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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.

schools. Yet low-income

schools. Yet low-income families may not be able to lease or buy a car or find housing near public transit. This creates a wide range of possible consequences for all members of the household. Transportation, especially the cost of a car, consumes a significant portion of a lowincome household’s budget, and that cost has increased over the last decade. The most basic transportation cost, as reported in the average Household Survival Budget for a single adult, is $341 per month, or $4,092 annually (21 percent of the budget). For a family of four, the cost is $680 per month, or $8,160 annually (15 percent of the budget). However, costs vary greatly among states and regions, with households in more rural areas paying more than households in largely suburban metro areas. For example, among single-adult households, the cost of transportation accounted for 14 percent of all expenses in the Survival Budget for New Jersey but almost 25 percent in Iowa. TRANSPORTATION Because most low-wage workers have to be on-site, transportation is crucial to them, and it also determines how easily a family can reach doctors, grocery stores, and STRATEGIES What do ALICE and poverty-level households do when they cannot afford transportation? Even in metro areas, however, transportation costs are high. A recent study found that moderate-income households in the nation’s 25 largest metro areas (those with an average income of $44,566 per year) spent 27 percent of household income on transportation expenses, an average of $11,912 annually. In addition, these expenses increased by 33 percent between 2000 and 2011, reflecting rising gas prices and growing populations living in suburbs (Hickey, Lubell, Haas, & Morse, 2012; Hoopes, 2016). 1: Forgo Other Expenses to Buy and Maintain a Car 2: Minimize Car Expenses 3: Avoid Insurance, Registration, and Paying Traffic Fines 4: Move Near Public Transportation The gap between how much ALICE families need for transportation and what they can afford to spend shows up clearly in Figure 8, which compares three different monthly transportation budgets for a family of four to the monthly salary of a full-time security guard. Just over 1 million ALICE workers are security guards, earning an average hourly wage of $13.48, or This section presents the best research available on the hard choices that struggling families are making every day when they do not have enough money to afford transportation, and the consequences of those choices. These are not policy recommendations, but information and analysis that can help stakeholders create the most effective solutions for their communities. 50 UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME

$26,960 annually (if full time, year-round) (Bureau of Labor Statistics, 2014). This job usually requires a car due to work locations and hours. Figure 8. Monthly Transportation Costs and Percentage of an ALICE Income, 2014 $2,500 $2,000 Monthly Cost $1,500 $1,000 31% of Income 42% of Income $500 $0 3% of Income Public Transportation (if available, used in Household Survival Budget) Running Cost of Car (used in Household Survival Budget) Leasing a Car Security Guard $13.48/hour ($26,960 annual) Transportation Options ALICE Job (Monthly Wages) Source: Bureau of Labor Statistics, 2014 and 2014a • The ALICE Household Survival Budget uses the cost of public transportation where available because it is much less expensive than the cost of a vehicle – only $77 per month on average, which represents only 3 percent of a security guard’s salary. However, there were only 56 counties (out of the 3,143 counties in the U.S.) where more than 8 percent of commuters used public transportation to get to work in 2014 (American Community Survey, 2014a). • Where public transportation is not available, the ALICE Household Survival Budget uses the running cost of a car as measured by the Consumer Expenditure Survey (CES) estimate of what a family actually spends on gas and maintenance. On average, this totals $692 per month nationally, slightly less than AAA’s estimate of $740. Yet this is still almost nine times higher than the cost of public transportation and represents 31 percent of a security guard’s wages (Bureau of Labor Statistics, 2014; AAA, 2014). • To fully reflect the cost of owning a vehicle, Figure 8 also includes the running cost of a vehicle plus the cost of leasing a car. On average, this totals $945 per month in the U.S., or 42 percent of a security guard’s wages (Bureau of Labor Statistics, 2014). When ALICE families live farther away from work, their transportation costs increase above these levels. UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME 51

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