Economic Insecurity

ECONOMIC INSECURITY IS a condition in which an individual's or household's economic well-being and stability are compromised. Households living in poverty are by definition economically insecure as they struggle on a daily basis to make ends meet and fulfill their basic needs. However, living in poverty is not a prerequisite for experiencing economic insecurity.

Many individuals and households exist on marginal incomes just above the poverty line or rely on unstable sources of income. Many who experience economic insecurity work full-time and do not receive public assistance or income maintenance benefits of any kind. Such households often live in constant awareness that even a slight change in their economic condition could push them into dire economic circumstances in which they are unable to meet basic needs such as food, clothing, shelter, and medical care. These marginal-income groups are often referred to in the United States as the working poor. Although many economically insecure individuals may never slip into short-term poverty, they are not far from its income boundaries.

Economic insecurity is more highly associated with certain individual and household characteristics, including household structure, race, age, gender, and geography. Single-parent households, especially female-headed households, nonwhites, children, the elderly, women, and those living in central cities or rural areas are at a higher risk of living in a state of economic insecurity. Additionally, those employed in the secondary labor market, transitional jobs, or seasonal work are more likely to be economically insecure.

National economic trends and events also play a role in the economic security of individuals and households. These include economic downturns, higher unemployment rates, recessions, business closures, and an overall lack of economic growth or decreases in per capita income. Adverse life events, such as the loss of a spouse, changes in family composition, involuntary job loss, illness, disability, and involuntary residential moves such as eviction or home foreclosure, all impact economic security negatively.

Economic insecurity is not reserved for only poor or marginal-income households. Many Western economies have seen rising levels of economic insecurity among upper-income working people. Corporate downsizing, job outsourcing, and growing globalization of the economy have wiped away a sense of career-long [Page 290]employment confidence for many. Policies aimed at globalizing production and distribution, and structural adjustment policies, while increasing labor market flexibility, have often resulted in an increased probability of losing one's job.

Economic insecurity resulting from the loss of a job may also result in other adverse outcomes, including threats to retirement benefits and lack of healthcare coverage. Additionally, job changes compromise one's ability to build social capital through the establishment of relationships with coworkers or neighbors in the event of disruption of residential stability. Economic insecurity may also result in individual behavior changes.

Threats of unemployment may convince workers to change jobs, which may result in a loss of seniority protection a current job may provide and future loss in upward job mobility. Individual actions and safeguards to reduce the risk of economic insecurity include such things as increased savings and asset development, decreased consumption, and development of human capital and a comparative advantage in the labor market.

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