URBAN AGENDA: A New Economic Measure for the Needs of 21st Century America
An undisputable truth about the outcome of the 2024 presidential election is that it underscored the disconnect between the perception of a vibrant economy and the reality on the ground for many voters.
Leading up to the election, all major economic indicators – GDP growth rate, consumer confidence, unemployment, inflation, interest rates, gas and energy prices – suggested the national economy was doing extra-ordinarily well. Yet, the outcome of the election suggested that voters perceived it to be otherwise. Anxious about high costs, Americans prioritized their wallets at the polls. Indeed, many said their financial struggles were not “seen” or had been marginalized.
Clearly, the ways we calculate and talk about the cost of living must better reflect reality.
The shortcomings of current government economic measures to look beyond mere subsistence to identify present-day costs, spending and savings that are essential to people getting ahead economically, has been a long-time concern of anti-poverty advocacy groups like the Federation of Protestant Welfare Agencies (FPWA) and my organization, the Community Service Society of New York (CSS). Earlier this year, CSS and FPWA published a survey that found 65 percent of Americans considered “middle class” were struggling financially. And they don’t expect that to change for the remainder of their lives.
Earlier this year, CSS and FPWA commissioned the Urban Institute to study the true cost of economic security in America. In a report released this week, the nonprofit research group offers a formula for understanding the costs to fully participate in today’s economy, as well as the resources to meet those costs. According to the report, 52 percent of Americans lack the financial resources to meet the “True Cost of Economic Security (TCES)” threshold in today’s society. Only 11 percent of these families are defined as living in poverty, but they strain mightily to afford basic daily necessities, save money and establish future financial security.
Nationally, the Urban Institute study set the median TCES at $139,700 for a family of two children and parents under the age of 65; $88,900 for childless adults under 65; and $105,100 for families with at least one adult age 65 or older.
More than 80 percent of people in single-parent households fall below the TCES threshold to cover their true living expenses, the study found. Meanwhile, half of all families with two children and two adults under age 65 cannot cover their TCES. Their predicament is driven more by deficient economic resources than high consumer prices, the study concluded.
Turning to demographics, the study found 71 percent of Latino families fell below the TCES threshold compared to 42 percent of non-Hispanic Whites, 67 percent of Blacks and 46 percent of Asian and Pacific Islanders. According to the study, these racial and ethnic disparities reflect many differences in family size and composition, geographic concentration, and opportunities for education and employment.
In a break from outdated economic measures designed to capture only the most acute material deprivation, the report’s new economic measure makes comprehensive estimates of the actual financial resources it takes for households to thrive, not just scrape by paycheck to paycheck. And it can be adjusted for costs and required resources in every region of the country.
Across the nation, the share of families with incomes below their respective TCES thresholds ranged from as low as 46 percent in the Midwest to a high of 57 percent in the West. Notably, Bronx County was among the five counties with the highest fraction of residents struggling to achieve economic security at 78.3 percent.
The TCES threshold considers a wide range of costs, such as housing, food, health care, childcare, transportation, mobile telephone, internet, taxes, loans and debt. It also factors in savings, which few existing cost-of-living or self-sufficiency measures include as an essential expense.
In addition to savings, financial resources in the TCES measurement include a wide range of income, including wages, money from a side hustle, tax credits, public assistance, pensions, alimony and the value of family members helping out with childcare.
The richness of the TCES metric is obvious. Especially when compared with conventional indicators like the Consumer Price Index (CPI), which focuses on a basket of more than 80,000 items, many of which have little to do with the day-to-day household expenses of low- and middle-income families.
The next step is the adoption of the TCES metric as a policy-making tool. To that end, CSS and FPWA will convene a panel next month featuring city officials and local stakeholders discussing ideas on how the new measure can be utilized to address economic realities modern households face.
Here’s the bottom line. We need this new metric because our economic suffering is far from over. While no U.S. President can do much to substantially reduce inflation, there are things a president can do to make inflation much worse. We have no time to waste if we hope to reverse the trend of worsening economic security.
David R. Jones, Esq., is President and CEO of the Community Service Society of New York (CSS), the leading voice on behalf of low-income New Yorkers for more than 175 years. The views expressed in this column are solely those of the writer. The Urban Agenda is available on CSS’s website: www.cssny.org.
The post URBAN AGENDA: A New Economic Measure for the Needs of 21st Century America appeared first on New York Amsterdam News.