Creating a Softer Economic Cushion

Jul 16, 2006

Authors: Greg Anrig

Publisher(s): The Century Foundation

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Compared to the past, U.S. workers today face a greater degree of unpredictability about what they will earn from year to year. At the same time, households have more debt and less savings than in the past. Those changes have combined to leave families increasingly in danger of experiencing sudden and severe financial hardship, especially if they lack health insurance. TCF vice president for program Greg Anrig, Jr. examines these issues and proposes reforms to the unemployment insurance system.

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Proposals reviewed in the brief include:

Facts about economic insecurity highlighted in the brief include:

• Beginning in the 1980s, Americans began to experience wider average changes in their incomes from year to year. That trend accelerated in the 1990s.
• While income fluctuations have become widest for workers with below-average earnings, the shift toward much greater volatility applies across the entire spectrum.
• At its peak in the mid 1990s, earnings instability was almost five times as great as it was in the early 1970s. It dropped somewhat in the late 1990s, but remains far higher than its earlier levels.
• Over the past two decades, household savings rates have steeply declined so that they are now negative.
• Over the same period, household debt has soared, most recently reaching its all-time peak of 118 percent of household income.
• Health insurance and pension are closely linked to employment and many workers do not have alternative access to these important benefits, which makes job loss an expensive and damaging event.
• In 1947, about 80 percent of workers in jobs covered by unemployment insurance received benefits when they lost their jobs; by 2001, only 43 percent of unemployed workers received benefits.
• Among the states, coverage levels vary widely, ranging from 21 percent in South Dakota and Louisiana to 74 percent in Connecticut and Massachusetts .
• The giant gaps and inadequacies of unemployment insurance are an outgrowth of the major changes in the economy since the program was created: more outsourcing and part-time work, more working women, more worker mobility, and lower levels of labor unionization.

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The Security and Opportunity Agenda is an initiative that consists of a series of short, engaging publications putting forward policy ideas for addressing the most serious challenges facing the United States. Each brief provides an overview of the nature of the problem to be confronted, a summary of public opinion data about the issue, an explanation of the proposed solutions and evidence that they will work, and an estimate of the costs involved. The series is intended to offer journalists, congressional staffers, and others concerned with current policy debates a concise guide to the problem and a clearly stated idea for a solution.