The number of ALICEs in America is increasing and they are falling farther down an economic rabbit hole all the time.
ALICE is an acronym for Asset Limited, Income Constrained, Employed. It was created by the United Way’s United for ALICE program. Chances are you know several ALICEs. You might even be one yourself since 29 percent of American households qualify as one.
A household with one or more working adults earning above the Federal Poverty Level who struggle to pay for basic needs is an ALICE household.
The poverty level is $15,060 annual income and below for singles. For a family of two, it is $20,440 and increases in increments of about $5,000 with each additional person. Alaska and Hawaii have slightly higher guidelines.
Who is an ALICE
Often people talk of “living paycheck to paycheck” and just getting by. However, ALICEs live paycheck to paycheck and do not get by. As a result, they routinely have to make hard choices about paying rent, rising childcare costs, health care and even buying food.
Often working in healthcare, retail, and food services – ALICEs are usually single parents. They come from Gen Z and baby boomers.
According to United for ALICE, 35 percent of single moms fall into the ALICE category. Of single Dads, 36 percent are ALICE. In addition, 27 percent of singles are ALICE.
Married couples with children are least likely to qualify as ALICE. Only 13 percent meet the requirements.
Alice Household Survival Budget
United for ALICE set the threshold for ALICE by creating a Household Survival Budget. It is an estimate of the minimum cost of fundamental household expenses. That includes housing, child care, food, transportation, health care, cell phone, taxes, and an emergency fund equal to 10 percent of the budget.
Poverty Stabilizes as More Fall Into ALICE
Poverty in the United States has been relatively stable since the pandemic recovery at about 11.5 percent. However, the number of households falling into the ALICE category is rising.
One reason for the high number of Alice households is inflation. Although inflation impacts all Americans, low-wage earners bear a unique burden.
United for ALICE felt the standard measures of inflation, such as the Consumer Price Index and Personal Consumption Expenditures Price Index (CPE), were inadequate. Both of those indexes include nonessential items ALICE households do not regularly buy. As a result, it developed the ALICE Essentials Index that monitors items in the survival budget.
That index has risen faster than the CPI over the past 15 years. From 2007 to 2023, the average annual rate increase for the ALICE Essentials Index was 3.3 percent compared to 2.5 percent for the CPI.
Less than one percent per year difference in these two indexes may not seem like much, but over time it adds up. For example, the most common job in the U. S. is retail sales, according to United for Alice. At 3.3 percent annual inflation over 15 years, those workers “saw an average $26,000 loss of buying power – more than a year’s earnings,” according to United for ALICE.
“The ALICE Essentials Index shows that no matter how hard ALICE families worked, they were priced out of financial stability,” said United For ALICE President Kiran Handa Gaudioso. “ALICE was grappling with a surge in inflation before the rest of us. We need to do better for our essential workers and factor these insights into delivering stronger supports for vulnerable families.”
A Rising Tide That Sinks More Households
President Kennedy once said, “A rising tide lifts all boats.” While that may hold true in nautical settings and many economic situations – it has not been applicable to ALICEs.
On a percentage basis, real wages have been rising faster for low-income households than for higher-income Americans. In fact the Economic Policy Institute found the rise in low income wages was “historic”.
Between 2019 and 2022, wages for the lowest 10 percent of wage earners grew nine percent, according to the institute’s report.
“This tremendous real wage growth at the lower end of the wage distribution was exceptional, significantly faster than in any other business cycle peak since 1979,” noted the report. “Nevertheless, low-wage workers, who are disproportionately women and Black and Hispanic, continue to suffer from grossly inadequate wages. The 10th percentile wage in 2022 was $12.57, or $26,145 annually for a full-time worker.”
For most people, a wage increase is a good thing. However, for many low-income workers (remember, they work in health care, food services, and retail) it may mean being pushed out of poverty into ALICE. As a result, low-income wage earners may go from having the support to feed their children, provide a home, and get health care and other essentials to choosing which of those essentials they can afford.
As an example, a single parent with one child making the $12.57 an hour or $26,145 annual income cited above, would make almost $6,000 too much to qualify for federal aid. If they made $10 an hour, or $20,800 a year, that same single parent with one child would miss the cut by $360.
Minimum Wage
One reason many ALICE households are locked in their financial quagmire is the almost 15-year stagnation of the minimum wage. The federal minimum wage has been stuck at $7.25 an hour since July 2009.
Even in times of low inflation – there is still inflation. As a result, buying power erodes over time. Consequently, a $7.25 minimum wage is now worth less in inflation-adjusted terms than at any time since 1956.
To counter inaction by Congress, 30 states have enacted minimum wage increases. However, all but five of those states offer a minimum wage below $15 an hour. The remaining 20 states adhere to the Federal minimum wage or have sent even lower standards. Georgia and Wyoming have a $5.15 minimum wage.
No single person earning less than $15 an hour can sustain an adequate standard of living, according to the EPI’s Family Budget Calculator. For single-parent households, the problem is even worse.
ALICE Options
A variety of remedies exist to help ALICEs. One of the most apparent is raising the level of income to qualify for government aid. Although this would help ALICE households, it would add to the federal budget – if it was not offset by additional revenue, such as taxes.
Raising the minimum wage is an idea that has significant support in Congress. A 2021 bill would have raised the minimum wage to $15 an hour by 2025. That measure passed the House but failed in the Senate. Last year Senator Bernie Sanders proposed upping that in stages to $17 an hour.
The argument against a livable minimum wage is that it would increase business costs. In turn, that could lead to an increase in the price of goods. However, more workers having more money to spend could increase sales which could hold prices down. In addition, higher wages will boost tax revenues.
Year after year public opinion polls (Reuters, University of Maryland, YouGov) have shown support for raising the minimum wage. The question is – when will public support transform into public action?
The 29 percent of households that are ALICE would like to know.
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