of these families," she said, "bankruptcy is a humiliating admission that they just can't make it in the middle class."
In the Ryans' case, the couple initially refused to file for Chapter 7. Instead, they filed for Chapter 13, under which they agreed to reimburse their creditors the full amount due them, but with the payments stretched out over four years.
For a time, the plan worked. John was hired by a Pittsburgh-based division of Philip Services Corp., a rapidly expanding Canadian firm that was pushing into environmental work. Kim pieced together part-time employment on her way to a full-time teaching job.
As the couple's income grew again, the bankruptcy judge raised the amount that they had to repay each month to more than $4,100 from $3,000. The family even found the funds to start Jackie at the $10,000-a-year Ellis School for girls.
Then, in January 1998, the Ryans' world was shaken anew. Just weeks after moving into elaborately renovated offices atop the 54-story One Mellon Bank building in downtown Pittsburgh, Philip, like Chambers before it, disclosed that it had accounting problems. The company eventually filed for bankruptcy protection, and John was laid off for the third time in five years.
As it turned out, being unemployed again wasn't the worst thing that would befall the family. In April, Kim suffered a miscarriage, which led to tests. In June, she was diagnosed with cervical cancer.
"I was so scared," Kim said. "I couldn't believe that we had to declare bankruptcy. Then I got cancer, and the bankruptcy didn't matter."
The Price of Illness The costs of coping with sickness and disease can be devastating.
Harvard's Warren and some of her colleagues estimated that in 2002, 424,500 families, or nearly one-third of those filing for bankruptcy, did so in part because of crushing medical expenses. That was a 20-fold increase from two decades ago.
For the Ryans, who had health insurance, the hit wasn't quite so direct. Court records show that they wound up with about $3,000 in unpaid medical bills, compared with more than $30,000 in past-due school loans. Yet Kim's condition proved a financial burden in other ways.
In July 1998, she underwent a major operation. She then spent most of the fall receiving radiation treatments, delaying her return to full-time employment and leaving the Ryans dependent on John's uncertain work situation.
There was an era in America when a family could live comfortably on the income of just one worker. Not anymore.
Today, three-quarters of college-educated families like the Ryans are two-earner households. Only one-quarter try to make it on the wages of a single earner.
Meanwhile, the influx of wives to the workforce has been especially important for middle-class families without college educations. Government figures show that fully 80% of their inflation-adjusted income growth over the last 25 years has been the result of the rising earnings of women. During the same span, men's wages have stagnated.
As time went by, the financial strain on the Ryans began to show itself in small indignities. The gas company complained it wasn't being paid fast enough and went to court. The family had to apply for Medicaid to cover some of the girls' healthcare costs. The younger girls qualified for free hot lunch at school, a benefit that Kim adamantly refused.
"The tickets were a different color," she said.
But the family couldn't always keep its troubles under wraps. When the leasing company took away the Volvo and the Saab broke down, John was forced to take his boyhood car, the 1967 GTO, out of storage. No longer blue, but rusting and without a muffler, it blared trouble.
"It wasn't as bad as it sounds," Jackie said, "except when I had to be driven to school."
Refuge in Faith John Ryan looked for a new high-paying job for a full year after his layoff from Philip.
At one point, to keep up his spirits and maintain some contact with the business world, he started working for $10 an hour at United Way. "It had me in a suit," he explained. "It had me downtown every day."
The Ryans also turned to their church, Oakmont United Methodist. With Kim debilitated during the worst of her illness, members of the congregation brought the family meals, washed their car and ferried the kids around town. Kim, in particular, found refuge in her religion.
"I used to think people who relied on their faith were simple," she said. "I thought smart people didn't need faith." Her ordeal, she added, taught her otherwise.
In late 2000, the perfect job seemed to fall into John Ryan's lap.
Marsh USA Inc., a subsidiary of insurance brokerage giant Marsh & McLennan Cos., decided to start a new business in Pittsburgh advising companies on environmental risks. The company wanted John to help with the launch.
In early December, he went to work at Marsh's downtown office as an assistant vice president, making about $90,000 a year. In short order, he was promoted to a full vice president. By the following April, he was being featured in the Pittsburgh Post-Gazette's question-and-answer profile "People on the Move."
Ambition: To add value and integrity wherever I am Dream Vacation: My wife and I zipping along on an ocean liner, headed to a beautiful white sand beach
Three months later, he was fired.
John said he was given no reason. Papers in a subsequent court dispute between him and the company over $40,000 in severance pay offer no insight. (The case was settled for an undisclosed sum.) A Marsh spokesman declined to comment.
Dominick DeSalvo, for whom John worked while at Philip and who has used Marsh's services, said that Marsh's Pittsburgh office went through a period of unrest several years ago and that virtually everybody who worked there at the time was now gone.
Chambers, Philip and Marsh all "have had their problems," said DeSalvo, who described John as "a good worker." "Unfortunately, John was always there on the downside, not the upside."
The Ryans held on in Pittsburgh for a couple of years more.
John took on several short-term law firm assignments and found other employment through a temp agency called the Legal Network. Kim recovered enough to take a full-time job at Quigley Catholic High School and later at a small private school in the community next to Oakmont.
Still, it wasn't enough. As Jackie was finishing her senior year at Ellis in 2003 and watching the mail for college acceptance letters, the bank sent word that it was renewing its efforts to foreclose on 1109 Pennsylvania. As soon as Jackie graduated, Kim and the girls moved to Wilmore, Ky., where Kim planned to attend Asbury Theological Seminary. She was intent on becoming a minister. John followed a few months later.
In July 2003, the Ryans again filed for bankruptcy, this time under Chapter 7. The house on Pennsylvania Avenue was sold at a foreclosure auction this year.
Trying to Regroup Sitting one evening last spring in the five-room brick bungalow that they rent in Wilmore, the Ryans tried to take stock of all they had lost.
"You lose it in pieces," Kim said. "Now I wonder: Did we ever live that life?"
They had regrouped the best they could. Jackie had enrolled, with financial aid, at Davidson College in North Carolina, her sights set on becoming an emergency-room doctor. Besides preparing for the seminary, Kim got a job with the Jessamine County school system and was about to begin writing a column for the local weekly newspaper, the Jessamine Journal.
As for John, he was working for the University of Kentucky reviewing research protocols.
The Ryans' income was $46,000 last year — about half of what they made in 2001 when John worked at Marsh and about the same as what they had earned 25 years ago in Iowa.
Only when a visitor asked about the green Kennedy rockers in which mother and daughter were sitting did the family lose its composure.
"It doesn't make any sense to me that he doesn't have more successes," Jackie said of her father.
Facing the Odds One Friday in late July, soon after being assigned to teach high school honors English and while studying for exams for her first seminary class, Kim was told that doctors had discovered a spot on her lung.
A few weeks after school opened in August, she took a leave of absence to begin radiation treatment and chemotherapy. Her departure from work cost the family her wages, which would have totaled more than $20,000 for the year.
In early September, it looked as if John, now 49, might land a well-paying job with the Kentucky government that would help the family through its latest crisis. But things didn't pan out.
By mid-October — even with the insurance from John's university post covering most of the cost of Kim's expensive medical treatments — the Ryans had no choice but to start looking for smaller, cheaper quarters.
Kim, 48, has Stage III lung cancer and only a 35% chance of survival. In one of her newspaper columns after receiving the diagnosis, she wrote about the odds that skunks face when crossing the county's rural roads — and about one she'd recently hit.
"I'd like to hope that my chances increased when that poor stinky skunk sacrificed himself for the 35% of us that are still trying" to get to the other side.
"I'll let you know . I plan to write once I'm safely across."
Families in crisis
The chances of experiencing a major setback - such as layoff, divorce or death - in the course of a decade have remained fairly constant or fallen for working families over the last 30 years. But the consequences have grown more severe. Those hit by a setback have seen the odds that their incomes will be chopped at least in half nearly double to more than 1 in 5.
Hits come no more often ...
Percentage of families beset by at least one of seven income-shaking events in the 1970s, '80s and '90s
... But they land harder
Percentage of families whose annual incomes fell by at least 50% when struck by one of these events
Shocks to the system
Percentage of families experiencing a plunge of 50% or more in annual income when hit by one of the following events:
Separation or divorce
Death of a spouse
Birth of a child
Illness hits head of household**
Unemployment for head of household**
Major drop in spouse's work hours*
Retirement or disability for head of household*
* Results in a reduction in work hours of at least 520 hours - or the equivalent of three months of employment - in the course of a year
** Results in a reduction in work hours of at least 320 hours - or the equivalent of two months of employment - in the course of a year
Source: Times analysis of a nationally representative sample of 5,000 families and their offshoots in the Panel Study of Income Dynamics
Times researcher Janet Lundblad in Los Angeles contributed to this report.