The Economic Security Index

Yesterday we hosted the launch of the Economic Security Index. The ESI is a new tool developed by a team led by Yale Professor (and former NAF Fellow) Jacob Hacker and supported by the Rockefeller Foundation. According to the project's website:

The discussion of economic security has been hampered by the lack of a simple measure that allows for the comparison of economic security over time and across Americans of different circumstances. The ESI fills this gap. It provides a simple measure of the joint occurrence of three major risks to economic well-being:

• Experiencing a major loss in income
• Incurring large out-of-pocket medical expenses, and
• Lacking adequate financial wealth to buffer the first two risks

Uniquely, the ESI tracks all these elements – major income loss, uncovered medical expense, and inadequate assets – within a single measure.

That's the intent, and what do the results say?

The Economic Security Index shows that economic insecurity disproportionately affects the less advantaged, but has risen substantially for all Americans.

This is a critical new development in the public discourse. There are many measures (all imperfect, including the ESI) that contribute to the common picture of the well-being of American families--the poverty rate, the unemployment rate, the personal savings rate. We have spent a good deal of time (aided by our friends and colleagues at CFED) in discussing the concept of "Asset Poverty," which is defined as "a household’s inability to access wealth resources that are sufficient enough to provide for basic needs for a period of three months." For years advocates of the asset poverty measure have tried to spread the word that asset poverty is much more widespread than poverty itself, and can have significant consequences for families suffering in this way.

The genius of this new measure is that modifies income-focused measures like the poverty rate, and takes into account a family's level of savings and other assets and combines it with what we know to be the nearly inevitable circumstances of life that are most often associated with a family falling on hard times, whether that be a job loss or a medical emergency. The ESI shows us very much the same thing as the asset poverty measure, too many Americans are teetering on the edge and more can and should be done to help lower the level of economic insecurity.

The report has received wide coverage online, here are the thoughts of some others: Jon Cohn and Kevin Drum.