The headlines are inescapable: Gas and grocery prices, housing, health care, and child care costs are all climbing and squeezing Americans’ household budgets.
Recent research supports these concerns. The Urban Institute’s True Cost of Economic Security (TCES) measure shows that nearly half of all people in the US live in economically insecure families. The share of people who are economically insecure varies considerably across the country, with people struggling even in low-cost areas.
Easing the affordability crisis and increasing economic security requires policies that both reduce costs and boost workers’ earnings.
How we measure the true cost of economic security
The Urban Institute’s TCES sheds light on what families need to thrive in the US and compares those needs with the actual resources families have.
What sets the TCES apart from other measures like the ALICE (Asset Limited, Income Constrained, Employed) measure, the Massachusetts Institute of Technology’s Living Wage Calculator, and the Economic Policy Institute’s Family Budget Calculator is the variety of costs it captures, its comprehensive approach to assessing family resources—including the value of homeownership—and its adjustment of survey data to account for underreporting of certain resources.
TCES sets a standard for what it costs families to be economically secure—not just get by. The TCES provides a comprehensive view of families’ localized costs, including paying for adequate food, clothing, housing, health care, child care, caring for a family member with a disability, transportation, student debt service, savings for unexpected expenses and retirement, and additional miscellaneous costs.
The TCES’s assessment of family resources is equally comprehensive, accounting for earnings, tax credits, all types of regularly received unearned income, the value of in-kind transfers and subsidies, and the value long-time homeowners derive from having no mortgage payments or payments below the cost of renting adequate housing.
family that earns enough to be secure according to the TCES measure isn’t “rich,” but is able to afford rent without doubling up, can maintain their vehicle, buy new school clothes for their children, and purchase sufficient nutritious food, while still putting away some money for retirement or an unexpected expense. A family with resources below costs isn’t necessarily poor, but at the very least, they are in an economically precarious position, one lost shift or one missed paycheck from having to deplete savings, incur debt, put off paying rent or utility bills, or skip meals.
Rates of economic insecurity vary across states
While nearly half of all people in the US live in economically insecure families, the rate varies considerably across the country. More than 55 percent of the residents of Hawaii, Mississippi, and New Mexico are economically insecure. In contrast, fewer than 45 percent of residents in Delaware, Illinois, Maryland, Minnesota, New Hampshire, New Jersey, North Dakota, Ohio, Rhode Island, and Virginia are economically insecure. Even in the states with the lowest rates of economic insecurity, more than 4 in 10 people are financially insecure. This is why affordability is an issue that resonates with so many people across the country.
Families with children fare even worse than other family types. About 56 percent of people in families with children and working-age adults are economically insecure, and insecurity among people in these families ranges from 70 percent in Hawaii to 44 percent in North Dakota. In 12 states, more than 60 percent of people in such families are insecure, compared with 9 states in which fewer than half of all people in families with children are economically insecure.
People in Families with Children Are Least Likely to Have the Resources to Meet Their Expenses
Families with children and adults under age 65
Source: Adapted from Acs et al. (2024). Authors’ analysis, applying the ATTIS (Analysis of Transfers, Taxes, and Income Security) model to combined 2022 and 2023 American Community Survey data, reweighted to reflect 2023 population and income characteristics. American Community Survey data were obtained from IPUMS USA, University of Minnesota, www.ipums.org.
Notes: The determination of whether resources are above or below the TCES threshold is made at the family level, not the person level. The medians are based on the family-level costs and resources of each individual. Family is defined as all related persons in a household, plus cohabiters and their relatives, and any unrelated children in the household who are cared for by the family. Households may include more than one family and some families may consist of a single individual. An adult is over age 17, or a person under age 18 who is the head (or spouse of head) of a family. Estimates do not include people who are unhoused or living in nursing homes, homeless shelters, or other group quarters. “Minimum value” indicates the county with the lowest TCES rate, median costs, or median resources in the data available for the state. “Maximum value” indicates the county with the highest TCES rate, median costs, or median resources in the data available for the state.
Costs are not the sole driver of economic insecurity
These differences between states reflect more than the cost of living. For example, Mississippi has the lowest median cost of economic security for people in families with children and working age adults, but more than 60 percent of people in such families are economically insecure there. Meanwhile, New Jersey’s cost of economic security for such families is among the highest in the nation, yet its economic insecurity rate is among the lowest. The big difference? Families’ median resources. New Jersey families’ resources are among the highest in the nation while Mississippi families’ resources are among the lowest.
The strength of the labor market, job opportunities, workers’ earning potential, norms and laws around worker pay, and social supports all contribute to family resources, and all affect affordability. After all, if costs go up 4 percent but wages go up 8 percent, life becomes more affordable. The challenge is that the costs of housing, health care, and child care have been growing faster than earnings in many communities.
What will it take to make life more affordable for Americans?
Addressing the affordability crisis requires attention to both costs and resources.
It will be equally important to expand the resources available to economically insecure families by ensuring all people have access to the schooling and training they need for employment in the changing economy, and that institutional supports for working families, such as the minimum wage, collective bargaining, and assistance paying for child care and health care, also expand.
Policymakers at all levels can help bring costs down by reducing barriers to the provision of key goods and services, such as by relaxing zoning and permitting requirements to increase the supply of housing and by expanding the range of health care services that can be provided by nurse practitioners and physician assistants.
Let’s help communities build more secure, hopeful futures.
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