Index measures ‘economic insecurity’
1 in 5 New Yorkers see a decline in income
NEW YORK STATE More than one in five New Yorkers saw a significant economic loss in 2010, according to a new report.
“Economic Insecurity Across the American States,” provides a state-by-state breakdown of economic insecurity. It uses a fairly new measure, called the Economic Security Index, that tracks the proportion of Americans who see their available household income — their household income after paying for medical care and servicing their financial debts — decline by 25 percent or more from one year to the next, and who lack the financial safety net to replace the lost income.
According to the report, New York’s Economic Security Index in 2010 was 21.6, a 27 percent increase from 1986. This means that about 3.3 million New Yorkers experienced a 25 percent decline in household income in 2010, compared with 1.9 million in 1986.
The report notes that nearly every state experienced record economic insecurity between 2008 and 2010, and that all states experienced a significant rise in insecurity between 1986 and 2010, which indicates that economic insecurity was rising before the recession.
“There’s been a rise in volatility over time,” said Stuart Craig, a research associate who worked on the report.
“Economic Insecurity Across the American States” was released by the New York City-based Rockefeller Foundation and Jacob Hacker, the director of the Institution for Social and Policy Studies at Yale University. Hacker developed the ESI about four years ago with the help of his research team.
“There were lots of meetings about the best way to create a simple measure of the economic risk people experience,” Scott said. “We have a lot of tools to talk about the economy. We can talk about how many people are in poverty, or how many people are unemployed. But ESI gives you a pictures of how people transition into less-secure situations.”
Among states, New York had the 18th highest average level of insecurity between 2008 and 2010, according to the report.
Economic insecurity tends to be higher among single parents, people who lack a college education and blacks and Hispanics, Scott said. He said New York’s higher-than-average high school dropout rate and large minority population might explain why the state’s ESI is worse than many other states.
tough on kids
The Schuyler Center for Analysis and Advocacy, a nonprofit organization in Albany with a focus on child welfare, education and health, lists income security as one of its key policy areas.
“We know what an important role income security plays in so many domains, such as health and child welfare,” said Kate Breslin, the Schuyler Center’s executive director. She said economic insecurity can greatly affect a child’s life and cited research showing that when a parent loses a job, it increases the likelihood that a child will repeat a grade by 15 percent, and that job losses and other economic problems cause stress that can be especially unhealthy for children.
Breslin said the Schuyler Center is interested in creating policies that can increase economic security and mitigate the stress families experience when they suffer a significant loss in income. “We need to make sure work does pay,” she said. “We need to make sure our tax policies benefit not just the richest, but the poorest.”
The City Mission of Schenectady has seen the number of people seeking assistance climb steadily over time. Many of these people are the working poor, said executive director Michael Saccocio. “The working poor are always on a razor-thin margin,” he said.
Saccocio suggested that in the past people often received help from parents and relatives during rough economic stretches, such as unemployment, and that this family support has eroded over time. As a result, people turn to the mission for help more quickly than they did just a generation ago, he said. “There’s nothing new about people hitting hard times, but maybe they once had more of a backup plan,” he said. “Maybe the older generation is going through their own hardships and they can’t help as much.”
But Saccocio said he was optimistic, because the mission’s clients are making a greater effort to step up and help themselves. “They’re saying, ‘If things are going to get better, then maybe I’m the one who is supposed to make it better,’ ” he said. “I think that can emerge when the safety net is eroding.”
The report found that Mississippi, Arkansas, Alabama, Florida and Georgia have the highest levels of insecurity, while New Hampshire, Wisconsin, Connecticut, Washington and Minnesota have the lowest. Insecurity was higher in the South and West, and lower in the Midwest and Northeast.
James Parrott, an economist at the Latham-based Fiscal Policy Institute, questioned the report’s finding that economic insecurity increased most rapidly in New York in the late 1980s. “I always thought the 1980s was the last period when the middle class did really well in New York State,” he said. “It’s hard for me to imagine that we fared worse in the late 1980s than the last three years.”
But he said the report seems to present an accurate picture of the damage caused by the recession, and the impact of damaging longer-term trends, such as wage stagnation and a decline in middle class jobs.
“It’s not as though things were fine and then fell apart,” Parrott said. “During the household bubble years, people sustained their households by going deeper into debt. Now households are in debt, and the option of borrowing more is not an option. So the prospect of maintaining the same living standard is going to be harder.”
Scott said that over time, financial risk has shifted from institutions to individuals, putting a greater number of people at risk of experiencing losses in income. He pointed to the decline of pensions and the rise of 401(k)s as an example of this trend.
A pension is a retirement plan in which an employer pays an employee a monthly sum after they retire, while a 401(k) is a retirement savings account that is managed by the employee, whose contributions into the account are deducted from his or her paychecks.