Since the financial crisis nine years ago, American households have been through some financial ups and downs.
After the crisis turned an ordinary recession into The Great Recession, a number of households lost income. Young people just entering the workforce often had to work two part-time jobs because full-time jobs were hard to get.
Things are a lot better now, but a new report from the Pew Charitable Trust found something hasn't changed since those uncertain times. A significant number of U.S. households are experiencing income volatility from one year to the next, defined as a 25% swing, up or down. More than a third of U.S. households experienced such a swing from 2014 to 2015.
Pew's most recent survey found only about 46% of respondents earned more money than they spend, meaning more than half are falling deeper into debt. Making matters more difficult, only 47% reported having consistent and predictable bills and income month-to-month. That makes financial planning harder.
Some key takeaways include the fact that income volatility is widespread but is pronounced among certain populations. Thirty-eight percent of families earning below $25,000 reported significant gains in income. At the same time, 20% of Hispanic households, and those with no college, reported declining incomes.
When income shifts, the change is often dramatic. At the median, the incomes of households with losses plunged by 49%, while families with gains raised their incomes by 56%. The median household income gain was $20,500 and the median income loss was $25,000.
Finally, the families experiencing income volatility, whether a gain or a loss, saved less and reported lower financial well-being than households with a stable income.
Structural economic changes?
The report does not assign a reason for the increase in income volatility, but the answer could lie in structural changes to the economy since 2008. The rise of the "gig economy" has led to more temporary and contract positions. They may pay well for a period of time before expiring.
Since the financial crisis, more people have started businesses, which are often "boot strapped" and under-capitalized. As businesses ramp up there are often periods where business is slow.
Whatever the reason, the Pew reports finds there are more U.S. households where income is not steady and predictable. When that's the case, it is more of a challenge to plan and budget and may leave families feeling less financially stable.