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1 in 3 middle-class families struggle with financial insecurity

American families struggle with financial insecurity

Coming up with $400 to cover an emergency expense might seem doable for a middle-class family, but one-third of them couldn't cover that last year. Their experience of financial insecurity underscores their financial fragility despite a growing economy, according to a new study from the Urban Institute. 

These middle-income families earn between $40,840 and $81,680 for a family of three, reflecting the level of income that would place them inside the middle class. But their struggles with financial insecurity highlight how a solid income isn't always enough to cover expenses such as rising rents and health care. The Urban Institute's findings are based on a survey of more than 7,500 adults age 18 to 64. 

A decade of economic expansion has tended to favor the wealthy over the middle class, and many of the jobs that have been created since the Great Recession offer meager pay and benefits, Heather Boushey, chief economist at the Washington Center for Equitable Growth, told a Congressional panel on Wednesday that examined the financial struggles of the middle class.

Middle-class Americans increasingly rely on the safety net

Tatum Tirado, a former Marine and single mother of two children, told lawmakers she struggles with covering her costs on her salary as a Washington, D.C., school teacher.

"I've devoted my life to public service and volunteer teach and tutor when I can," Tirado told the panel. "And yet still I struggle! How do I provide for my family or feel confident I am climbing the ladder to live the middle-class lifestyle so many of us aspire to, when everything continues to get more expensive -- but my salary does not keep up?" 

Tirado said she lives in a 600-square-foot apartment with her two daughters and can't afford to buy a home in the D.C. area because of high housing costs. 

Rising expenses

Tirado has plenty of company, based on the Urban Institute's findings. The high rate of financial insecurity among middle-class families reveals that the problems extend beyond income, said K. Steven Brown, research associate in the Center on Labor, Human Services and Population and the Research to Action Lab at the Urban Institute. 

"We were certainly surprised by the percentage of families, especially moderate-income families, that are struggling with financial insecurity," Brown said. "There are rising health care costs, housing costs -- all those things present challenges for families, even middle-income families."

Families that experience a setback like a big medical bill or an expensive car repair may struggle to get back on solid footing, Brown noted. Unequal growth in wages is only one of the forces slamming middle-class families, according to Washington Center's Boushey. Expenses for child care and health care have skyrocketed in the past few decades, she noted. 

"As incomes have stagnated, the building blocks of a stable middle-class living have steadily become more expensive," Boushey told the Congressional panel. "Health care, child care and education are a few of the fundamental but increasingly unaffordable pillars of the American dream."

Working, but not enough

One surprising finding in the Urban Institute data is that almost one-third of families with two working adults struggled with material hardship in the past 12 months, such as failing to make a mortgage or rent payment. 

To be sure, unemployment stands at a record low, and American employers posted the most open jobs in December in the nearly two decades that records have been kept. But not all these jobs are the type of good-quality positions that include benefits and wage growth. 

In fact, about one-quarter of the workers surveyed by the Urban Institute said they wanted to work more, but couldn't. The reason? About half cited their employers' scheduling practices or restrictions on their hours.

"There has been incredible growth of jobs," Brown noted, "but also incredible growth of not-so-great jobs."