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The Consequences of Insufficient Household Income

This new Consequences of Insufficient Household Income report provides a deeper level of understanding of the choices that ALICE and poverty-level families across the country make when they do not have enough income or assistance to afford basic necessities, and the consequences of those choices.

INTRODUCTION How do

INTRODUCTION How do people in our day-to-day lives – child care workers, cashiers, salespeople, busboys, auto workers, home health aides – support their families on low-wage incomes? They do so by making difficult choices about what to pay for and what to forgo. These choices are daunting, and they have both immediate and long-term consequences for low-income households and their communities. To give a face to households that earn more than the Federal Poverty Level (FPL) but less than the basic cost of living in their area, United Way created the acronym ALICE, which stands for Asset Limited, Income Constrained, Employed. ALICE lives paycheck to paycheck, just one car accident or medical bill away from crisis. The United Way ALICE Project has studied the ALICE population in 15 states, using a set of new tools to measure financial hardship: 4 UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME

The ALICE Threshold – a bare-minimum economic survival level that takes the local cost of living into account. Families earning below the ALICE Threshold include both ALICE households and those in poverty. • The Household Survival Budget – a bare-minimum budget that estimates the lowest cost of the five basic household necessities – housing, child care, food, transportation, and health care. • The ALICE Income Assessment – a measure of how far ALICE households remain from reaching the ALICE Threshold despite both earned income and assistance from government and nonprofits. • The Economic Viability Dashboard – a measure of the conditions ALICE households face in each county on three indices: Affordable Housing, Job Opportunities, and Community Resources. Of the 38 million households across these states, 40 percent could not afford the bare-minimum Household Survival Budget in 2014. The number struggling in a given county depends on the local cost of the Household Survival Budget as well as the income opportunities available. The Household Survival Budget estimates costs only at a survival level, yet ALICE families do not earn enough to afford even that. The gap between the cost of the Household Survival Budget for a family of four and what an ALICE worker earns is shown in Figure 1. In 2014, across the states included in the United Way ALICE Project, the bare-minimum cost of housing, child care, food, transportation, health care, and taxes for a family of four totaled $4,729 per month on average – well more than the full-time wages of a typical ALICE job. A security guard working full time, year-round could afford only 48 percent of this basic budget. A nursing assistant, retail salesperson, child care worker, or packer could afford just over one-third of the budget. And in every state, the budget is still well above the Federal Poverty Level (Figure 2), which covers only 42 percent of the average state Survival Budget. Figure 1. ALICE Household Survival Budget vs. ALICE Monthly Wages, 2014 Monthly Cost Misc Taxes Health Care Transportation Food Child Care $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Housing ALICE Household Survival Budget $26.87/hour ($53,736 annual) Retail Salesperson $9.66/hour ($19,320 annual) Child Care Worker $10.44/hour ($20,880 annual) Packer $11.08/hour ($22,160 annual) Nursing Assistant $11.33/hour ($22,660 annual) Federal Poverty Level $11.93/hour ($23,850 annual) Security Guard $13.48/hour ($26,960 annual) Source: U.S. Department of Housing and Urban Development, 2014a; Child Care Aware of America, 2015; U.S. Department of Agriculture, 2014; Bloomberg, 2016; and Bureau of Labor Statistics (BLS), 2014 and 2014a UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME 5

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