New Reports Show Widespread Economic Insecurity In America

The latest Census reports sparked a lot of media attention to poverty in America — the issue’s annual 15 minutes of fame.

No surprise to anyone that the poverty rate rose last year — even when measured by the very low poverty thresholds based on food costs.

More notable perhaps were the increases found when the Census Bureau used its new supplemental poverty measure.

But everyone, I think, knows that poverty rates give us an incomplete picture of how low-income people in the U.S. get along — or don’t — financially.

Three recent reports round out the poverty rates with data on economic insecurity — defined by each in a different way. Brief recap follows.

Census Report for the New York Times

The New York Times asked the Census Bureau to use its supplemental measure for an analysis that captured the number of people with incomes above the poverty threshold, but by only 50%.

Turns out that there are 51 million Americans in what the Times reporters call “the fretful zone,” where one untoward event can mean a plunge into what we officially define as poverty.

Adding the poor and “near poor” together, we find that nearly a third of the U.S. population is economically insecure.

Wider Opportunities for Women

Wider Opportunities for Women provides a much more detailed analysis of people who are “living below the line” that represents economic security.

The measure here is one that WOW has developed in collaboration with the Center for Social Development at Washington University in St. Louis — the Basic Economic Security Tables (BEST) Index.

Basically, the index pulls together basic living costs, including work-related expenses like child care, and adds some savings for both emergencies and retirement.

These, needless to say, are different for different family configurations — number of workers in the household, number of children (if any), their ages. The index adjusts accordingly.

The WOW analysts slice and dice the population to show us discrete results for some configurations and also for some major racial and ethnic groups. We thus get a fairly complex picture of who lacks “financial stability.”

Bottom line is that 45% of people in the U.S. live in households that do. This figure comprises 39% of all adults and a very disturbing 55% of all children.

For single women, the economic insecurity rate rises to 62%. For African-American and Hispanic women, to 76% and 80% respectively.

These, as WOW acknowledges, are conservative figures because the index doesn’t include items that many families would consider essential — “commonplace” purchases like gifts and home electronics or big-ticket investments like sending a child to college.

The rates are still plenty high enough to give anyone pause — especially now when programs that shore up below-the-line budgets are so vulnerable to further spending cuts.

Economic Security Index

We get a third, lower estimate from a research team headed by Yale Professor Jacob Hacker. They’ve developed what they call the Economic Security Index, though it actually measures economic insecurity.

People count as economically insecure if they meet two basic conditions.

  • Between one year and the next, they lost at least 25% of their inflation-adjusted household income, less out-of-pocket medical costs — because they made less, had higher medical expenses or both.
  • They didn’t have enough “liquid assets,” e.g., money in a bank account of mutual fund, to make up the difference.

The latest ESI report projects long-term figures — mainly from the Census Bureau — forward to 2009.

End result is an estimated 20.4% of Americans who experienced economic insecurity that year.

Note, however, that these are only people who suffered a major economic loss. People too poor to make ends meet don’t get into the estimate unless they were significantly better off the year before.

Still, it’s notable that Americans in the bottom fifth of the income scale register highest on the multi-year ESI — nearly double the rate of the top fifth for the 10-year period preceding our Great Recession.

Same for groups that have disproportionately high poverty rates — African-Americans, Hispanics, single-parent families and people who didn’t graduate from high school.

The report doesn’t have much to say about this.

But I think it’s fair to guess that people who are making barely enough to cover their household’s basic needs — if that — can’t afford to sock away a stash for the rainy days that come, even when the economy is booming along.

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