American Economic Insecurity the (New) Rule
By MICHELLE HIRSCH,
Posted: December 15, 2010
Worried about saving for retirement, paying for health insurance, or depreciating home values? A new study from Yale University reports 93 percent of American households experienced at least one substantial decline in wealth or earnings, or substantial increase in nondiscretionary expenses.
The report examines what kind of economic commotion American households felt in four major areas: Wealth, health care, employment, and familial arrangements, and how they are impacting Americans’ lives and futures.
The results conclude “economic insecurity has become the rule, not the exception, for many Americans—even in good times.”
The same team of scholars, led by political scientist Jacob Hacker and funded by The Rockefeller Foundation, concluded this summer in the first of an eight-part series that Americans’ economic insecurity has been rising for nearly 25 years, 2009 being the highest year on record. Economic insecurity is defined by the report as the number of households whose inflation-adjusted “available household income” dropped by 25 percent or more from one year to the next.
The study lays out new data that explains further what the consequences of economic insecurity actually are for families—including provoking an inability to meet basic economic needs like providing food, housing, or medical care. A particularly striking theme of this new data is that trends mostly predating the latest economic downturn, such as rising out-of-pocket medical expenses, continue to dog Americans’ financial stability and eat into their earnings.
“Though people’s worries about job security increased substantially as the economy broke down, concerns about other economic security risks—debt, retirements savings, medical costs, health insurance, and housing stability—were as common in 2007 as they were during the recession,” the report said.
Although the economy has turned the corner, worries about retirement savings and medical costs have not gone down, and employment fears have only slightly, the report concluded.
The study also revealed that seven-in-ten Americans have seen their earnings fall or their nondiscretionary costs (such as medical expenses) rise between Spring 2008 and Fall 2009. These economic “shocks,” as the report terms them, also tend to strike in succession and attack multiple areas of economic life, often at once. About half of all respondents within the first data set who experienced a shock reported that it reoccurred in the next six months. And of households who reported persisting employment disruption, three-quarters also reported shock episodes in at least one of the other four areas studied (wealth, health care, employment or family).
Another major point of the report is how progressively middle class families, along with lower-income families, are falling victim to these economic disruptions.
“The thing that really struck me was the frequency with which people reported not being able to meet their basic economic needs, like paying for food, housing or medical care,” Hacker told The Fiscal Times. “The most common form of unmet need was not going to the doctor because of the cost, but there is a significant share of families that are reporting multiple unmet needs.”
The report found that among households with incomes between $60,000 and $100,000, about half of the respondents hit by either employment or medical cost shocks reported some unmet need, and 40 percent reported multiple unmet needs.
While wealth and medical cost “shocks” were most frequent, the study did find that Americans fret about family-induced economic turmoil about as much as they worry about losing their jobs. According to the report, about 40 percent of respondents said they are very or fairly concerned about losing their jobs—about the same proportion said they were very or fairly worried about the financial pressure of assisting a family member or losing their spouses or partners to death or divorce.
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