Americans are understandably worried about their economic security today, as the unemployment rate hovers near 10%. Yet they were also quite worried about their economic security before the recent severe economic downturn.
The ESI helps explain why. The chance of major economic loss without adequate protection has risen substantially over the last quarter century (and, if the focus is just on large income losses, even more substantially since the late 1960s).
Economic Security and Economic Anxiety
The ESI is constructed from observable events. It counts the number of people who actually experience economic insecurity. It is not an estimate of the share of Americans who feel insecure.
The prevalence of public concern about economic insecurity is likely to be far broader than the personal experience of the events that give rise to insecurity. Many more Americans perceive themselves as vulnerable to large income drops or medical spending spikes than the number who actually experience these events.
Even before the current economic crisis, economic security was a major concern of most Americans. In a Rockefeller Foundation-sponsored poll in February 2007, before the onset of the current recession, two-thirds of respondents declared the economy had become less secure in the last decade. Not surprisingly, the recent downturn has increased public concern. A Kaiser Family Foundation survey revealed that between March 2007 and July 2009, the share of respondents who reported being worried about losing their job grew from 33 percent to 55 percent. A follow-up Rockefeller-sponsored survey that was fielded as part of the American National Election Studies found that the share of Americans "very worried" about their own family?s economic security doubled in two years from 12 percent in 2007 to 24 percent in 2009; the share "fairly worried" increased from 12.2 percent to 28.5 percent.
For many Americans, especially those who are poorest or who have the fewest financial resources, the 25% loss threshold may be too high. About one in five Americans, according to an opinion survey conducted in conjunction with this study, indicate that they would face financial hardship if they were forced to go for as little as two weeks without income.
Extending the ESI
ESI captures three core elements of economic security: major loss in income, large out-of-pocket medical expenses, and lack of an adequate financial safety net.
Still, the ESI does not capture every element of economic insecurity. It does not directly capture the vulnerability of families to drops in their financial wealth, a risk highlighted by the present economic downturn. Nor does it capture changes in the risk of retiring without adequate income, though other measures of risk exist and suggest it has increased sharply.
And while the ESI does account for medical spending, it does not capture other expenses that might be considered nondiscretionary, such as the costs required to earn income (including child-care costs).
Future reports based on the ESI will take up a number of these issues as well as others, including
- how different segments of American society and parts of the nation have fared when it comes to economic insecurity;
- the specific causes, persistence, and severity of household income declines; and
- how levels of and trends in economic security differ across selected affluent nations.
To better understand the relationship between the events measured in the ESI and the subjective experience of economic insecurity, the Rockefeller Foundation has also supported a linked project to examine what shapes people's perceptions of economic insecurity. Some of the results from the first wave of this survey—conducted in conjunction with the American National Election Studies—have been reported on previous pages. The analyses produced from this opinion research will allow for better understanding of how people's perceptions of economic security are linked to their real economic experiences.
Finally, the ESI will be updated on a regular basis in future years as new data become available.
Ultimately, no single measure can capture a worker or family's economic security. But the ESI represents a simple but powerful tool for doing so—one that can be used for research as well as public education and discussion.