Americans are trapped in a ‘cycle of financial insecurity’
Jan 25, 2016
Nearly seven years after the Great Recession, millions of Americans are stuck in a financial rut.
Home ownership rates are at an historic low, renters are burdened by rising rents and — even though unemployment has fallen considerably in recent years — the percentage of underemployed Americans is twice those who are unemployed, according to the “2016 Assets & Opportunity Scorecard” released Monday by the Corporation for Enterprise Development, a nonprofit group in Washington, D.C. focused on expanding opportunity for low-income households. It assessed the 50 states and the District of Columbia on 61 measurements spanning financial assets and income, businesses and jobs, housing, health care and education. It also ranked these states on 69 policies that promote financial security.
Building up even a small amount of savings is a challenge. In fact, 44% of households are “liquid asset poor,” meaning they have less than three months of savings to live above the poverty level if they suffer a loss of income, the report notes, echoing the findings in several recent surveys on American savings.
“Housing expense reduces income to pay for food, doctors and child care, leaving bills that can’t be paid on time and forcing consumers to take on high-cost, short-term loans,” it adds. (Over half of renters spend more than 30% of their gross income on rent, the traditional measure of affordability, according to data released last year by Harvard University’s Joint Center for Housing Studies.)
Among the other key highlights, home ownership rates are hovering at just under 64% in the final quarter of 2015, still near the lowest level in three decades. And while the national underemployment rate has fallen to 5% in December 2015, down from a recent high of 10% in October 2009, the underemployment rate was nearly 9.9% in December 2015, showing that people are still struggling to find full-time employment. “What’s more, one-in-four jobs are in a low-wage occupation,” the report adds. (On a more positive note, the government recently said more than 11 million people had signed up for the Affordable Care Act, including 4 million under the age of 35.)
Americans are still struggling to regain their pre-recession wealth and the scorecard estimates that this is far worse for people of color. Households of color are 2.1 times more likely to live below the federal poverty level and 1.7 times more likely to lack liquid savings, it says.
“Those who once enjoyed a modicum of financial stability have settled into a new normal of ongoing financial vulnerability, while the struggles of those who were financially insecure before the recession have only deepened,” the authors write. “The number of households below the poverty line has barely budged and millions of low- and moderate-income people live paycheck to paycheck.”