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Economic Insecurity Reaches 25-Year High

If you’re concerned about the state of your personal finances, know that you are not alone. In fact, as Market Watch recently reported, you are a member of an ever-expanding club.

According to a report released by the Rockefeller Foundation and Jacob Hacker, a political science professor at Yale University, one in five Americans will experience economic insecurity in 2010.

This statistic represents a 25 year high, and is especially large compared with 1985, when only one in eight people were similarly worried about their finances.

What, exactly, does the report mean by “economic insecurity”? Well, it defines this term as describing those whose available household income fell by at least 25 percent from one year to the next due to a loss in income (or job loss) or an increase in medical spending.

Here is a breakdown of some of the report’s most compelling figures:

• Economic insecurity is partially governed by income level. Between 1997 and 2007, roughly 21 percent of the nation’s poor experienced economic insecurity, while only 12 percent of the wealthiest Americans did the same.
• The rise in insecurity is mostly due to the increased likelihood in 2010 that a family member will suffer a drop in income, higher rates of consumer debt, and inflating medical costs.
• Adjusted for inflation, the overall earnings of men have steadily dropped since the 1970s.
• Individuals living alone experience the lowest levels of insecurity. On the flip side, single-parent households with children suffer from the highest levels of economic insecurity.

Analysis Shows Insecurity Affects Everyone

Professor Hacker, who headed the study, recognized that poor Americans are more affected by economic insecurity than wealthy families. However, he cautioned that, as a whole, levels of insecurity have risen across the board, and that “it’s an issue squarely confronting the American middle class.”

Further, levels of economic insecurity seem to follow the trend of the overall American economy. According to the report, when “the business cycle experiences an upturn, Americans’ odds of suffering a large fall in income decreases.”

However, in a more surprising discovery, the report also found that “this cyclical pattern has been accompanied by a gradual rise in the overall prevalence in economic insecurity in good times as well as in bad.”

Consequences of Growing Economic Insecurity

As economic insecurity grows, home foreclosures have become increasingly common. In addition, many families are behind on medical bills, and struggle to pay off their credit cards.

In the midst of this financial turmoil, many Americans have turned to personal bankruptcy to help them press the “reset” button on their finances.