In April, Jeff Arns got the news he was hoping for. His annual evaluation went well and he got a raise of almost 9 percent, bringing his salary to $100,000. He went for a celebration dinner at Tender Greens.
“It sounds like a big number,” Arns, 50, said in early August, sitting under a shade structure in Sorrento Valley, near a job site where he’s a construction superintendent. “I was like, thank you, guys. I’ll be fine now. But then when I got home, after taxes and everything, it wasn’t.”
This story is for subscribers
We offer subscribers exclusive access to our best journalism.
Thank you for your support.
Arns was taking home around $400 more per month. But food, utility and gas prices were still rising. He started looking for cheaper groceries for his family of three, using coupons and meal planning. Chicken and rice became the new go-to. He canceled his Paramount+ streaming plan. In August, his rent went up 10 percent, by $240.
To cover the growing gap, he’s been using credit cards. “It’s just scary. $1,000 a month my debt grows,” he said. Now he owes $31,000, after being debt free a year earlier.
In this high-inflation summer in this always expensive city, Arns, a single parent raising two teenagers, feels scared, he said.
“The prices have to go down, or I have to make more money, one or the other. And neither one is really, you know, in the forecast,” he said.
Like Arns, millions of Americans say they are anxious about their finances as inflation limits their buying power and there’s a possible recession on the horizon. A June Primerica poll of middle-income Americans found that while 54 percent of people feel positive about their personal finances, three-quarters said their income can’t match their cost of living — an 8 percent increase since March.
While there’s no recent data on how many people are living paycheck to paycheck in San Diego, experts said inflation and high housing costs, on top of San Diego’s already high cost of living, are making it harder than before the Covid-19 pandemic for people across income levels to cover essential expenses.
Ray Major, SANDAG’s chief economist, said Arns’ situation is not surprising.
“Making $100,000 a year, you would think that was enough to have a reasonably nice standard of living, right? But it’s not anymore,” Major said, noting that an almost 9 percent raise on $92,000 in 2022 results in less real buying power than the old salary had a year ago.
Arns’ situation is also not unusual, he added. “This is emblematic of not just this one person, but this is what’s happening to the vast majority of San Diegans,” Major said. “It’s low-income people also, but it’s people that you would consider to be the upper middle class.”
Major is concerned that the financial burden families face today will outlast this period of high inflation or any recession. San Diego households before the Covid-19 pandemic were saving on average around $175 a month. In July they were reaching into savings or charging credit cards — around $1,065 a month, Major said, basing calculations on government statistics. Because of this, people won’t be in a position to pounce on opportunities once interest rates do come down or as the real estate market shifts.
“What you end up with is a situation where the middle class is going to miss out,” Major said.
Arns’ situation points to an additional concern: how people with lower incomes are coping. “If he’s struggling, then there are many families in the same or worse situations,” said Kyra Greene, the executive director of Center on Policy Initiatives, a think tank.
Arns suggested the same thing: “I’m personally drowning. And I’m not a low-income guy, you know?”
In July, three months after that April pay hike, he told his boss, one of the company’s owners, he was stressed about money and admitted it was affecting his job performance.
He asked for a second raise. “This is a weird thing to ask,” he remembers saying. Later, he worried he was risking his job. His supervisor was sympathetic and said he’d get back to him, Arns said.
As he waited for his boss to run the numbers, Arns ran his own.
- Two: How many credible offers he was getting a month from recruiters at large construction companies offering $130,000 to $150,000. He’d probably have to leave San Diego, though.
- $2,640: His rent, as of August.
- $30,000: How much more he needed a year to break even if his expenses stayed the same.
- Unknown: How many other people asked his boss for raises to cover their own higher rents and utility bills. Just like Arns.
In his bedroom between midnight and dawn, when his daughter Jennifer, 18, and his son Devon, 13, were asleep in the next room, worries roiled. He was thinking about the rent. Thinking about what he might have done differently. Thinking about lying flat.
A few months ago Arns read about a trend called lying flat, or 躺平, which started last year in China. Workers, especially young and low-to-middle income ones, are quitting jobs or doing the minimum and opting out of the economy as a form of protest against overwork.
Sliding down the income scale, joining the working poor or the unemployed, brings Arns a sense of both terror and vague comfort. “It’d be horrible,” he said, but less income would give him a certain security through food stamps and a public safety net. He could stop using his credit card to pay for breakfast cereal.
By the county’s definition, Arns is almost in the middle when it comes to income. His $100,000 salary is close to the area median income of $106,900.
That’s almost enough to make ends meet. For a household with one income supporting three people, San Diego’s living wage is $55.77 an hour, or $115,995 a year before taxes, according to MIT. These estimates are based on data from the start of the year, before this summer’s 40-year-high inflation. A living wage is the income a household needs in order to afford basic necessities given the cost of living in a specific area.
He’d rather earn enough to support his family. “I’m much happier being at work, where I can be productive, and being a part of this great economy that we used to have,” Arns said.
But that’s been getting harder in San Diego, long before this summer’s inflation, especially because of housing prices, Greene said.
According to the Census, 42 percent of San Diego County residents and 54 percent of renters are spending more than 30 percent of their household income on housing. Those figures were from a 2020 survey, looking at pre-pandemic data.
“What we absolutely know,” Greene said, “is that there are fewer and fewer jobs in our economy that pay a living wage. As the living wage needs to go up to meet costs, we know that families are falling behind that amount.” As a result, she added, “It is harder and harder for people to have the sort of — if not necessities, they’re the things that we think we are supposed to provide to our families to have a decent standard of living.”
“They’re just hammered at every intersection,” said Phil Blair, the executive officer of Manpower Staffing. He was talking not about the middle class. Not San Diego renters. Not the sandwich generation. But small businesses.
On top of the standard stressors, business owners now face supply chain disruptions and a tight labor market where workers are sometimes asking for 20 to 25 percent bumps when changing jobs. And getting them.
“Supply and demand is what runs the system,” Blair said.
Blair estimated that the average pay increase year over year in San Diego County is 5 to 6 percent. This is in the range of other cities in the western U.S., which in June saw yearly gains in wages and salaries of 4.5 to 6.5 percent, with a 5.7 percent gain in the Los Angeles-Long Beach area, according to the Bureau of Labor Statistics.
Inflation is a wrench in this system. “Employers look at what they have to pay to get workers, and they have to raise their prices, which makes the inflation higher, which makes the workers want to get more money,” Blair said.
Here’s one more wrench: Even if they wanted to, businesses can’t always simply raise prices.
Josh Chesnut is the boss, the person Arns is waiting to hear back from on that raise. He’s the co-founder of C2 Building Group, a boutique Solana Beach construction company whose core markets include life science development and creative office projects in San Diego County.
“We’re a niche business,” Chesnut said. “It’s a very competitive market. It’s that squeeze, right? We’ve got to be careful not to price ourselves out of getting opportunities, ’cause then we won’t have jobs for people to get paid for.”
Imagine, he added, how tricky price increases are for a company that signs a contract with a client at a fixed price long before the work is done. “And then we have subcontractors that have suppliers giving them increases every month,” he said.
There’s often a tension between what’s good for business and what’s good for his employees. “We’re in a really challenging position of trying to manage projects with constraints that have been put on us, and then also treating our people the way that we care about them,” he said.
He added: Workers come first.
Arns isn’t the only person who talked to Chesnut about his financial situation this summer.
“A lot of our team and our employees are saying, ‘We need raises,’” Chesnut said. The company’s payroll, which has around 60 employees, about half salaried, “has gone up significantly from last year.”
Nationwide, small business owners spent more on labor than a year ago. “Small business payroll spending was up 13 percent (year over year) in June, boosted both by solid hiring and higher wages,” a Bank of America report said.
Like other employers, Chesnut is considering inflation when he sets wages. It is “definitely in our conversations when we’re sitting down, looking at what adjustments we should be making. We know that the historic 2.5 to 3 percent isn’t the reality.” But compensation isn’t a formula, it’s case-by-case, he said.
So, in this case, could he theoretically give Arns a $30,000 raise, or even a smaller one?
“I would prefer to not share because, even though I know the answer, I don’t want that to be the outlet for it,” Chesnut said.
No good option
The quick answer when Arns can’t afford something his family needs : charge it. Food, rent, surprise expenses like a laptop charger, plus interest, added up to $31,000 in credit card debt by early September. He was debt free a year ago, Arns added.
As the balances grow, his credit score is slipping, making it more expensive to borrow. “I’m just running out of options,” he said.
For Arns, these months of inflation and heavy credit card use have led to a series of twisted logic problems.
He could file for bankruptcy, but that would ruin his credit for years. He already filed once, in 2012, so he knows the costs. That time he had been laid off and was spending freely. Now he’s earning six figures and struggling to cover his son’s back-to-school supplies.
He could downgrade his tidy Pacific Beach apartment, if he can find something cheaper. He’s paying $120 more than the county average for a two-bedroom of $2,520, according to real estate researcher CoStar. But then he’d have to pay for the move itself with a credit card that carries an annual percentage rate of 25 percent, and also perhaps start paying more for gas and commuting time.
“He’s actually making the smartest economic choice to stay in his apartment — his current principal unit that is still too expensive, but is cheaper than all the other things that are too expensive,” Greene said, when she was invited to comment on Arns’s financial dilemmas in a recent interview. She added, “Making the smart choice can still impoverish people.”
He could pick up a side gig, working evenings or weekends, maybe as a plumber, a trade he knows. But Arns, a salaried construction manager, is on call outside the 40 to 50 hours he works weekly. His company wouldn’t like him having a second job, he said.
Or he could take a higher-paying job, but that’s not a clear winner, even if it solves the cash-flow problem. That would mean leaving a job he likes and working longer hours. Seeing less of his children — especially his teenage son — would be a steep price. Their mother isn’t involved currently or paying child support, Arns added, so he’s their only present parent. After growing up with an absentee father, he doesn’t want to do the same.
And those higher paying jobs would likely not be in San Diego, Arns said. So he’d uproot his son. His daughter just started community college, tuition free, and still lives at home for now.
Or maybe they could move in with his mom, in central Oregon, for a few years. She raised Arns and his sister in Mira Mesa as a single mom, on macaroni and cheese “for lunch and for dinner. We grew up really poor.” Inflation was a lot higher when he was a young boy in the early 1980s.
He could help her and save money on rent at the same time. But that would mean walking away from Southern California’s booming building industry and perhaps ending his 20-year career in construction.
If he changes companies or careers, Arns will join the millions of Americans who quit their jobs this year as part of the Great Resignation. Locally, 24,000 workers have left the workforce since the beginning of the pandemic.
“That’s what I’m thinking, you know, waking up at 3 a.m. I’m thinking about, am I going to have the courage to make a tough decision if I need to, for them, you know? To improve our life or not,” he said.
Which should Arns choose? Which would you?
Greene said it’s easy to look at someone else’s options and think you know better.
“Some people are going to look at this story and say, well, he should just economize better. But the same people are going to say, he should spend whatever money he can to try to get his kids into a good college and provide them with a quality childhood,” she said. “And then people are going to say, well, he should work more if he needs more money, but then people are also going to say, this is what’s wrong with America today. People don’t spend enough time with their kids.”
In early September, more than a month after he asked his boss for a repeat raise so he could keep up with San Diego’s rising cost of living, Arns was still waiting for an answer.
U-T staff writer Phillip Molnar and U-T researcher Merrie Monteagudo contributed to this report.