There’s a new report from the Economic Policy Institute that’s both startling and eye-opening. What’s in it will surely give you reason to pause and make the connection in how poverty affects your finances – if its hasn’t already.
Long Term Effects
Not only will affect your finances but it’s bound to affect your children as they begin their adult lives. We all know the contradictory information that seems to be coming from the evening news: credit card approvals are up, credit card defaults are up, unemployment is down, unemployment is down, but… It’s challenging just to make sense of anything when it comes to the American banking and financial sector. This survey provides a long overdue perspective.
The first thing we noticed is the difference in median earnings from 1973 and today. For a male who works an entire year and full-time, he earned:
1973: $51,668
2012: $49,398
Yes – you read it right – that’s a drop.
Poverty Affects Your Finances, Health Care
A full 15 percent of Americans lived in poverty in 2012 and a staggering 22 percent of children under the age of 18 live in poverty. That’s a total of 46.5 million Americans living in poverty in one of the wealthiest countries in the world. Not only that, but half of those 46.5 million Americans are living in “deep poverty”.
Between 2000 and 2012, there was a jump in the number of Americans receiving government assistance. In that decade, more than 25 million found themselves on government assistance, including Medicaid and Medicare.
So how does poverty affect your finances? Earlier this year, sociologists at the University of Michigan discovered that many of us who are ill and don’t seek treatment typically do this for one of two reasons: we’re already overloaded with credit card debt or we already have a lot of medical debt. A whopping 64 percent of Americans say they’ve not sought much needed health care for those reasons.
So not only are more of us are living in or at the poverty levels (or in deep poverty), but we’re also not seeking out medical attention.
We’re broke, sick and carrying too much credit card debt.
We found that having credit card debt or medical debt was associated with forgoing medical care, as opposed to having student loans, housing loans or car loans,
said Lucie Kalousova, Ph.D., a co-author of the study, “Debt and Forgone Medical Care,” published in a recent Journal of Health and Social Behavior.
Slower Recovery, Lost Time at Work
Those who don’t seek medical attention or even if they delay it, they often find recovery slow or impossible. This translates into lost time at work, which, of course, translates into a loss of income. And so the cycle goes. By the time many do seek treatment, they’re often paying even more to regain their health.
In an already overwhelmed medical system in the U.S., these instances can further strain hospital emergency rooms and public health facilities.
Differentiating Debt
Understanding why it’s just credit card debt that plays a role is a bit more complicated. Some experts, and indeed, the authors of the report, suggest credit card debt is considered “bad debt” because of the higher interest rates. And, too, many use their credit cards during tough financial times, so in their minds, they’re worsening their financial situation.
In recent years, other studies have shown similar conclusions in that when household incomes are lower, people delay seeking medical attention and when there’s no health insurance at all, they will often delay much needed help even longer.
To support that theory, the U.S. Centers for Disease Control reported that about 11% of working-age Americans declined to see a doctor in 2010 because of the cost, even though those people were ill at the time. Most who fell into that characterization reported on average $8,541 in credit card debt.
Affordable Care Act
The Affordable Care Act, at least theoretically, should provide a stronger and more socially accepted safety net for even heavily indebted people who avoid seeking medical care today because they lack good health insurance,
said Lucie Kalousova, Ph.D., a co-author of the study. She went on to say that the theory between federal subsidies for American families earning up to 400 percent of the federal poverty line and the choices the new laws should provide, could equate to a healthier nation. Still, these studies are only as good as the ability to gauge the new healthcare laws after it’s in effect.
Our study is only the first step in this direction and more comprehensive research is needed to address these questions,
she said.
And still, there are those who believe the government’s already taken too much control. Consider California’s quagmire with a sudden influx of retirees who have created what that state’s governor is calling a “retirement tsunami”. A new law signed last year by Governor Brown, known as the California Secure Choice Retirement Savings Program, puts into place automatic payroll contributions into retirement accounts for 6.3 million Californians whose employers don’t sponsor any type of retirement plan.
These are controversial moves, say many, especially since employers who do not take out those funds will be fined up to $500 per employee. So not only must employees fall into line with the the healthcare requirements or face fines, they must now fall into line with deducting their employees’ paychecks for a forced retirement fund. Three-quarters of eligible workers make less than $46,420 a year, which puts them into the demographic that relies heavily on Social Security in retirement. The new law won’t end reliance on Social Security, but it could provide workers with additional financial security. Many are already saying this is just another effort by the governor to annihilate another program. Social security as put into place for those very reasons.
If the healthcare system is waiting for Obamacare to suddenly fix everything, there are sure to be many disheartened supporters. Until these cycles break between poverty, health insurance and personal finance, it’s not likely to improve – and in fact, could worsen.
What are your thoughts about these new statistics? Think they go hand in hand? And how would you feel about being forced to save money you’ve already earned?
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