As was witnessed during the recent partial government shutdown, missing a single paycheck can put a household into financial uncertainty. But it’s not just furloughed government employees who are in trouble …
Despite the lowest unemployment rate in decades and a stable economy, new data shows that 4 of 10 Americans are one missed paycheck away from poverty.
The report by think-tank Prosperity Now found that 40 percent of American households are “liquid asset poor”—in other words, that they don’t have enough money saved away to make ends meet at the poverty level should their income be suddenly interrupted. That figure jumps to 57 percent for non-white households.
Kasey Dietrich, director of applied research at Prosperity Now told press that we’re not just talking about low-income people here. “This is a problem of middle-class people and even people with higher income without enough savings. If they hit a shock, they are in the same boat,” Dietrich said.
“Income poverty rates haven’t fallen below where they were in 2008 and 2007. The cost of living is greatly outpacing growth in wages, and the numbers show that too many of the jobs people do have are not setting them up to afford their healthcare, put money away, or securely meet their housing costs.”
The new findings represent an increase from last year when researchers noted that 36.8 percent of Americans were ‘liquid asset poor’.
This time around, 13 percent of U.S. households have fallen behind on bills, nearly one-third don’t have a savings account, and close to 40 percent have no money put aside for an emergency.
Of the Americans who have savings accounts, the median savings account balance is $4,830.
Then again, the prices have risen significantly in the past year, especially for gas and rent. Adjusted for inflation, workers’ wages grew 0.6 percent over the year. Annual inflation was 2.3 percent in September, according to the Labor Department.
At the same time, wage growth was mostly characterized by economists as moderate. With unemployment near historic lows, wage growth is pretty much the only missing piece of this puzzle. According to the Bureau of Labor Statistics, hourly wages increase by only 0.2 percent to 2.7 percent.
Lower unemployment generally leads to higher wages, but the effect has been slower in manifesting. But again, one of the reasons for that is that working-class is not keen on asking for wages increase, something branded by millennials.
Recent research shows that US workers are willing to give up substantial earnings in exchange for non-wage perks and benefits. Apparently, self-scheduling, paid vacation and moderate physical activity is the most wanted non-wage job characteristics.
“40 percent of respondents preferred a lower-wage job with a flexible work schedule and telecommuting over a higher-wage job without those attributes," the report from the RAND Corporation's “American Working Conditions Survey” shows.
The Prosperity Now report was produced ahead of a report on U.S. fourth-quarter gross domestic product (GDP), which has now been delayed due to the government shutdown.
However, The Congressional Budget Office estimates the 35-day shutdown subtracted about $11 billion in growth from the economy. That downgrade that could potentially keep the U.S. from achieving 3 percent GDP for 2018 for the first time in 13 years.
By Charles Benavidez for Safehaven.com
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