NewburyportNews.com, Newburyport, MA

Community News Network

March 24, 2014

Poor aren't alone in living check to check

When you hear the term "paycheck to paycheck," you probably think of low-income households struggling to make ends meet. That's even the title of a new HBO documentary highlighting the plight of America's working poor.

But a paper released at the Brookings Institution's Brookings Panel on Economic Activity conference Friday finds that a sizable number of wealthier households are living paycheck to paycheck, too.

"The Wealthy Hand-to-Mouth," by economists at Princeton and New York University, finds that roughly one-third of American households — 38 million — are living a paycheck-to-paycheck existence. These are families who hold little to no liquid wealth in cash, savings accounts or checking accounts.

But the paper also finds that two-thirds of these households are not actually poor; although they resemble poor families in their lack of liquid wealth, they own substantial holdings ($50,000, on average) in illiquid assets. Because this money is locked up in things such as their houses, cars and retirement accounts, they can't easily access it when times get tough.

Demographically speaking, the wealthy hand-to-mouth are older, more educated and have substantially higher incomes than their poor counterparts. Perhaps the most striking difference: Although the poor hand-to-mouth tend to stay that way for long periods of time, wealthy hand-to-mouth status is transient, lasting an average of 2 1/2 years.

There is an important policy consideration here: Economic stimulus programs typically target the poor, because they are the most likely to immediately spend cash windfalls on necessities that they otherwise would be unable to buy. But this study implies that wealthier hand-to-mouth households, because they face similar monthly constraints on spending, would also respond positively to economic stimulus.

The paper concludes that "in order to maximize the aggregate consumption response to fiscal stimulus payments, the payments should feature more moderate phasing out with household income."

1
Text Only | Photo Reprints
Community News Network

Offbeat
NDN Video
Golden Sisters on '50 Shades' trailer: 'Look At That Chest!' 'Hunger Games: Mockingjay Part 1' Sneak Peek "The Bachelorette" Makes Her Decision Chapter Two: Designing for Naomi Watts Thieves pick the wrong gas station to rob Staten Island Man's Emotional Dunk Over NYPD Car - @TheBuzzeronFOX GMA: Dog passes out from excitment to see owner Baseball Hall of Famers Inducted Florida Keys Webcam Captures Turtles Hatching Morgan Freeman Sucks Down Helium on 'Tonight Show' Robin Wright Can Dance! (WATCH) She's Back! See Paris Hilton's New Carl's Jr. Ad Big Weekend For Atlanta Braves In Cooperstown - @TheBuzzeronFox Chapter Two: Becoming a first-time director What's Got Jack Black Freaking Out at Comic-Con? Doctors Remove 232 Teeth From Teen's Mouth Bradley Cooper Explains His Voice in 'Guardians of the Galaxy' Deja vu: Another NYPD officer choke-holding a suspect 'Fifty Shades of Grey': Watch the Super Sexy First Trailer Now! Reports: Ravens RB Ray Rice Suspended For 1st 2 Games Of The Season
Special Features
NRA Waterfront Plans