The Federal Reserve bank recently released its tri-annual Survey of Consumer Finances. In addition to providing a multitude of economic metrics, the report highlights some important effects of the recession.
Incomes are down in some disturbing ways, according to the report. Median family incomes fell by $3,800 over the Survey’s three year span. Income inequality declined, though mostly because of a loss of income from high earners rather than lower earners earning more. Additionally, median income for households age 65-74 rose, while mean income for that age dropped, signaling increased retirement insecurity as more older people reenter the workforce.
Some of the survey’s most powerful findings involve the nation’s troubling credit markets. Median net worth declined dramatically by almost $50,000 from 2007-2010, and most of that decline can be attributed to a decline in housing values. Meanwhile, college debt burdens have increased during this period, and while families are saving more in the survey, much of this savings is meant to guard against crises like foreclosure or job loss. These trends jeopardize the average family’s ability to meet long term goals.
In general, the report’s findings underscore a lack of confidence felt throughout the economy. The average family has been hit with a one-two punch of declining incomes and declining home values. This effects the capacity of average families to achieve long term goals like saving for retirement or sending children to college.
Illinois follows many of the trends the Survey of Consumer Finances highlighted nationally. Median incomes fell in Illinois by about $4,500 between 2007 and 2010. Home values are down dramatically in this state falling by 17.2 percent between the first quarter of 2007 and the second quarter of 2011. Illinois also ranks 20th in the amount of student debt the average college student carries at $23,885 for private and public non-profit colleges.
The current minimum wage of $8.25 an hour, or $16,500 a year, is keeping workers in poverty and forces them to depend on public assistance to make ends meet. The proposed Illinois Minimum Wage Bill (SB 1565) calls for increasing the minimum wage by 50 cents an hour plus inflation every year for over four years until it reaches $10.65 an hour.
Expanding access to automatic savings plans are effective ways to address the problems these recent reports underscore. A recent study by the Urban Institute projects that automatic IRAs can increase retirement income for people born between 1987 and 1996 who would not otherwise have access to retirement plans by up to 10%. College savings plans can also help families meet long term goals. Studies show that college savings plans have the potential to reduce average after graduation debt among other effects. These are measure that families could take today to ensure they meet long term goals.
IABG works to increase access to these tools, including advocating for:
- Automatic IRAs
- Universal Children’s Savings Accounts for College
- Alternative Small Dollar Loans
- Credit Building Products
- Safe banking products
In times of economic crisis, it is important that families have access to structured savings opportunities so they can continue to meet long term goals. Learn more about IABG’s policy work.
Tom Skelton is a guest blogger for IABG. Tom previously worked on financial security issues as an Americorp VISTA at the Land of Lincoln Legal Assistance Foundation