Economic insecurity is the threat, or risk, of inadequate income. Conversely, economic security is the assurance of adequate income through mitigation of that risk or its consequences. However, it may be easier to understand economic security and insecurity when contrasted with economic status.

Economic status is visible and measurable, reflecting how much a person earns, owns, saves, and consumes.¹⁹Economic status is not to be confused with socioeconomic status, which is defined by the American Psychological Association as follows: “Socioeconomic status is the social standing or class of an individual or group. It is often measured as a combination of education, income and occupation.” In short, “economic status” refers to what resources one owns and can afford to buy, while “socioeconomic status” refers to one’s well-being compared to others’. That status is amenable to evaluation in many ways. For example, one might ask whether a person earns enough to manage the basics of daily living, or colloquially, to “make ends meet.” Researchers and policy makers disagree on what is “enough” or what “ends” entail in terms of basic needs like food, housing, education, and health care, or what comprises a good, or sufficient, status.²⁰For example, one definition of economic status is whether a person is “in poverty.” A poverty threshold is a dollar amount below which someone is considered poor and above which someone is not poor. What that poverty threshold should be, and what it should measure, is the subject of a long and sometimes fierce debate.  Regardless of the definition of status, it is measured at a point in time—for instance, whether a person can pay rent in a given month.

Economic security, on the other hand, is much less tangible or measurable, reflecting the more expansive concept of whether a person will be able to maintain an adequate standard of living in the wake of an event such as job loss, illness, or natural disaster. The idea of economic security depends on two factors: the likelihood of the at-risk event, or “shock” (e.g., job loss, illness, or natural disaster), happening and the level of protection in place should the event happen or should the shock occur. Economic security is therefore composed of both risk exposure and risk protection. Given that it relies on unforeseen future events, economic security is often considered over a longer and undefined time horizon, such as whether a person can pay rent if they become unemployed.

Consider two employees of a company: the chief executive officer and the janitor. By most measures, the CEO is in the much riskier job; about half of CEOs who depart their position for any reason are fired or forced out of their jobs.²¹Sahada, 2019. Up to Half of Exiting CEOs Don’t Quit. They Get Fired. CNN Business. Yet CEOs are not economically insecure. Not only do they make significantly more money than the janitor but they also probably have an employment contract that compensates them even if they are fired (often called a “golden parachute”).²²CEOs are a well-studied profession. They are not only leaders in industry but also the poster children for inequality. A recent report from the Economic Policy Institute found the ratio of “CEO-to-typical-worker compensation was 320-to-1” in 2019, up from 293-to-1 in 2018, 61-to-1 in 1989, and 21-to-1 in 1965 (Mishel and Kandra 2020). As for “golden parachutes,” the most recent data show “change in control benefits for the top 200 CEOs” to be about $27.9 million in 2019 (Executive Change in Control Report, 2020). In addition, a high-earning CEO has very likely accumulated credit and assets; their wealth is a de facto form of insurance to borrow against or sell. The janitor, on the other hand, may be less likely to be fired but also much less likely to have adequate income, a severance, savings, or immediate alternative employment options. And with a low income, the janitor is much less likely to have significant assets or access to credit.²³To expand on the example, janitors and cleaners made, on average, $30,010 per year as of May 2019. For families earning less than the median family income—$86,000 in 2019 (see Table H-5)—there is a 50 percent chance of owning a home (see Table 8). As such, it is very unlikely that the janitor owns a house.  The janitor has a substantially higher level of economic insecurity, even if the CEO has more risk in terms of job stability.

Thus, economic security is not just income but precarity. The two are correlated, but not necessarily uniformly or evenly across persons and positions.

Measuring economic insecurity remains difficult. Researchers attempt to measure protection against risk through assets such as savings and insurance. Although they seek to predict the likelihood of a particular negative shock, the true extent of risk, and the true extent of protection, is often not known until a shock occurs.²⁴Potter 2011, for example, details the failure of the economics community to forecast the level of risk present in the housing market leading up to the Great Recession in 2007.  On top of this uncertainty, not all shocks are similar. A hurricane causing a business to close for two months is a shock to its workers, but of a different degree than the shock to workers if the business closes permanently. Similarly, a business closing permanently is a shock to its workers of a different degree if it is easily substitutable (like a restaurant in a mall food court) versus if it is the largest employer in a small city (like a manufacturing plant).²⁵Janesville, by Amy Goldstein, documents the story of workers at a General Motors plant in Janesville, Wisconsin, when it closed in 2008. The factory employed 4,800 individuals and provided high-wage jobs that the laid-off workers struggled to replace.

Since the 1930s, the U.S. has achieved substantial gains in economic status. Per capita Gross Domestic Product (GDP), or the total size of the U.S. economy divided by the number of people in it, rose in real terms from $10,081 in 1940 to $58,164 in 2020.²⁶To account for the change in prices over time, dollar amounts from prior eras are adjusted for comparison to today’s dollars, or to “real” terms, by accounting for the average change in prices over time. Throughout the report, we note by use of “real” that dollar amounts are adjusted in this manner. GDP data come from the Bureau of Economic Analysis Table 1.1.6. Real Gross Domestic Product, Chained Dollars, line 1. Dollars are in terms of chained 2012 dollars. Population data comes from the Bureau of Economic Analysis Table 2.1. Personal Income and Its Disposition, line 40.  On average at least, people in the U.S. are better off now and have grown steadily better off over time.

As a part of being better off, people in the U.S. consume more every year. For example, during the Great Depression, between 1930 and 1933, consumption spending decreased each year by at least 2.2 percent. Since then, in no two consecutive years has consumption spending in the U.S. economy decreased. Only in four years (out of over eighty) has consumption decreased relative to the prior year.²⁷The largest year-over-year decrease in consumption spending since 1942 took place in 2009 and was small in comparison to decreases observed during the Great Depression (1.3 percent). The data are available only through 2019; 2020 will likely be the fifth year of decline.Bureau of Economic Analysis Table 2.3.1. Percent Change from Preceding Period in Real Personal Consumption Expenditures by Major Type of Product 1930–2019.”

Perhaps the most salient measure of progress is that households own more goods than they ever have. Table 1²⁸Residential Energy Consumption Survey: 1980, 1987, 1997, 2005, 2009, and 2015.  and Table 2²⁹Pew Research Center. 2019. Mobile Fact Sheet.  below show data on ownership rates of common household items for recent years.

In terms of larger assets, between 1960 and 2018, the portion of households that owned at least one car increased from 78.5 percent to 91.5 percent, while the portion owning at least two cars nearly tripled to 59 percent, and the portion owning at least three cars increased almost nine-fold to 21.9 percent.³⁰Oak Ridge National Laboratory. Table 9.04: Household Vehicle Ownership, 1960–2018.  In a similar vein, the proportion of U.S. owner-occupied households increased by over 50 percent between 1940 and 2020, from 43.6 percent to 67.4 percent.³¹U.S. Census Bureau. 1976. Historical Statistics of the United States, Colonial Times to 1970.U.S. Census Bureau. 2020. Homeownership Rate for the United States [RHORUSQ156N], retrieved from FRED, Federal Reserve Bank of St. Louis. 

The increase in access to basic consumer goods—goods that many would consider necessities—is clear evidence of an improvement of economic status, but how much it says about economic security, or how much economic security these goods confer, is unclear. For instance, most individuals, when asked if they could weather an unemployment spell or the illness of a partner that forces them to quit their job, are unlikely to bring up that they have a refrigerator or cell phone. Security comes from larger assets, such as cars or homes. As to the former, automobile ownership is at an estimated 91.5 percent, but cars as assets provide weak security because they are (except in rare cases) constantly depreciating in value. Homeownership, as previously noted, was at 67.4 percent in 2020.

Many of the averages in ownership of goods mask differences across key demographic groups. In 2018, for example, 94.4 percent of the U.S. population had access to internet at the speed of 25 Mbps—an adequate speed for most users—while only 77.7 percent of those in rural areas and 72.3 percent of those on tribal lands had such access.³²Federal Communications Commission. 2020. 2020 Broadband Deployment Report. Figure 4, p. 23.Busby et al. 2020 indicate that the FCC’s report significantly overestimates the portion of individuals with access to broadband internet at every level.Of U.S. households, 91 percent owned a car in 2019, but households of color were three times as likely to be without a car than White households.³³National Equity Atlas. Car Access, United States: Percent of Households without a Vehicle by Race/Ethnicity: United States; Year 2019.  Overall homeownership increased to 67.4 percent in 2020, but Black homeownership was only 46.4 percent, Hispanic homeownership was 50.9 percent, and Asian (which includes Native Alaskan and Native Hawaiian) was 61.0 percent, compared to 75.8 percent for non-Hispanic White individuals.³⁴U.S. Census Bureau. 2020. Quarterly Residential Vacancies and Homeownership, Third Quarter 2020. CB20-153.

Hence, even as the average household earned, owned, and consumed more, many in the U.S. may still be economically insecure.

To assess economic insecurity (and the risk of inadequate income), we present three discussions of income in the U.S.: poverty, income trends, and income volatility.