The Federal Reserve System Board of Governors released a report last month on the fourth annual Survey of Household Economics and Decisionmaking (SHED). This survey covers several topics: individuals’ overall financial well-being, employment experiences, income and savings behaviors, economic preparedness, access to banking and credit, housing and living arrangement decisions, education and human capital, student loans, and retirement planning.
Overall the survey found that there has been some continued improvement in the economic well-being of households, compared to previous years. However, the improvement is slow and some groups continue to lag behind.
Seventy percent of adults reported that they were living comfortably or doing okay financially in 2016, which is an increase over the past few years. There do seem to be some disparities, however. Those with a high school decree or less were more likely to report that they were struggling financially, and non-Hispanic white adults at this education level were less likely, compared to other races or ethnicities, to report an improvement in their financial well-being.
In fact, African-American and Hispanic adults report being in a better position that the previous year. A higher percentage of African-American and Hispanic adults in all educational categories reported being somewhat or much better off compared to the previous year, compared to white non-Hispanic adults. Still, the percentage of African-American and Hispanic adults who report that they find it difficult to get by or are just getting by is greater than white adults (35.5 percent and 36 percent, respectively, compared to 27.8 percent). In addition, respondents will lower education levels are less likely to report an improvement.
It is important to note that this does not speak to the actual income or wealth of respondents—it is a subjective assessment of their financial state. Other data in the report shed more light on income, showing that income levels for more than half of African-American and Hispanic respondents were less than $40,000 (52.8 percent and 54 percent, respectively). Comparatively, 35.1 percent of white respondents reported the same. There are also other significant income disparities. Rural residents were also more likely to have incomes less than $40,000, as were single people (men and women), adults between age 18 and 29, and those with a high school degree or less.
One particularly interesting aspect of the survey was looking at intergenerational trends. The survey asked if people felt they were better off compared to their parents, and also if they worried about certain financial topics when they were children. The results indicate that African-American and Hispanic adults were more likely to indicate that they were better off compared to their parents (though, the report also notes “this may reflect the different starting points from which these individuals are comparing”).
In regard to childhood concerns, the results show that African-American and Hispanic adults worried much more about family finances, having enough food, crime and personal safety, and having a stable caregiver, compared to white adults. The table below shows the percentage of respondents by age group, who reported concerns about these topics when they were growing up.
While economic preparedness improved some, 44 percent of respondents reported that they still could not cover an emergency expense costing $400. This is a decrease from 50 percent in 2013, but still a significant percentage. Income volatility—inconsistency in month-to-month income—also is a cause of financial stress. Twenty-two percent of respondents reported occasional monthly variation, while 10 percent reported that their income varies quite a bit each month. The most significant factor contributing to income volatility was irregular work schedule (43 percent).
While 26 percent of all adults reported being underbanked or unbanked, 54 percent of non-Hispanic African-American adults reported so. Forty percent of respondents said that they had applied for a form of credit (most commonly, a credit card or auto loan) in the previous year, and 9 percent reported being denied at least once. Many were also not denied but received less credit than they had requested. Lower-income and non-white adults were also more likely to be denied or offered less than what they desired. For those with incomes over $100,000, only 7.9 percent of whites were denied compared to 26 percent of African-Americans and 14.2 percent of Hispanics.
The SHED survey is unique in that measures not only the quantifiable aspects of economic well-being but also how people feel about it year to year. This is important because even if indicators show an improving trend, comfort, mental stress and emotional well-being are subjective and not necessarily tied to numeric measures.
At the same time, this survey provides yet more evidence for what we already know exists: persistent and growing economic inequality. There is so much data and media coverage illustrating the problem of inequality (see this recent article on housing as a driver of inequality and this article about poverty and economic mobility). We have the data, stories, and experience to describe and deconstruct the problem of inequality; it has come time to move onto solutions.