The Study Panel’s assessment of economic insecurity, through examinations of poverty, income trends, and income volatility, relied on data that were available at the time of writing, most of which was for the year 2019. Poverty in the U.S. dropped, under the official poverty measure, to a historic low of 10.5 percent, but much of the population ended 2019 cash-strapped and indebted. The typical household’s income did not grow as fast as the economy nor did it keep up with the price of certain goods, like a home or a college education. For many, income itself was insecure and prone to volatility, or unpredictability. People were materially better off in many respects than any prior generation, but also in precarious economic situations.
Economic insecurity is a function of exposure to economic risk and of the level of protection available if the risk is realized. The assessment of insecurity has so far focused on the latter. A realized risk can be anything from a wrecked car to a flooded or forest fire-torched house to a high medical bill.
While these risks can be devastating, they typically hit individuals sporadically—one at a time, here and there. In contrast, recessions, in which the overall economy declines, are periods of widespread economic shock. In a recession, tens of millions across the country suffer risk through job loss, income cuts, and business closure. In some ways, the most accurate measure of economic insecurity is how well households fare during recessions.
The “pandemic recession” officially began in February 2020, the same month that the World Health Organization and the U.S. Department of Health and Human Services issued public health emergencies. In April, the unemployment rate jumped from 4.4 percent to 14.7 percent and the economy shed 22.5 million jobs. Schools closed, businesses were forced to shut down or greatly limit operations, and food prices increased quickly.
Recognizing that a historic downturn was fast approaching, in March, Congress passed the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide relief and support for households and businesses. The bills included, on a temporary basis:
- Requirements for some employers to provide paid sick leave and paid family leave, reimbursed by the government
- Borrower opt-out forbearance of student loans
- Borrower opt-in forbearance of mortgages
- Federally funded increases to Unemployment Insurance benefit amounts and extension of benefit duration
- Creation of a new unemployment program for independent contractors and workers otherwise ineligible for unemployment benefits
- Waived eligibility restrictions for Supplemental Nutrition Assistance Program (SNAP)
- Recovery payments in the amount of $1,200 to most documented adults
- Supplemental $500 payment to households for each child under seventeen years old
- Ability to withdraw from 401(k) retirement accounts without penalty
- One-time emergency payments
The FFRCA, CARES Act, and extension of certain CARES Act provisions passed in December 2020 speak to a basic, if reactive, strategy for increasing economic security. Insecurity is the risk of inadequate income in the face of a shock, and Congress saw that a large shock was coming. They acted to bolster and expand access to existing programs, create new programs, ease debt payments, and send cash to 85 percent of households. Action to permanently address economic insecurity would do all these things but would be proactive as well, reducing the sources of insecurity and exposure to risks. The U.S. has an effective policy support system that establishes a baseline of economic security, but there are still unmet needs and unaddressed sources of risk.