There is a possibly apocryphal tale about Donald Trump that whilst walking through Manhattan with his then young daughter Ivanka (the year was 1990), they stumbled across a homeless man and Donald Trump said to Ivanka – “You know, that guy has 8 or 9 billion dollars more than me”. This was the level of debt he found himself in.
But even with such astronomical debts, Trump was never really economically insecure, and probably didn’t feel like he was. He didn’t have to worry about what might happen if his washing machine broke down or where his next meal might come from. He had status, contacts and a public profile which he ultimately used to secure further investment, yielding future income.
This highlights an important point about economic security. Income levels, debt, wealth and other static or individual measurements might tell us part of a story about someone’s life but they are insufficient to fully understand whether someone is economically insecure. We need to understand that economic security comes from the feeling of resilience that we derive from our household, family and wider social networks, and how we assess our future financial prospects.
Earlier this month the RSA launched the first in a series of reports on this topic. Working in partnership with Nottingham Civic Exchange, a place-based think tank set up by Nottingham Trent University, the report looked at the issue of economic insecurity through a policy lens. It seeks to get to the bottom of how we can address the challenges of economic insecurity, starting with a definition that understands this experience comprehensively through both objective and subjective means:
“Economic insecurity describes harmful volatility in people’s economic circumstances. This includes their exposure to objective and perceived risks to their economic well-being, and their capacity to prepare for, respond to and recover from shocks or adverse events."
The report argued that addressing economic insecurity should be a priority for policymakers. It is a theme which is relatable to most people and should be addressed alongside more traditional policy goals around employment, inequality and poverty. While Trump is a clear outlier – objectively and subjectively unfazed by massive debt – our research and data analysis revealed a troubling trend among the general public: many who have, objectively, above average wealth and income, feel subjectively that they are insecure – ‘just about managing’ to make ends meet each month.
At the event we heard from a wide range of speakers, with a particular emphasis on how growing economic insecurity affects people and households. Surveys show an increasing anticipation that young people will have to make do with less than previous generations. There may be more employment now than in previous years but the prevalence of low paid work is baking in economic insecurity for the long-term. And, as mooted by my colleague Atif Shafique in an article for Prospect, there is a danger of not merely experiencing a lost decade but a lost generation.
Polly Tyler, a student and single parent studying at Nottingham Trent University wanted to highlight the growing issue of economic insecurity even for those on middle incomes, and the generational challenges this creates. She explained the difficulty of getting by and budgeting when there is no certainty in terms of wages over a given period of time. The issue of housing is a particular challenge for those in low-paid, precarious work. Inability to afford rising rents or get on the housing ladder, coupled with static or fluctuating wages, mean that what might have been a temporary money worry for a previous generation is the start of a lifetime of insecurity for someone that has no way of putting money to one side to build a comfortable future or save for retirement.
The panellists and audience members also discussed mental stress of juggling difficult decisions in household finances. As Professor Albert Aynsley Green pointed out, insecurity is likely to affect someone with a disability in a distinct way. What are the long-term effects on children that grow up in families that have volatile economic circumstance? Few policymakers consider this, because few have direct lived experience.
Dr Paula Black, Director of Nottingham Civic Exchange, was clear that these issues were the result of policy choices, or at best, a lack of action. Key institutions, from benefits agencies to public sector procurement processes, often reinforces these issues. But Nottingham could do more. Employers and public sector bodies could focus on inclusive growth, ensuring social value in their contracting and offer apprenticeships that lead to secure, fairly paid work with a career path. Nottingham has more than its fair share of people who are “just about managing”, but there is a chance for it to be a leader in trying to work to ameliorate this issue.
The damage to health and wellbeing of a precarious life, where at any moment a fairly small life event such as your washing machine breaking down can lead to a spiral of financial difficulties that you can’t get out of, can be severe. And the ability to get out of that cycle, given the scarcity in many communities of “good work”, competing priorities and the damage that insecurity can do to decision making, means that it is a state that many people live in for extended periods of time. The complexities of individuals and households mean that economic insecurity is fluid and dynamic and needs to be understood looking at objective facts and subjective feelings. Just because someone earns a decent wage doesn’t mean they feel secure – they may have costs, debts, commitments and responsibilities or dependencies that can’t easily be measured. They may simply understand the fragility of their future career path. Trump may have been in debt to the tune of billions of dollars but he never really felt what it is to be economically insecure.
Building on the theme of economic insecurity, the RSA looked in detail at how workers are faring in the UK. Seven portraits of modern work provides case studies and further analysis of what it’s like to navigate today’s labour market: download the report here, or look in depth at the data using our interactive tool.