RELEASE: New CAP Data Analysis Shows More Families Subject to Income Volatility, Economically Unstable Situations

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Center for American Progress issue brief examines wealth concentration and increasing economic volatility, suggests progressive policy solutions—like a federal jobs guarantee and public investments in early childhood education, caregiving, and infrastructure—to stabilize family incomes.

Washington, D.C. — A new Center for American Progress issue brief examines the most recent available data on the overlap between income volatility and wealth inequality, finding that American families today face more negative income shocks—that is, their income was less than usual in the previous year—and other economically unstable situations. To compound the situation, middle-class wealth has declined—leaving families unprepared to confront job instabilities such as layoffs, cuts in hours, and loss of overtime pay—following the Great Recession. People without a college degree and communities of color feel these effects even more deeply.

At the same time, wealth has become increasingly concentrated at the top, with the top 10 percent of income earners owned more than two-thirds of all wealth in 2016, the last year data are available.

Though the end of the Great Recession is nearly a decade old, the data show that many middle-class and working-class families have yet to fully recover from its impact,” said Christian E. Weller, CAP senior fellow and the author of the analysis. “These data make clear that bold, new policy solutions—like a federal jobs guarantee and major investments in the pillars of the middle class—are the solution to the lasting economic pain that has followed many families since the housing crisis and stock market crash of 2008.”

CAP examined the most recent available data on the overlap between income volatility and wealth inequality. Additional findings include:

  • In the years after the Great Recession of 2007 to 2009, median family wealth was 40 percent lower than it was in the years before 2007, while wealth at the 90th percentile rose by 2 percent.
  • Income volatility has grown. The share of families who have seen a negative income shock grew from less than 18 percent before the Great Recession to 22.3 percent since then. At the same time, people’s time with their current employer has also fallen since the Great Recession, as workers have lost jobs and moved to new ones, highlighting the fact that jobs have become less stable.
  • The chance of an income drop overlaps with less wealth. Households with negative income shocks had a median wealth of less than $33,016 in 2016 dollars from 2010 to 2016, while households with positive income shocks—meaning their income was greater than usual in the previous year—had $104,300 in median wealth during that same time.
  • Families who see their incomes fall are more likely to experience economic hardships. For instance, households with negative income shocks were more likely to have been at least two months late on any past payments; to have filed for bankruptcy in the past year; and to be underwater on their mortgage—meaning they owe more than their house was worth—during that time.
  • Income volatility contributes to other financial stresses. About two-thirds of families with negative income shocks did not even have emergency savings equal to one month of their regular income in the years after the Great Recession. Roughly one-fourth of families with negative income shocks had debt payments greater than one-third of their income at the same time.
  • Economic stress adversely affects families’ ability to save. Typically, households with economic stresses had a less than 40 percent chance of saving regularly or irregularly from 2010 to 2016, while those without economic stresses had more than 50 percent chance of being savers. Families with more income volatility also are more likely to forego health insurance for economic reasons, a lot less likely to participate in a retirement plan at work, less likely to contribute less to their 401(k) plans, and often have shorter financial-planning horizons.

Read the brief: “Working-Class Families Are Getting Hit From All Sides” by Christian E. Weller.

For more information or to speak with an expert, contact Allison Preiss at apreiss@americanprogress.org or 202.478.6331.

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