standing on shaky ground - effects of longterm economic in security

8/6/2019 Standing on Shaky Ground - Effects of Longterm Economic In Security

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standing on shaky GroundAMERICANS'EXPERIENCESWITH

ECONOMICINSECURITY

December 2010

ESI EconomIcSEcurIty IndEx

Jacob S. Hacker

Philipp Rehm

Mark Schlesinger

With support from The Rockefeller Foundation


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TheEconomicSecurityIndex(ESI),developedbypoliticalscientist

JacobHackerandamulti-disciplinaryresearchteamwithsupportfrom

theRockefellerFoundation,isdesignedtoprovideameaningful,succinct

measureofAmericanseconomicsecurity.ProfessorHackerisbasedatthe

InstitutionforSocialandPolicyStudiesatYaleUniversity,whichaimsto

facilitateinterdisciplinaryinquiryinthesocialsciencesandresearchinto

importantpublicpolicyarenas.

TheESIispartoftheCampaignforAmericanWorkersinitiativeof

theRockefellerFoundation.Theinitiativestrivestoimproveeconomic

securityamongAmericanworkersandtheirfamilies,inpartbyimproving

knowledgeandunderstandingamongpolicymakersandthoughtleadersof

thedimensionsofAmericaneconomicsecurity.

TheESIresearchteamhasbeenguidedbyatechnicalcommitteeretained

bytheRockefellerFoundationtoprovideoversightandtoreinforcethe

intellectualandanalyticalintegrityoftheresultingwork.Chairedby

BrookingsInstitutioneconomistHenryAaron,thetechnicalcommitteeis

comprisedofsevenleadingexpertsoneconomicsecurity:

HenryAaron(BROOINSINSTITUTION)

aryBurtless(BROOINSINSTITUTION)

HenryFarber(PRINCETONUNIERSITY)

Robertreenstein(PRESIDENT,CENTERONBUDETANDPOLICYPRIORITIES)

LarryMishel(DIRECTOR,ECONOMICPOLICYINSTITUTE)

AliciaMunnell(DIRECTOR,BOSTONCOLLEECENTERONRETIREMENTRESEARCH)

RobertSolow(NOBELPRIzEINECONOMICS,1987)

ESI EconomIc SEcurIty IndEx


3/36standing on shaky ground 1

Executive SummaryThis report draws on two new surveys elded in the springand fall of 2009 that paint a comprehensive and sobering

portrait of Americans experience with economic insecurityand their capacity to cope with economic instability.

Collectively termed the Survey o Economic Risk Perceptions and Insecurity(SERPI), these surveys ocus on our domains o economic lie: employment,health care, amily, and wealth. In each, they identiy how oten householdsexperience various economic disruptions, how requently those disruptionscoincide across the our domains and persist over time, and what imprintthose disruptions leave on Americans expectations, concerns, and ability tomeet basic economic needs. Because parts o the survey were modeled ater a

separate 2007 poll, the SERPI also shows how Americans outlooks changed inresponse to the recent economic downturn.

These repeated snapshots convey a powerul picture o Americans standing onshaky ground, rocked by economic tremors whose consequences include not

just worry and anxiety but severe economic hardship. Economic shocks werestrikingly widespread in 2009.

n In the 18 months rom March 2008 to September 2009, ully 93 percent ohouseholds experienced at least one substantial decline in their wealth orearnings or substantial increase in nondiscretionary spending, most oten or

medical needs or assistance to amily members.n Nearly seven in ten households saw their earnings substantially all or their

nondiscretionary expenses substantially rise.

n During this 18-month period, 23 percent o households reported a drop o atleast a quarter o their annual household income. This conrms the ndingso the Economic Security Index (ESI), an integrated measure o economicsecurity based on publicly available statistics. Projections based on the ESIshow that the share o Americans experiencing large income losses washigher in 2009 than at any point in the last quarter century.

Though intensied by the downturn, Americans economic insecurity has beengrowing or years, and it appears to have little diminished since 2009.

n While public concerns about job security rose dramatically as the economyweakened, worries about other risks to economic securitydebt, retirementsavings, medical costs, health insurance, and even housing stability werealready as common in 2007 as they were in the depths o the recession.

n According to separate opinion surveys, concerns about retirement savings andmedical costs did not diminish at all between the summers o 2009 and 2010,and concerns about the job market declined only slightly.


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Economic instability leads not just to uncertainty but to anxiety and economichardship. This hardship is experienced not just by those at the bottom o theeconomic ladder but also by those squarely in the middle class.

n By the spring o 2009, 78 percent o Americans were quite worried about atleast one risk to their overall economic security.

n Households experiencing major economic dislocations are, on average, three toour times more likely than otherwise comparable households to report beingunable to meet multiple basic needs, such as ood, shelter, and medical care.

n More than hal o amilies with incomes between $60,000 and $100,000 thatexperience employment or medical disruptions report being unable to meet atleast one basic economic need.

n Households with dependent children appear to be more at risk oexperiencing problems in the ace o economic instability than do householdswithout children.

Looking orward, Americans appear extremely vulnerable to uture economicshocks, in part because o the wearing down o their basic household buersagainst economic risks, such as personal wealth and the potential to borrowrom amily and riends.

n By the all o 2009, roughly three in ten Americans appeared highly vulnerable toadditional shocks; perhaps as many as hal appeared at least partially vulnerable,in the sense that their buers against economic instability were limited.

n Buers against economic instability are eroded by persisting and clusteredeconomic shocks, depleting the security o even previously prepared

economic households.

n While economic shocks are broad-based, the private buers that householdshave against economic risks are much weaker or less afuent and lesseducated households than or higher-income and well-educated households.

Economic instability is so disruptive because shocks requently persist overtime, come clustered together, and occur at roughly the same time in multipledomains (employment, health care, amily, and wealth).

n About hal o all the economic shocks experienced in 2008 reoccured in thesame households in 2009; these persisting shocks are associated with higher

levels o unmet need.

n In a given domain, households oten experienced repeated shocks in closesuccession. For example, more than a third o households that experienced ashock in employment or medical expenses experienced multiple shocks in thesame area.

n O those Americans who reported persisting disruptions o employment,three-quarters also experienced persisting shocks in at least one o the otherthree domains o economic lie.

economic security project


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Yet strikingly little is known about how Americans perceive their economicsecurity, how those perceptions relate to their economic experiences, or howexperienced instability aects households, well-being.

This report lls this gap. It draws on two new surveys elded in the spring andall o 2009, collectively termed the Survey o Economic Risk Perceptions andInsecurity (SERPI). The SERPI ocuses on our major domains o Americans

economic lives: (1) employment; (2) wealth (housing, retirement savings, andother asset holdings); (3) health care; and (4) amilies.

In each area, the SERPI examines not just the economic shocks thatAmericans experiencedwhether loss o resources or increases innondiscretionary spending, such as medical costsbut also the eects o thoseshocks on Americans lives, expectations, and concerns or the uture. Because

parts o the survey were modeled ater a poll on economic security conductedjust beore the downturn, the SERPI also shows how Americans outlookschanged in response to the recession.

As suggested by the title o this report, many Americans areand seethemselves to bestanding on shaky ground. The recent economic downturnrepresented an especially powerul quake, emanating rom two distinctiveepicenters: declining employment and disrupted nancial markets. Yet

Americans aced jarring economic shocks even beore the downturn, andcontinue to do so today. The SERPI and related evidence suggest that economicinsecurity has become the rule, not the exception, or many Americansevenin good times.

Economic shocks, like an earthquake, do not consist o a single tremor.Households experiencing an economic shock are also more likely toexperience that same shock again in the near uture, to ace other shocks in

the same domain, and to be hit simultaneously by shocks in other domains. Thispersistence and clustering means that even the most prudent households can losetheir nancial ooting. Although poor households are most vulnerable becausethey oten lack the nancial resources to buer economic disruptions, the securityand well-being o even more afuent households are at risk.

The damage is oten severe. Households experiencing major economicdislocations are, on average, three to our times more likely than otherwisecomparable households to report being unable to meet multiple basic needs,such as ood, shelter, and medical care. Strikingly, these eects are not limited

Standing on Shaky Groundamericans experiences with

economic insecurity

Three years after the onset of the recession, public concernsabout the economy remain high.


6/364 economic security project

to those at the bottom end o the income distribution: more than hal oamilies with incomes between $60,000 and $100,000 that experience persistingmedical or employment shocks report being unable to meet at least one basiceconomic need.

This pattern o repeated shocks underscores how crucial basic saeguards

against economic insecurity are. Yet the SERPI suggests that Americans arenot adequately protected against uture economic instability. By the all o2009, between a third and a hal o all Americans appeared vulnerable to utureinstability, in that they lacked substantial nancial reserves, could not pay otheir current debt, and/or believed they could not borrow more than $5,000rom amily and riends. This is in part the result o past instability: householdsacing repeated economic shocks are about twice as likely to report havinginadequate buers to deal with uture economic uncertainties.

The remainder o this report lays out the basis or these conclusions, startingwith a description o the survey. The rst part o the report examines the main

dimensions o American economic security: how oten amilies experienceshocks; how they perceive the economic risks they ace, including whether andwhen they eel anxiety about them; and how these shocks aect their economicwell-being. The second part o the report considers how these experiencesand perceptions dier across major socio-demographic groups in Americansociety. The concluding section takes stock o these ndings and considers theirimplications.

The Survey of Economic Risk Perceptions and Insecurity

Long beore the onset o the recent downturn, Americans worried about thestability o their nances. Yet surveys assessing Americans perceptions oeconomic security were both rare and limited in scope. Although researchersdocumented varied orms o increasing economic risk, eorts to assess public

views and experiences were quite narrow and ocused almost entirely on risksrelated to job loss.1 Recent surveys have lled in some o the gaps, but theytoo have generally asked questions about only one or two domains o risk.2More important, these assessments o public attitudes have looked almostexclusively at Americans expressed worries, with little attention to their actualexperiences or to their capacity to buer economic shocks. 3

The SERPI in Brief

The Survey o Economic Risk Perceptions and Insecurity was designed toll this void. Fielded twice in 2009, it measured a wide range o events and

perceptions that could leave amilies eeling insecure, ocusing on our broaddomains: employment, medical care, wealth, and amilial arrangements.4The survey gauged Americans worries using a consistent set o questions thatallows or comparison and ranking within and across these areas, as well asover time. The survey also included an extensive set o questions about peoples



encounters with unstable economiccircumstances in both the recent andthe more distant past. Another clustero questions measured the capacity ohouseholds to saeguard themselves

against economic risks or to buer thenancial shocks that they experience.Yet another set o questions assessedboth the psychological consequenceso insecurity and its relationship tohouseholds ability to meet basic needsinvolving ood, housing, and essentialmedical care.

The SERPI was incorporated as anindependent part o the 20082009 PanelSurvey o the American National Election

Studies, a survey unded by the NationalScience Foundation or the past halcentury. Panel surveys interview the sameindividuals repeatedly over time. With

the nancial support o the Rockeeller Foundation, the SERPI was elded asthe sole questionnaire or the ANES panel in March (Wave 15) and September(Wave 21) o 2009. The panel was constructed to provide a representativesample o the American population aged 18 and older as o November 4, 2008. 5Data collected on economic experiences, perceptions, and expectations duringthese two waves were merged with socio-demographic and other personalcharacteristics collected rom respondents in other waves o the survey.

Ensuring Comparable, Accurate Measures of Perceptions

To allow comparison o pre- and post-recession responses, parts o the SERPIwere modeled ater a poll sponsored by the Rockeeller Foundation in thespring o 2007. The core o this 2007 survey was a question about your amilyseconomic security dened in general terms.6 The survey also asked aboutconcerns related to more specic economic risks, including losing ones job,acing large out-o-pocket medical spending, and lacking adequate income to

pay or a comortable and secure retirement.7All told, the survey asked aboutteen distinct economic risks. In each case, respondents were asked i they

were very, airly, somewhat, or not at all worried about each risk.8

To assess the requency with which worries coincided with bad experiences,a matched set o questions was asked about respondents experiences witheconomic instability (reerred to below as experiencing an economic shock).For example, worries about employment were matched with questions regardingwhether any adults in the household had lost their jobs. Respondents in theMarch 2009 SERPI were asked about whether they had experienced the event

The SERPI was designed to complement

the Economic Security Index (ESI), an

integrated measure of economic security

based on publicly available statistics. The

ESI represents the share of Americans who

experience a 25 percent or greater year-to-

year decline in their available householdresourcestheir income minus their medical

costs and debt serviceand who lack an

adequate nancial safety net to cushion the

fall. According to the ESI, economic insecurity

has worsened since the mid-1980s, with a

projected one-in-ve Americans experiencing

25 percent or greater losses in 2009. Yet the

ESI provides limited information about the

dimensions and causes of these large losses,

or how Americans subjectively perceive these

objective economic eventsall of which theSERPI uniquely illuminates. For more on the

ESI, visit economicsecurityindex.org.



in the prior twelve months, and those responding on the September 2009 wavewere asked i they had experienced the event in the past six months. Forthose completing both waves o the survey, thereore, the SERPI provides aunique 18-month history rom March 2008 to September 2009 o Americansexperiences with economic risks during the recession. The appendix to thisreport describes the survey in greater detail and discusses some o the moretechnical issues raised by its implementation and interpretation.

Americans Experiences of Economic Insecurity

Almost every Americans economic security was disrupted in the 18 months

between March 2008 and September 2009. These disruptions are evident in therequency, character, and consequences o the economic shocks experiencedby American households.

Economic Instability Touches Almost Every American

The SERPI included measures o eleven distinct shocks related to householdearnings or nondiscretionary spending (see text box). During the 18 months

preceding the all o 2009, over 90 percent o respondents reported experiencingat least one shock in the domain o employment (two measures), wealth (threemeasures), health (three measures), or the amily (three measures). Whileit is not surprising that the simultaneous downturn in the housing and stockmarkets destabilized wealth or many Americans who might otherwise have eltsecure, almost seven in ten (68 percent) o all Americans experienced a shockrelated to domains other than wealth, either an unexpected loss o earnings oran increase in nondiscretionary spending.

These shocks were oten quite substantial. During these 18 months, almost aquarter o all households reported a decline in earnings totaling 25 percent ormore o annual income. This conrms the ndings o the Economic Security

Economic Shocks Measured by the SERPI

Employmentn unemployed not by personal

choice (respondent or immediateamily member)

n lost more than a month o workdue to serious illness or injury

Health Caren lost health insurancen major out-o-pocket medical

expenses as the result o seriousillness or injury (respondent orimmediate amily member)

n paid a lot more or healthinsurance than expected

Wealthn retirement benets at work cut

substantiallyn value o investments or retirement

unds declined substantiallyn value o house declined

substantially

Familyn divorced or separated rom

spousen spent a substantial sum helping

out extended amilyn spouse/partner passed away



index, an integrated measure o economic security based on publicly availablestatistics that suggests that the share o Americans experiencing large income

losses was higher in 2009 than at any point in the last quarter century. (For moreinormation, see the prior report in this series, Economic Security at Risk:Findings rom the Economic Security Index, July 2010.)

As Figure 1 shows, the most common orm o economic disruption involvedlosses ohousehold wealth, which were experienced by more than three-quarters o all households. Shocks related tomedical costs were the secondmost common, experienced by about hal o all households. A third o allhouseholds reported some disruption oemployment; shocks caused byamily

needs were about as requent.

Economic Shocks Often Persist over Time

Economic shocks may be isolateda one-time or inrequent event in a amilyslie. However, once experienced, a shock may reoccur persistently over time orcoincide with other economic shocks. Because the SERPI assessed experiencesat two points in time, it is possible to determine the proportion o those whoexperienced a shock in the year prior to March 2009 who also reported thatsame shock in the subsequent six months.

As it turns out, such persisting shocks are close to the norm among thoseexperiencing an economic shock: About hal o all respondents who experienced

Fig. 1 Prevalance of Economic Shocks

Spring 2008 through Fall 2009

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a shock in the rst year reported that it reoccurred in the next six months.Persisting shocks are most common in the wealth domain and least common inthe amily domain. As documented below, persisting shocks are more likely to

produce negative eects or the households that experience them.

Multiple Shocks Are Common

Many households experience multiple shocks in the same domain. As Figure2 shows, these are most common or declines in wealth: More than hal o all

Americans who experienced at least one wealth shock (such as a decline instock value) reported other wealth shocks (such as declines in housing valueand reduced retirement benets) over the same time period. A multiplicity oshocks is least common or amily disruption (only 10 percent who experienceda amily shock reported multiple shocks). Employment and medical domains

all in between these extremes.The most requent orm o clustering, however, occurs across risk domainsrather than within them. Figure 3 indicates that households experiencingeconomic instability in one domain more oten than not also experience shocksin other domains at the same time. For instance, almost three in our Americanswho experienced a persisting shock to employment between the beginning o

Fig. 3 Persisng Shocks across Domains

6.7%23.3%

35.7%

34.3%

PersistingEmploymentShocksOnly

PersistingShocksinEmployment+OneOtherDomain

PersistingShocksinEmployment+TwoOtherDomains

PersistingShocksinAllFourDomains


PersistingShocksinEmployment+OneOtherDomain

PersistingShocksinEmployment+TwoOtherDomains

PersistingShocksinAllFourDomains



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Fig. 2 Frequency of Mulple Shocks in Each Domain

PercentageExpe

riencingShocks

OnlySingleSh ock Mu ltip leShocks



2008 and the all o 2009 also reported a persisting shock in one o the otherdomains (wealth, health, and amily), and oten in several o them at once. Abouta third o those with persisting employment shocks experienced a persistingshock in just one o the other three domains. But almost hal (44 percent)experienced persisting shocks in three or more domains over these 18 months.

As these gures reveal, Americans lives are not simply disrupted by the

occasional unortunate happenstance. Many experience a series o economicshocks, the combined impact o which is much larger than any o the individualshocks. When economic shocks both cluster andpersist, the lives o eventhe most prudent and careul households can be deeply disrupted and those

households expectations or the uture can beprooundly unsettled.

Widespread Worries about Economic

Insecurity

The deep economic downturn o 2009 gave riseto widespread concerns among Americans. Priorto the onset o the recession, about hal o the

American public worried somewhat about theireconomic security considered in the most general

terms, with a quarter very or airly worried. By the spring o 2009, more thanhal (53 percent) o all Americans were very or airly worried, with only aboutone in ten not at all concerned. By the all, concerns had slightly abated asthe public grew more sanguine about the stock market and the viability o their

plans or retirement.

gure 4

Americans lives are not

simply disrupted by the

occasional unortunate

happenstance. Many

experience a series oeconomic shocks.

Fig. 4 Rising concerns About Economic Insecurity

2007 to 2009

SourcesofInsecurity

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Just as the recession amplied general concerns about economic security, italso intensied worries about job loss. Employment concerns rose dramaticallyas the unemployment rate rose rom 4.5 percent in the spring o 2007 to 9.3

percent in the spring o 2009.

Yet worries about a host o other risks to economic securitydebt, retirement

savings, medical costs, health insurance, and even housing stabilityincreasedmore modestly between 2007 and 2009. More than 40 percent o Americans, orexample, were already very or airly worried about having enough money toretire on prior to the onset o the recession. The share very or airly worriedabout medical costs and health insurance also remained relatively stable(and, in the case o health insurance, the share very worried actually droppedbetween 2007 and 2009). In these areas, concerns were already notably highbeore the downturn.

What Sources of Economic Instability Cause the Most Worry?

The SERPI provides a more comprehensive portrait o economic concerns in2009. Looking across the 15 dierent sources o potential worry, more thanthree-quarters o all Americans reported that they were very or airly worriedabout at least one o these economic risks. Worries about wealth were the mostrequent cause o economic unease, though concerns about medical costs werea close second.

Perhaps the most surprising nding is the prevalence o worries relatedto the amily. While employment concerns have received considerableattention, insecurity related to the amily realm is largely absent rom theagenda o the media and public ocials. Yet Americans worry about amily-induced insecurities roughly as much as they worry about insecurities due to

Fig. 5 Scope of Concerns about Economic Security

Spring 2009

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employment: In the midst o adramatic economic downturnabout 39 percent o Americansreported being very or airlyworried about losing their job

(or, i out o work, ndingemployment)almost exactly thesame proportion who reportedbeing very o airly worried aboutlosing their spouse/partner.

In light o the recent debateover health care reorm, it is notsurprising that Americans weredeeply worried about unstableinsurance enrollment, rising

premiums, and gaps in coverage. Yet during that debate, there was remarkably

little public discussion o the nancial eects o time away rom work dueto illness. Thus it is striking that about a third o the public was very or airlyworried about losing several months o earnings due to an extended illness.Worries about orgone income due to illness are just slightly less common thanconcerns about losing ones job and just as prevalent as concerns about losingones health insurance.9

Are Americans Worries Reasonable?

Comparing the prevalence o worries and the requency o shocks, Americansappear to accurately assess the likelihood o some common risks. In the domain

o employment, or example, the requency o shocks and the proportion o thepublic worried about these events match relativelyclosely. However, this close match does not holdor all shocks. About as many Americans worryabout losing their partner or spouse as aboutsubstantial out-o-pocket medical expenses, andmany more do so than are worried about needingto assist amily members in nancial need. Yetdivorce or death o a spouse or partner is actuallyar less common than either o these latter sourceso nondiscretionary spending. Similarly, worries

about losing insurance coverage are almost ascommon as are worries about high out-o-pocketmedical spending. Yet losses o insurance coverage

actually occur only about hal as oten as do high out-o-pocket medical costs.

These divergences may refect the publics misperception o certain risks.People tend to infate the chance o unpredictable events that induce greatear or anxiety.10 Yet the heightened worry associated with certain risks mayalso refect the expected severity o the resulting economic losses. An intuitive

Worries about orgone

income due to illness are

just slightly less common

than concerns about

losing ones job and just

as prevalent as concerns

about losing ones health

insurance.



measure o expected severity is the estimated length o time it takes or ahouseholds nancial circumstances to return to the level enjoyed beore theevent occurred. When asked to estimate how long recovery would typicallytake, Americans predicted that amily disruptions (death o spouse or divorce)would have the longest-lasting consequences, with nearly eight in ten (78

percent) saying it would take more than six months to recover economically.The consequences o illness (either out-o-pocket spending or time lost romwork) came close in terms o their anticipated duration. Unemployment andinvestment losses, by contrast, were seen as having the most transitory eects.11

Substantial Anxiety about Economic Insecurity

While the previous measures concern peoples worries about economicinsecurity, worries may not aect the quality o individuals lives substantially.Thinking about negative events is rarely pleasant, but worries are not alwaysassociated with intense negative eelings.12 Extreme anxiety, by contrast, caninduce physiological stress responses. I anxiety is chronic, these stressors can

lead to declines in both physical and mental health.13

According to the spring and all 2009 waves o theSERPI, roughly 17 to 19 percent o the public reportedthemselves to be very or extremely anxious on eachwave o the survey when thinking about economicinsecurity. A total o 28 percent o all Americans wereeither very or extremely anxious about their economic

prospects on at least one o the two surveys; 9 percenthad persisting high anxiety across both surveys.

Not surprisingly, those who were most worried aboutspecic orms o economic uncertainty proved to bemost anxious as well: O those who reported themselves to be very worriedabout unstable employment, medical costs, fuctuating wealth, or amily-relatedshocks, roughly 40 percent were very or extremely anxious about economicinsecurity. By contrast, among those who reported no intense worries aboutthese specic economic risks, less than 2 percent elt intense anxiety abouteconomic insecurity.

A similar pattern is evident or those who experienced shocks, as is evidentin Figure 6. Among the households that had been ree o any o the elevenshocks measured in the SERPI, only about 5 percent reported themselves to

be very or extremely anxious. Among households that had experienced one ormore shocks, the requency o this intense anxiety jumped to between 15 and25 percent depending on the domain o risk. And or all our domains, whenhouseholds experienced shocks that persisted across the two time periodsin the survey, they reported even more extreme anxiety. Ater experiencing

persisting shocks unrelated to wealth, about a third o all Americans reportedthemselves to be very or extremely anxious about economic uncertainty.

A total o 28 percent o all

Americans were either very

or extremely anxious about

their economic prospects

on at least one o the two

surveys.



The Impact of Insecurity on Economic Well-Being

The requency o anxiety and the degree to which it occurs in tandem witheconomic shocks strongly suggest that Americans ear the potentially seriouseconomic dislocations these shocks create. The SERPI allows us to examinethis implication more directly. A series o questions prompted respondentsto indicate i they or members o their household had unmet needs or ood,housing stability, or medical careor example i they had gone hungry, losttheir home, or ailed to see a doctor (see the Technical Appendix or the specicquestions asked). Because these unmet needs are measured on each wave othe survey, respondents could report up to six unmet basic needs over the 18months covered by the SERPI.

Economic Shocks Are Associated with Unmet Needs

Some households that have not experienced any economic shocks nonethelessreport unmet needs,because their earnings are modest and savings are limited.Indeed, roughly one in ve households that have experienced no economicinstability (no shocks in the past 18 months) still report having at least oneunmet basic need.14 But households that have experienced economic shocksespecially persisting shocksreport much higher levels o unmet need. AsFigure 7 shows, this is particularly true o employment and medical shocks:

Fig. 6 Economic Shocks and Anxiety about Economic Instability

20082009

30%

15%

30%

Sh S

h

Recen

Pas

ting

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ting

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0% AtAll

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ocks

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ersistingShocks

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ersistingShocks

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PastShock

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ersistingShocks

RecentShock

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ersistingShocks

Employment Health Wealth Family

ExtremelyAnxious

VeryAnxious

InPastSixMonths,butnotinPast718months

=InPast718Months,NotReoccuring

Recent=

Past

Persisting+InPast6MonthsANDinPast718Months

Recent = In Past Six Months, but Not in Past 7-18 Months

Past = In Past 7-18 Months, Not Reoccuring

Persising = In Past 6 Months AND in Past 7-18 Months



70%70%70%

60%60%

50%Need

s

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etet

40%Unm

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ent

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lthCost

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isting

Wea

lthS

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ily

Sh

ock

Pers

isting

Fam

ily

Sh

ocks

PercentReportingUnmetNeed

s

Fig. 7 Economic Shocks and Unmet Basic Needs

20082009

OneUnmetNeed M ult ipleUnmetNeeds

Shocks to wealth and amily are associated with a doubling o households

reporting any unmet need and a veold increase in households reportingmultiple unmet needs, whereas shocks to employment and medical spendingare associated with a tripling o households reporting any unmet needs and asevenold increase in the proportion o households reporting multiple unmetneeds. For the most part, then, basic needs seem to be ar more threatenedby disruptions o employment or by unexpected medical spending than byemergencies in the amily or by unanticipated drops in wealth. 15

Are the Effects of Insecurity Distinct from Economic Disadvantage?

Households that report unstable economic circumstances are ar more likely

to experience both heightened anxiety and unmet needs. But amilies that aceunstable economic circumstances might have other attributes that make them

vulnerable to these bad outcomes as wellmost notably, lower incomes. Lessafuent households are more likely to have unmet needs and also to have lessstable employment and less comprehensive health insurance. Thus, it is crucialto examine whether economic insecurity is independently associated withhardship, even ater household income is taken into account.

To do that, it is helpul to group respondents into household income quartilesour equally sized groups ranked rom poorest to richest. Comparing within

OneUnmetNeed MultipleUnmetNeeds

PercentageReporngUnmetNe

eds



each quartile, it becomes clear that even among the top 25 percent oAmericansand, indeed, within every income quartileeconomic instability isassociated with an increased level o unmet basic needs (Figure 8). A quartero amilies in the lowest income quartile (those with annual incomes o lessthan $35,000) reported some unmet needs even i they had experienced no

economic instability in the previous 18 months. But among those that had acedeconomic instability, unmet needs were ar more common. Among those whohad experienced persisting employment shocks, or example, almost 90 percentreported some unmet basic needs, and 56 percent reported multiple unmetneeds.

Strikingly, the same relationship holds among amilies in the third quartile ohousehold income (annual incomes between $60,000 and $100,000). Amongthose that experienced no economic instability, unmet basic needs were abouthal as common as in the lowest income quartile, reported by about 12 percento all households. For those who encountered persisting economic shocks,the level o unmet needs was ar more commonstrikingly so, considering

that these households are relatively well-o. About hal o households in thisquartile that had experienced persisting shocks to employment or medical costsreported some unmet need; almost 40 percent reported multiple unmet needs.Even among solidly middle-class amilies, in short, economic instability isassociated with much higher levels o unmet basic needs.

Fig. 8 Unmet Needs Associated with Economic Instability,

for Selected Income Strata

100%100%

90%90%

80%80%

70%70%

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cks


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cks


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cks

LowestIncomeQuartile SecondQuartile ThirdIncomeQuartile HighestIncomeQuartile

MultipleUnmetNeeds OneUnmetNeed* No respondents in this income strata reported unmet needs in the absence of economic shocks

PercentageReporngUnmetN

eeds

*



Incomplete Buffers against the Impact of Economic Shocks

The impact o some economic shocks, such as high health care costs and partialdisability rom work, can be lessened by purchasing insurance. Others, such asunemployment and a complete inability to work, are at least partially insured by

public policies. But or many risks (including loss o a spouse, declining value

o investments, urgent nancial assistance to ones extended amily, and lostearnings apart rom ormal unemployment or disability), insurance protection isgenerally either unavailable or beyond the means o the average citizen.

Households can guard against uninsured or partially insured risks only bysaving, borrowing rom amily and riends, or drawing on the equity o theirassets, such as their home or retirement account. The SERPI included severalquestions about these inormal risk buers.16

At the core o these measures is the households sel-assessed capacity to getby without hardship should their income be interrupted or an extended length

o time. As Figure 9 shows, just over 29 percent o Americans reported thattheir household could go six months or longer without experiencing hardshipi their earnings were to stop tomorrow. Yet nearly hal o households could gono longer than two months without hardship setting in; one in ve could last nomore than two weeks. I the capacity to go at least three months without incomeis treated as a threshold o adequate reserves (recall that almost a quarter oall household experienced a drop o 25 percent or more in their annual incomein the 18 months preceding the all o 2009), then more than hal the American

population appears to lack adequate buers.

Three additional measures o buers in the SERPI are related to the capacity toborrow: in nancial markets (i.e., taking out a loan), drawing against equity (i.e.,home equity loans), and through more inormal mechanisms (i.e., rom amilyand riends). Combined with our measure o nancial reserves, these oer amultiaceted assessment o the ability o households to deal with unexpectedeconomic shocks. In the aggregate, they do not make Americans appear much

Fig. 9 How Long Can Household Go without IncomeBefore Hardship Sets In?

29.3%

19.4%

18.7%

23.4%

9.2%

Threetosixmonths

LessthantwoweeksThreetofourweeksOnetotwomonths

Sixmonthsormore

LessthantwoweeksThreetofourweeksOnetotwomonthsThreetosixmonthsSixmonthsormore



more secure. To be sure, about athird o respondents anticipatedthat they could borrow $5,000or more rom amily or riends iacing some urgent nancial need.

However,44 percent expected notto be able to borrow at all, and one

in ve considered themselves to beso deep in debt that they doubtedthat they could ever pay it o.

Why Household Buffers

Are Weak

Why does such a large share ohouseholds have limited savings,high levels o debt, and limited

capacity to borrow in times o needrom riends and amily? Althoughsome Americans lack oresight or prudence, two other causes also come into

play: prior economic shocks and a basic lack o resources. Households buersare requently depleted by shocks to earnings or nondiscretionary spending.Comparing respondents who experienced a drop in income or loss o wealthbetween the rst and second waves o the survey (and had not experienced

a prior shock), those that did not experience aneconomic shock between the two surveys saw amodest improvement in their risk buers over theintervening six months. By contrast, those who didexperience a shock reported degradation in all ourmeasures o buer resilience.

Lack o buers is also strongly associated witheconomic disadvantage, suggesting that resourceconstraints are one important reason why someamilies are ill-prepared against economic risks.

Understanding why such a large share o households have limited economicbuers thus requires examining more closely who is most likely to experienceeconomic shocks without adequate protectionsthe question taken up in thenext section.

The Uneven Experience of Economic Insecurity

The SERPI documents that insecurity and instability are commonplace inAmericans economic lives, with consequences that are requently severe oreven middle-class amilies. Nonetheless, the experience o insecurity variessubstantially across American societyacross income and educational groups,amily types, and other important demographic characteristics. This is not

Nearly hal o households

could go no longer than two

months without hardship

setting in. One in fve could

last no more than two

weeks.


20/36


21/36



percent o households in the highest income quartile reported themselves tobe very worried about at least one threat to continued employment. Economicuncertainty in other domainsnotably, medical carewas even more common:

About a quarter o the most economically advantaged households reportedthemselves to be very worried about these risks.

No group in American society appears ully insulated rom economic instability.Among college graduates, or example, more than 63 percent experiencedpersisting shocks to their wealth, almost 21 percent experienced persistingshocks due to medical costs, more than 12 percent experienced persistingshocks due to employment instability, and 11 percent experienced amily-related persisting shocks. By comparison, the prevalence o persisting shocksamong households headed by those with, at most, a high school degree wasmore than 45 percent or wealth shocks, nearly 26 percent or medical shocks,nearly 24 percent or employment shocks, and just over 13 percent or amily-related shockshigher or every category but wealth, but only modestly so orevery domain but employment.

Starker Disparities in the Strength of Buffers

While exposure to risk during the recession did not vary as dramatically asmight be supposed, the strength o protections against those risks did. Thus thesignicance o the uneven exposure to economic risks depends in large part onthe distribution o buers against economic risksinsurance, savings, amilyrisk-sharing, and other resources that can be tapped in response to economicinstability.

We might expect that those whose lives are most aected by economicturbulence would have the greatest incentive to prepare. What the SERPIshows, however, is that those households that have the weakest buers alsoace the greatest risk. Because these risks are concentrated among households

Fig. 11 Uneven Financial Buers against Economic Uncertainy

Socio-Economic Status, 2009

0

Percentage

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High School Some College College Graduate Lowest Quarle Second Quarle Third Quarle Fourth Quarle

=3 Income Account CanBorrow$5000+fromFamily/Friends FinancialReserves=3Months+Income DrainedRetirementAccounttoPayBills DebtTooLargetoPayOffCan Borrow $5000+ from Family/Friends Financial Reserves Months+ Drained Retirement to Pay Bills Debt Too Large to Pay Off

CanBorrow$5000+fromFamily/Friends FinancialReserves=3Months+Income DrainedRetirementAccounttoPayBills DebtTooLargetoPayOff



that have aced longstanding economic disadvantages, households ace seriousconstraints in preparing against economic dislocations.

Which Americans are better prepared to cope with risks because they canbuer them? Some o the dierences charted in Figure 11 are unsurprising:Risk buers are more resilient or households with advantaged socio-economiccharacteristics, whether measured in terms o educational attainment orhousehold income.

Family Composion, 2009

0

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Race and Ethnicity, 2009

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Couple Single Dependent Children No Dependent Children

%

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CanBorrow$5000+fromFamily/Friends FinancialReserves=3Months+Income DrainedRetirementAccounttoPayBills DebtTooLargetoPay

=3 Income AccountCanBorrow$5000+fromFamily/Friends FinancialReserves=3Months+Income DrainedRetirementAccounttoPayBills DebtTooLargetoPayCan Borrow $5000+ from Family/Friends Financial Reserves Months+ Drained Retirement to Pay Bills Debt Too Large to Pa

CanBorrow$5000+fromFamily/Friends FinancialReserves=3Months+Income DrainedRetirementAccounttoPayBills DebtTooLargetoPay



Other patterns, however, are less predictable. Although Arican-Americansand Latinos have roughly similar economic circumstances, risk buers or

the ormer are distinctly weaker, particularly the balance between debt andnancial reserves and the very limited capacity to borrow rom amily andriendsa dierence that has been identied in prior research or wealthholding, but not or these other orms o risk buers.17

Also noteworthy is that households with children appear to be less adequatelybuered against risk than do other households. Their greater capacity toborrow rom amily and riends appears more than oset by weaknessesevident in the other three measures o buer resiliency.

The Unequal Consequences of Economic Insecurity

How do unequal exposure to and protections against economic risk infuencehouseholds nancial well-being? Figure 12 tells the story. Because respondentsrom higher socio-economic status are both (modestly) less likely to experience

Unmet Needs by Educaon, Race/Ethnicity

(With and Without Shocks)

70%70%

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aduate

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r r rAmerican

American

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College

African

African

African

NoShocks AnyShocks NonwealthShocks NoShocks AnyShock s N onwealthShocks

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HighSchool

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CollegeGraduate

White

African

American

Latino

White

African

American

Latino

White

African

American

Latino

NoShocks AnyShocks NonwealthShocks NoShocks AnyShock s N onwealthShocks

PercentagewithU

nmetNeeds



shocks that might induce unmet needs and (substantially) more capableo buering those shocks when they occur, the consequences o economicshocks or economic well-being are notably more negative or less advantaged

Americans, measured in terms o education.

Dierences by race and ethnicity are also striking. Given that Arican-Americanshave more risk exposure and less resilient buers, it is not surprising that theyreport very high levels o unmet needs when they experience economic shocks.Latinos report comparable levels o unmet needs, and both groups report much

higher levels o unmet needs than whites. Yet,more surprising, Latinos who do not experienceeconomic shocks report lower levels o unmetneeds than either Arican-Americans or whites.

Family composition has mixed implications. Onthe one hand, two-adult households are much lesslikely to experience unmet needs when they ace

no economic instability. On the other hand, among households experiencingeconomic shocks, the gap in unmet needs between single- and multiple- adulthouseholds is much smaller. This may partly refect the higher baseline level ounmet needs or single adults, but it suggests, at a minimum, that multiple adult

households are powerully aected by shocks. This is in large part becausemany o these shocks are transmitted through employment; multi-workerhouseholds thus get doubly exposed to unemployment, benet cuts and thelike, even though their dual-earner capacity also allows them to more readilybuer some o these shocks.

The presence o children in the household yields a more consistent pattern.Although households with children report modestly greater unmet needscompared to childless households when there is no economic instability, both

Households with children

appear to be less adequately

buered against risk than

do other households.

Fig. 12 Unmet Needs by Family Composion

(With and Without Shocks)

Multiple Multiple MultipleMultiple Multiple Multiple

60%60%60%60%

50%50%50%50%

40%40%40%

30%30%30%

20%20%20%

10%10%10%

0%0%0%

Single Multiple Single Multiple Single Multiple No Ch ildren No Children No ChildrenSingle Single Single No Children No Children No ChildrenSingle Single Single No Children No Children No ChildrenAdults Adults Adults Adults Adults Adults Children Children ChildrenAdults Adults Adults Adults Adults Adults Children Children ChildrenAdults Adults Adults Adults Adults Adults Children Children Children

NoShocks AnyShocks NonwealthShocks NoShocks AnyShocks N onwealthShocksNo Shocks Any Shocks Nonwealth Shocks No Shocks Any Shocks Nonwealth ShocksNo Shocks Any Shocks Nonwealth Shocks No Shocks Any Shocks Nonwealth Shocks

0%

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SingleAdults

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SingleAdults

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NoChildren

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Children NoChildren

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NoShocks AnyShocks NonwealthShocks NoShocks AnyShocks N onwealthShocks

PercentagewithUnmetNeeds



dierentials get strikingly larger when the households experience economicshocks. The gap in unmet needs between households with children and withoutchildren grows by 10 percentage points in the ace o economic instability andappears equally large whether the shocks involve wealth or other risk domains.It remains unclear why households with children are less capable o coping

with economic uncertainty. Children themselves can be a source o unexpectedcosts. In addition, adults in households with children may be constrained bychild care or other responsibilities, limiting their ability to adapt to shitingwork expectations, medical needs, or other changing circumstances.

Economic Insecurity through Americans Eyes

Insecurity has become a dominant moti in Americans economic lives.Strikingly, however, no regularly unded national survey tracks even a smallshare o the actors that shape Americans economic security.18 Drawing on aunique two-wave survey that comprehensively examines these actors during

the recession (and allows comparison back to 2007), this report has painted abroad portrait o how Americans perceive their economic security.

This portrait shows that Americans are standing onshaky ground. During the recent downturn, ew havenot been touched by economic uncertainties. Yet evenbeore the recession, more than hal o all Americansexpressed worries about their economic prospects.

As economic shocks have multiplied and instabilitypersisted, these worries have transormed intobroader and more persistent anxiety driven by

the widespread experience o economic loss.

To be sure, these shocks are not elt equally.Americans dier in their exposure to economicinstability and, even more starkly, in their capacityto cope with it. Less advantaged Americans andracial and ethnic minorities look substantially more

vulnerable to economic shocks than do Americans as a wholeprimarilybecause their basic economic buers are so weak. Households with childrenappear more deeply aected, perhaps because the adults in these householdshave less fexibility to adapt to changing economic circumstances.

Yet economic uncertainties touch even those who are relatively well-o:About hal o households with between $60,000 and $100,000 in annual incomewho experienced persisting shocks to employment or medical costs reportedsome unmet basic needs; almost 40 percent reported multiple unmet needs.

Altogether, somewhere between a quarter and a third o all Americans reportedunmet needs associated with economic shocks.

While less advantaged

Americans and racial

and ethnic minorities

look substantially more

vulnerable to economic

shocks, economicuncertainties touch even

those who are relatively

well-o.



The SERPI assessed Americans experiences and perceptions o economicinsecurity in the depths o the recession, which might lead to the concern thatits ndings are highly time-bound. Yet, as Figure 13 indicates, general poll datasuggest that 2009 was not particularly unusual.19

Worries about job loss did jump in 2009. By the summer o 2010, however, these

concerns had abated only modestly. The increase in reported worries duringthe downturn was surprisingly modest or housing stability, in part because

Americans concerns were already high; nor did they decline much ater 2009.For wealth (adequate retirement savings) and medical costs, concerns werehigh even beore 2009 and have not diminished since. Americans have beenstanding on shaky ground or some time, and the ground still seems extremelyunstable.

Whether the ground on which Americans stand is more stable in the uture

depends not just on the pace o economic recovery, but also on whether welearn rom their longstanding experiences with economic insecurity and workto reduce its requency, severity, and impact in the uture.

90%90%

80%80%

70%70%

ans

ans

60%ric

60%ric

50%Ame

50%Ame

ofof

40%ge

40%tage

nta

en

30%Perc

20%

10%

0%

Summer2005 Summer2007 Summer2009 Summer2010CategoriesofInsecurity

Losin Job Losin Home Medical Costs

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Summer2005 Summer2007 Summer2009 Summer2010

PercentageofAmericans

CategoriesofInsecurity

LosingJob LosingHome MedicalCosts

Fig. 13 Tracking Public Concern about Aspects of Economic Security

Percent Very or Somewhat Worried, 2005 to 2010

Source: Kaiser Family Foundaon, Kaiser Health Tracking Poll



Technical Appendix

This appendix describes in more detail the Survey o Economic RiskPerceptions and Insecurity.

The SERPI was incorporated as a part o the 2008-2009 Panel Survey o theAmerican National Election Studies (ANES), a survey unded by the NationalScience Foundation or the past hal century. The Panel Survey was an on-linesurvey o a nationally representative sample o Americans who agreed to beinterviewed monthly between January 2008 and October 2009. Thirteen o themonthly waves were available to other researchers. With nancial support romthe Rockeeller Foundation, the SERPI was elded as the sole questions or the

panel in March (Wave 15) and September (Wave 21) o 2009.

The ANES panel was constructed to provide a representative sample o theAmerican population aged 18 and older as o November 4, 2008. Although not

all eligible panelists completed the two waves involved in the SERPI, all theresults reported below are weighted to replicate a nationally representativedistribution o respondents. Data collected on economic experiences,

perceptions, and expectations during these two waves were merged with socio-demographic and other personal characteristics collected rom respondentsin other waves o the ANES survey.

Measures of Economic Insecurity

To accurately assess the prevalence and consequences o insecurity, it wasessential to measure insecurity in a more complete manner than had been done

previously. At the same time, the SERPI was designed to allow comparisono perceptions o insecurity measured prior to the economic downturn. Inthe spring o 2007, the Rockeeller Foundation sponsored a survey under theauspices o its New American Worker initiative that asked three thousand

Americans about their economic security. The core o this survey was aquestion about your amilys economic security dened or respondents asbeing able to keep your job, maintain your income, have health insurancecoverage, and retire comortably. The survey also asked about concernsrelated to more specic economic risks, including losing ones job, acing largeout-o-pocket medical spending, and lacking adequate income to pay or acomortable and secure retirement.

To allow comparisons with this 2007 survey, the two waves o the SERPIincorporated an identically worded set o questions about economic securityin general, as well as about some o the more specic orms o economicrisks asked about in the 2007 survey.20 However, the SERPI substantiallyaugmented these earlier questions. In the employment domain, the expandedscope included questions about (1) losing ones job (i currently employed), (2)nding a job (i currently unemployed but still in the workorce), and (3) losingseveral months rom work due to serious illness. In the health domain, the



risks included (1) large out-o-pocket medical expenses, (2) losing insurancecoverage due to cost increases, (3) having coverage cut, (4) being unable todetermine what types o services were actually covered, and (5) uture nursinghome costs. In the wealth domain, risks included (1) inadequate savings tosupport an adequate retirement, (2) being unable to cover the costs o current

housing arrangements, (3) cuts in pension benets, and (4) having debt solarge that it could never be paid o. Risks in the amily domain included (1)urgent nancial assistance to members o ones extended amily, (2) losing ones

partner/spouse due to divorce, and (3) losing ones partner/spouse due to death.

To ensure comparability across surveys, the same response scale was usedas in the 2007 American Worker survey: respondents were asked i they were

very, airly, somewhat, or not at all worried about each risk. Although ramingresponses in terms o worry may mean that some respondents will be morewilling than others to express their concerns, past studies suggest that worry isa reliable measure o concerns involving uncertain prospects.21

To assess the requency with which these worries were realized, a matchedset o questions were asked about whether respondents had experienced thecorresponding unexpected events. For example, worries about employmentcorrespond with questions regarding whether any adults in the household hadlost their job. These negative events are described collectively in the reportas economic shocks. Respondents on the March 2009 SERPI were askedabout whether they had experienced specic shocks in the past year, thoseresponding on the September 2009 wave were asked i they had experiencedspecic shocks in the past six months. For those completing both waves othe survey, it is thereore possible to construct an 18-month history o theirexperiences, ranging rom March 2008 to September 2009.

Specically, respondents were asked about two shocks in the employmentdomain (whether any worker in the household had been unemployed not bypersonal choice or had lost more than a month rom work due to serious illness

or injury), our shocks related to medical expenses (whether they had lost their

health insurance, had problems getting their insurance to pay or major medical

expenses, had out-o-pocket major medical expenses as the result o serious

illness or injury in their immediate amily, or had to pay a lot more or their health

insurance than expected), three shocks related to wealth (had their retirement

benets at work cut substantially, had the value o their investments or retirement

unds decline substantially, or had the value o their house decline substantially)

and three shocks related to amily (whether they had spent a substantial sumhelping out their extended amily, been divorced or separated rom their spouse,

or had their spouse/partner pass away).

Past research suggests that particular risks will eel more distressing i theyare relatively hard to anticipate or expected to have a relatively large impacton household well-being.22 As part o the SERPI, respondents were asked, or asubset o economic risks, to assess whether the events in question were onesthat people can plan or, ones that come unexpectedly, or a mix o predictable



and unpredictable circumstances? 23 And i those unortunate events cameto pass, how long it might be, or the typical person like yoursel, beore thehouseholds nancial situation returns to how it was beore the event occurred.

Buffers against Economic Risks

The extent to which economic uncertainty eels threatening depends in largepart on a households capacity to buer nancial shocks should they occur.This in turn depends on the households savings and ability to tap into the equityo its illiquid assets, balanced against the carrying costs or the householdsdebt.24 Beyond these household resources, risk can also be buered by drawingupon the nancial resources inherent in broader amily connections and socialnetworks.25

The value o households equity is dicult to assess with great reliability; theliquidity o these assets is even more dicult to measure. The SERPI thereoreincluded indirect, but more readily answered, questions. These included: (1)

an estimate o how many weeks/months the household could last, withouthardship, i its current earnings vanished, (2) whether it had recently tappedinto the equity o retirement accounts in order to pay expenses, and (3) whetherthe household had accumulated debt so substantial that the respondentanticipated diculty in being able to pay it o. To assess the availability onancial resources through social networks, respondents were asked howmuch they could borrow rom amily members and close riends in a time oneed.

Consequences of Economic Insecurity

High levels o insecurity may be consequential either because they cause

distress or because they interere with households ability to meet otherbasic needs. The SERPI measured distress through a combination oquestions regarding how requently respondents reported thinking abouttheir households economic insecurity and the extent o anxiety that theyexperienced when they did so. The SERPI measured households ability to meetbasic needs through a combination o questions regarding ood security (hadmembers o the household gone hungry because there was not enough moneyto pay or groceries), housing instability (losing ones home through evictionor inability to pay the mortgage), and unmet medical needs (not going to thedoctor or a known problem out o concern or costs).

Unlike the measures o psychological distress, which are directly attributedby respondents to perceptions o economic insecurity, these measures ounmet basic needs do not require households to attribute unmet needs tospecic causes. To assess their relationship with insecurity, thereore, requirescomparing unmet needs or households that report higher and lower levelso perceived insecurity or experienced instability but that otherwise looksimilar. In the text, this is done through comparison o households in similardemographic groups (or example, the third income quartile). To ensure that



the higher levels o unmet need that are associated with reported economicinstability were not in act a consequence o some other actor that occurredin conjunction with economic instability, a set o multivariate regressionmodels that identied the association o unmet needs and economic shockswas estimated. These models controlled statistically or the households annual

income in the year prior to the economic shocks; the value o its stock holdings;household size, race and ethnicity; the educational attainment o the primaryrespondent on the survey; and gender and age.

The results rom these models revealed that while instability in all oureconomic domains was associated with higher levels o unmet need or thehousehold, only or shocks associated with employment and medical expenseswas this relationship statistically signicant, controlling or shocks in otherdomains and the above-mentioned socio-economic characteristics o thehousehold. Conversely, all our buers were associated with unmet needs in astatistically signicant manner, again controlling or the presence o economicshocks and other socio-economic characteristics o the household. The

probability o unmet need was about hal as large or persisting employmentshocks, compared with those that occurred but once in the previous 18 months;or persisting shocks associated with medical expenses, the probability ounmet need was twice as high as or non-reoccurring shocks.



1 Jacob Hacker, The Great Risk Shift: The New Economic

Insecurity and the Decline of the American Dream, rev.

and exp. (New York: Oxford University Press, 2008);

Peter Gosselin and Seth Zimmerman, Trends in Income

Volatility and Risk, 19702004, Urban Institute Work-

ing Paper (Washington, DC: Urban Institute, May 2008);

Thomas Cusack, Torben Iversen, and Philipp Rehm, Risks

at Work: The Demand and Supply Sides of Government

Redistribution, Oxford Review Economic Policy 22, no. 3

(2006):365389; Philipp Rehm, Risks and Redistribution:

An Individual-Level Analysis, Comparative Political Studies

42, no. 7 (2009): 855881; Charles F. Manski, Measuring

Expectations,Econometrica 72, no. 5 (2004):13291376; J.

Dominitz and C. Manski, Perceptions of Economic Insecu-

rity: Evidence from the Survey of Economic Expectations,

Public Opinion Quarterly61 (1997):261287.

2 The MetLifes Study of the American Dream: Against the

Backdrop of the Financial Burden Shift(New York, NY: Met-

ropolitan Life Insurance Company, 2007). Families USA,

Too Great A Burden: Americas Families at Risk , Publica-

tion No. 07-113 (Washington, DC: Families USA Foundation,

2007); Kaiser Family Foundation, Health Security Watch

(Menlo Park, CA;: Kaiser Family Foundation, 2007); Paul

Fronstin, Savings Needed to Fund Health Insurance and

Health Care Expenses in Retirement, EBRI Issue Briefno.

295 (Employee Benet Research Institute,

July 2006). One exception to these more narrowly focused

surveys was a survey to which we will return later in the

report: The Rockefeller Foundation,American WorkerSurvey(New York: Rockefeller Foundation, 2007) [elded

by Yankelovich Inc, February 6-19, 2007].

3 Lars Osberg and Andrew Sharpe, How Should We

Measure the Economic Aspects of Well-Being, Review of

Income and Wealth 51, no. 2 (2005):311336; E. Ligon and L.

Schechter, Measuring Vulnerability, Economic Journal113,

no. 486 (2003):C95C102.

4 There is an extensive literature relating each of these

domains to instability of economic circumstances and

(less extensively) to perceptions of economic insecurity.

For some illustrative examples: Links between unemploy-

ment and subsequent earnings trajectories and perceived

insecurity were explored in Dominitz and Manski, Per-

ceptions of Economic Insecurity; and Liliana Winkelman

and Ranier Winkelman, Why Are the Unemployed So

Unhappy? Evidence from Panel Data, Economica 65

(1998):115. The consequences of medical expenditures on

economic security were documented most extensively

in Sara R. Collins, Jennifer L. Kriss, Michelle M. Doty, and

Sheila D. Rustgi, Losing Ground: How The Loss of Adequate

Health Insurance Is Burdening Working Families (New

York: Commonwealth Fund, 2008); see also Peter J. Cun-

ningham, The Growing Financial Burden of Health Care:

National and State Trends, 2001 2006, Health Affairs 2,

no.5 (2010):10371044; Changing distribution of wealth

and its consequences for risk buffering was explored in

Karen E. Dynan and Donald L. Kohn, The Rise in U.S. House-

hold Indebtedness: Causes and Consequences, Discussion

Paper, 2007-37, Finance and Economics Discussion Series

Divisions of Research & Statistics and Monetary Affairs

Federal Reserve Board (Washington, DC, 2007); and Jona-

than Gruber, The Wealth of the Unemployed, Industrial

and Labor Relations Review55, no. 1 (2001):7994. Illustra-

tions of the impact of family congurations on economic

security was examined in Marianne E. Page and Ann Huff

Stevens, The Economic Consequences of Absent Parents,The Journal of Human Resources 39, no. 1 (2004):80107;

and Paul Attewell, The Impact of Family on Job Displace-

ment and Recovery,Annals of the American Academy of

Political and Social Science 562 (1999):6682.

5 Although not all eligible panelists completed the two

waves involved in the SERPI, all the ndings reported are

weighted to produce nationally representative results.

Of the 3,657 active panelists in March 2009, 2,493 (68.2

percent of the eligibles) completed the survey; of the 2,527

active panelists in September 2009, 2,203 (62.5 percent

of the eligibles) completed the survey. A total of 2,084

respondents completed both waves of the survey.

6 Economic security was dened as being able to keep

your job, maintain your income, have health insurance

coverage, and retire comfortably.

7 Not every respondent was asked about all of these

risks: those who were retired were not asked about losing

their job; those who had no younger children were not

asked about the costs of child care or education; those

who had no health insurance were not asked about the

risk of unexpected premium increases or otherwise losing

insurance coverage.

8 Worry is a generally robust metric for assessing inse-

curity. See Louie Rivers and Joseph Arvai, Win Some, Lose

Some: The Effect of Chronic Losses on Decision Making

Under Risk,Journal of Risk Research 10, no. 8 (2007):1085

1099; V. Ricciardi, The Financial Psychology of Worry and

Women,Social Science Research Network (SSRN) Working

Paper Series, 2008. [(http://papers.ssrn.com/sol3/papers.

cfm?abstract_id=1093351].

Notes



9 Collins, Kriss, Doty, and Rustgi, Losing Ground; Families

USA, Too Great a Burden; Kaiser Family Foundation, Health

Security Watch.

10 Jennifer Lerner and Dacher Keltner, Fear, Anger and

Risk,Journal of Personality and Social Psychology81, no. 1

(2001):146-159; Jennifer Lerner, Roxana Gonzalez, DeborahSmall, and Baruch Fischhoff, Effects of Fear and Anger

on Perceived Risks of Terrorism: A Natural Experiment,

Psychological Science 14, no.2 (2003):144150.

11 Comparing expectations between people who have

actually experienced these events and those who have

not, it appears that those who are subject to an economic

shock are more pessimistic about the duration of their

impact, perhaps reecting greater awareness of the

actual consequences or greater anxiety based on prior

experience.

12 Talya Miron-Shatz, Am I Going To Be Happy AndFinancially Stable? How American Women Feel When

They Think About Financial Security,Judgment and

Decision Making 4, no. 1 (2009):102112.

13 The literature on the linkage between stress, anxiety

and health is vast. See, for example, Terrence D. Hill, Cath-

erine E. Ross, and Ronald J. Angel, Neighborhood Disorder,

Psychophysiological Distress, and Health,Journal of

Health and Social Behavior46, no. 2 (2005):170186, and

E. B. Faragher, M. Cass, and C. L. Cooper, The Relationship

between Job Satisfaction and Health: A Meta-Analysis,

Occupational and Environmental Medicine 62, no. 2

(2005):105112.

14 Most commonly, this involves not going to the doctor

for needed care because the respondent was concerned

about the potential costs of that visit.

15 There is one exception to this general pattern. When

there are multiple shocks in the family domain (most of-

ten, when the loss of a partner/spouse coincides with the

need for nancial assistance from ones extended family),

the level of unmet need is more than twice as high as for

households that experience a single family-related shock.

Multiple shocks in the family domain seemingly induce

more unmet needs than for multiple shocks in any other

domain of economic life.

16 The value of households equity is difcult to assess

with great reliability; the liquidity of these assets is even

more difcult to measure. The SERPI therefore included

indirect, but more readily answered, questions. These

included: (a) an estimate of how many weeks/months the

household could last without hardship if its current earn-

ings vanished, (b) whether it had recently tapped into the

equity of retirement accounts in order to pay expenses,

and (c) whether the household had accumulated debt

so substantial that the respondent anticipated difculty

in being able to pay it off. To assess the availability of

nancial resources through social networks, respondents

were asked how much they could borrow from family

members and close friends in a time of need. Because

the aggregate distribution of responses was very similar

across the two waves of the survey, only the fall results

are presented here. As noted above, because the stock

market had rallied somewhat by the fall of 2009 and

some aspects of the national economy were at least tem-

porarily appearing a bit more robust, these fall estimates

are slightly more optimistic about the capacity of risk

buffers than would be the estimated based on the spring

survey data.

17 Lauren J. Krivo and Robert L. Kaufman, Housing

and Wealth Inequality: Racial-Ethnic Differences in

Home Equity in the United States, Demography41,no. 3 (2004):585605; N. Anders Klevmarken, Joseph P.

Lupton, and Frank P. Stafford, Wealth Dynamics in the

1980s and 1990s: Sweden and the United States, The

Journal of Human Resources 38,

standing on shaky ground - effects of longterm economic in security

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