By Cornelius Frolik,
Staff Writer
Updated 10:54 PM Friday, July 6, 2012
A record 1.8 million Ohioans saw their household incomes decrease by 25
percent or more in 2010, according to a new report.
As the risk of financial losses has increased in the state, more Ohioans lack
an adequate safety net of savings and assets for use in the event of an
economic emergency.
Many Ohioans do not have enough savings to last three months without
experiencing serious hardship.
Policy experts stress the importance of building a nest egg in case residents
hit a financial rough patch or experience a rainy day, which they say is
nearly inevitable. They acknowledge, however, it is very difficult to put
money aside when finances are tight.
“With inflation, and more expensive energy costs and more expensive food,
there are just not as many opportunities to save,” said Shawn Cassiman,
assistant professor of social work at the University of Dayton.
The Great Recession caused widespread financial destruction, and the state
experienced record levels of economic insecurity between 2008 and 2010,
according to a report released last month by the Economic Index Security
project, which is supported by the Rockefeller Foundation. The entire nation
experienced previously unseen levels of economic instability.
Income dips 25% for 1 in 5
In 2010, about 20 percent of Ohioans saw their available household incomes
decline by 25 percent or more, and these residents had insufficient
financial wealth to replace the losses, according to the report.
Available household income is the money remaining after paying for medical
care and servicing financial debts. The estimates do not include residents
who are in the armed forces or residing in health care or correctional
facilities.
Although economic insecurity spiked during the recession, it had been on the
rise in Ohio for years. The share of Ohioans who experienced severe
financial losses grew each year beginning in 2004, and has trended upward
since 1986.
In 2004, about 16 percent of residents experienced income losses of 25 percent
or more; about 14 percent did in 1986. The losses are attributable to
changes in income and increases in out-of-pocket medical expenses.
“The story here is we have unprecedentedly high levels of economic risk that
are broadly shared across all groups,” said Stuart Craig, co-author of the
report and a research associate with the Economic Security Index project.
People who suffer severe financial setbacks and lack savings typically have to
cut back on nonessential expenses, such as preventative and routine medical
care and check-ups, vehicle maintenance, entertainment, recreation, dining
out and vacations, experts said.
Consumers who experience income reductions often are forced to change their
living situations, moving in with friends and family members or downsizing
to smaller homes or apartments.
If the income losses are dramatic, people will often skip necessary medical or
dental treatments or decide against purchasing medications they need. Some
people allow their bills to become delinquent, risking damage to their
credit scores or facing penalties or disconnections of utility services.
Contessa Brown, 42, of Dayton said she had a full-time factory job in Troy and
a part-time restaurant job in Piqua until she was injured in an automobile
accident in November.
She said her vehicle was totaled and she suffered injuries to her neck and
back. She was laid off by both employers shortly after the crash, because
she lacked transportation to and from work.
Brown said she lacked emergency savings, and she was forced to move in with
her daughter in Dayton to scrape by. She said it has been hard and she lives
“hand-to-mouth,” but she learned from her experience, and said she will
start saving as soon as she secures employment.
“No matter hard it is, as soon as I start getting some income I am going to
start a bank account because I had nothing to fall back on — nothing,” she
said.
More lack safety net
More people have insufficient or no emergency savings, although they often
need savings that will last six months or more to survive an economic
disaster, said Greg McBride, senior financial analyst with Bankrate.com, a
Florida-based financial information company.
About 49 percent of Americans lack emergency savings that will last three
months, an increase from 46 percent last year, according to a new Bankrate
survey. About 28 percent of Americans have no emergency savings, up from 24
percent last year.
In Ohio, about 27.3 percent of households have little to no financial cushion
to protect against unemployment or other financial emergencies, according to
the Corporation for Enterprise Development. This was up from 22.6 percent in
2009.
When homes and cars are excluded as assets — which is sensible because they
are not easily converted into cash — about 43.6 percent of Ohio households
lack a financial safety net, the group said.
McBride said saving is not a priority for many, although unplanned expenses
are unavoidable: Cars break down, people get sick or injured, family members
die or workers lose their jobs, but savings can temper a crisis.