20% of Americans hit by major economic loss
By Jeanne Sahadi, senior writerJuly 21, 2010: 11:31 PM ET
NEW YORK (CNNMoney.com) -- A new study released Wednesday estimates that 20% of Americans suffered a significant economic loss last year - the highest level in the past 25 years.
The new Economic Security Index looks at the interaction of three key variables that have a direct bearing on a person's economic security: income loss, medical expenses and debt.
The index, which tracks data since 1985, shows that economic insecurity has risen across all groups, not just among low-income families and those without much education.
The index was constructed by Yale political scientist Jacob Hacker and a team of researchers, and the project was funded by the Rockefeller Foundation.
The ESI defines people as economically insecure when their situation meets two criteria. First, within a year's time they have lost 25% or more of their available gross income. Available gross income is the money they have left over after paying for medical costs and debt.Second, they don't have enough in an emergency fund or other liquid reserves to make up the difference.
Hacker noted that it can typically take between six to eight years to restore one's available income to its previous level. Meanwhile, a survey cited by Hacker found that 48% of Americans said last year they only had enough resources to carry them for two months before experiencing any economic hardship.
According to the index,which is based primarily on Census Bureau data,12.2% of Americans were economically insecure in 1985. By 2009, Hacker and his team estimate that 20.4% of Americans could be classified that way. The actual number of people affected increased by more than half, from 28 million in 1985 to roughly 46 million by 2007, the last year for which hard numbers were available.
"There's been a ratcheting up over time," Hacker said.
'Virtually all' groups affected
A large loss in income can occur for any of several reasons. The loss of a job is the most obvious. But even if one remains employed, income can vary because of a change in hours or wages, or because of a spike in medical expenses or debt payments.
By Jeanne Sahadi, senior writerJuly 21, 2010: 11:31 PM ET
NEW YORK (CNNMoney.com) -- A new study released Wednesday estimates that 20% of Americans suffered a significant economic loss last year - the highest level in the past 25 years.
The new Economic Security Index looks at the interaction of three key variables that have a direct bearing on a person's economic security: income loss, medical expenses and debt.
The index, which tracks data since 1985, shows that economic insecurity has risen across all groups, not just among low-income families and those without much education.
The index was constructed by Yale political scientist Jacob Hacker and a team of researchers, and the project was funded by the Rockefeller Foundation.
The ESI defines people as economically insecure when their situation meets two criteria. First, within a year's time they have lost 25% or more of their available gross income. Available gross income is the money they have left over after paying for medical costs and debt.Second, they don't have enough in an emergency fund or other liquid reserves to make up the difference.
Hacker noted that it can typically take between six to eight years to restore one's available income to its previous level. Meanwhile, a survey cited by Hacker found that 48% of Americans said last year they only had enough resources to carry them for two months before experiencing any economic hardship.
According to the index,which is based primarily on Census Bureau data,12.2% of Americans were economically insecure in 1985. By 2009, Hacker and his team estimate that 20.4% of Americans could be classified that way. The actual number of people affected increased by more than half, from 28 million in 1985 to roughly 46 million by 2007, the last year for which hard numbers were available.
"There's been a ratcheting up over time," Hacker said.
'Virtually all' groups affected
A large loss in income can occur for any of several reasons. The loss of a job is the most obvious. But even if one remains employed, income can vary because of a change in hours or wages, or because of a spike in medical expenses or debt payments.