A Household of Three with an Income of $81,000 is No Longer Financially Secure

Many Americans are still struggling to make ends meet despite low rates of unemployment and a booming stock market. According to a report released by the Urban Institute (a Washington D.C. think tank), one in three Americans with a “moderate income” has experienced “financial insecurity” in the last year.

Moderate income was defined as making between $40,840 and $81,680 annually for a family of three. Financial insecurity was described as the inability to come up with a small amount of money to buffer unexpected costs as well as the use of emergency services for cash shortages like payday loans, auto-title loans, and selling items at a pawn shop.

The report revealed some other startling statistics as well, including that in the past year, 14% of adults have been contacted by a debt collector, 13% missed a payment on a credit card, and 22% were not confident that they could come up with $400 for an unexpected expense.

A great majority of Americans are one missed paycheck, or one small emergency away from suffering real financial stress. “People assume that if you have a job that pays $50,000 per year or more you’ll be financially secure” said Steve Brown, a research associate at the Urban Institute and author of the study.

Unfortunately, the study highlights one of the major issues facing today’s economy, that stagnant wage growth has not kept pace with skyrocketing costs of basic things like a car, college and healthcare.

According to Steve Brown, “factors like student-loan debt, housing expenses and medical expenses” have negatively affected the standard of living of the middle and working classes, “[a]nd we’ve found having a job – even a good job – hasn’t kept pace with all those expenses. Many people are living on the edge. They are in positions where everything is going right as long as nothing goes wrong. But if a surprise hits like a car breaking down or health bills hitting, it can really throw them off.”

The study supports other findings that show Americans lack emergency funds for unexpected costs. In a survey published by the finance website Bankrate, one third of Americans said they would need to borrow money in some way to pay an unexpected expense of $1,000 or more.

However, the news isn’t all bad. According to a study by the Economic Policy Institute, if your income places you in the top 1% of earners, your wages have never been higher, with the top 1% seeing wage growth of 157% since 1979. Compare that to your average hourly-worker, who’s seen a measly 0.2% of annual wage growth since the 1970s.

It’s a hard pill to swallow, and is a stark reminder that the economy includes both Main Street and Wall Street, and just because one is doing well does not mean the other is prospering too.


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