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Consumer debt is a systemic problem with significant consequences, but there are systemic solutions.

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This brief explores the interaction between two critical financial security challenges, income volatility and lack of retirement preparedness.

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These five charts explore the magnitude of consumer debt.

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A conference exploring the challenges and opportunities at the intersection of FinTech and financial inclusion.

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 Explore AI's potential to fundamentally transform the relationship between financially vulnerable Americans and consumer debt.

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 Dyvonne Body shares the strong correlation between debt and health challenges.

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 Kiese Hansen discusses elected officials taking leadership on issues of household financial insecurity..

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Joanna Smith-Ramani joins Petal Card’s Co-Founder and CEO Jason Gross to explore some of the problems surrounding access to credit.

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Daniel Dowdy discusses the latest data on consumer savings and consumer debt.

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This research primer sheds light on the meaning of current trends in consumer debt.

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A reflection on EPIC's work in understanding and searching for solutions to income volatility.

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 Here is how, and why, we chose our next topic: consumer debt.

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The number one reason people participate in the on-demand workforce is to earn more income or supplement their income. What gets lost in the press is that the vast majority are doing this part time. We also found there are a lot of reasons individuals participate in the on-demand workforce – it isn’t a universal thing. 57% reported they wanted to supplement their income, 46% reported they liked the flexibility and control provided by this type of work, 35% reported a greater work-life balance, 32% reported liking being their own boss, and 32% wanted to try something new.

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Megan Kiesel discusses her work in keeping clients financially stable and less stressed out.

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In The Financial Diaries: How American Families Cope in a World of Uncertainty, Jonathan Morduch and Rachel Schneider explain why this is happening – and what needs to change – based on the results of their groundbreaking study, the U.S. Financial Diaries (USFD).

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Traditional financial products have typically been designed around single financial functions—borrow, save, pay, transact, invest, or insure.

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The specifics of unfair scheduling practices are important – we need to understand what workers are facing to craft the policies that are most likely to address their challenges.

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We sat down with Noah Lang, CEO and co-founder of Stride Health which delivers intelligent healthcare coverage to self-employed and independent working Americans. Noah was part of a roundtable session for a small group of FinTech leaders, held by the Financial Security Program’s EPIC initiative on income volatility. The group discussed workplace volatility and shared opportunities for FinTech to lead with solutions. Noah shared his insights from that meeting and talked to us about how Stride Health is helping to solve for income volatility.

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There is a game-changing opportunity in the growth of the fintech industry to help address household financial insecurity. To foster these solutions, EPIC hosted a private roundtable session for a small group of fintech leaders on the topic just under two weeks ago. Sasha Orloff of LendUp participated in the roundtable and below are his unique insights and how LendUp’s products help provide a solution for those experiencing income volatility.

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Somewhere between 25% and 30% of households don’t have a stable monthly income and, in some cases, find themselves stuck turning to alternative financial products with high fees to make up for the months their income falls short. And the money spent in the alternative financial services industry is only growing. It grew by 5.9% from 2014 to 2015 and is now a $145 billion industry according to the Center for Financial Services Innovation.

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As laid out in an earlier post, there are many ways to measure income volatility. The current diversity of methods, while frustrating to researchers seeking one, elegant statistical device, is actually a strength, providing a textured, fuller picture of Americans’ financial lives. Another reason researchers should be wary of a universal method for calculating volatility is that the field is still grappling with why we should care about volatility, which will inevitably influence how we measure it.

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How many Americans experience substantial fluctuations in their monthly income? Seems like a simple enough question. But, like so many statistical riddles, it depends on who – and how – you ask. Take, for example, the results from the Federal Reserve’s 2015 Survey on Household Economics and Decisionmaking, affectionately referred to by policy wonks as “The SHED.” The 2015 survey re-asked a question from 2013 on income volatility, giving the more than 5,000 respondents the following three options to “best describe” how they or their partner’s income changes from month to month in the past year: (1) roughly the same amount each month; (2) roughly the same most months, but some unusually high or low months during the year; or (3) often varies quite a bit from one month to the next. Nearly a third of respondents answered (2) or (3), a substantial portion of the population. But other studies have found that an even larger number experience volatility, which begs the question – why the discrepancy?

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It is important to consider how these challenges impact families. Every working parent knows that family responsibilities can interrupt their work in ways that can have a meaningful impact on their household balance sheets. Having children, paying for childcare, caring for elderly and ill family members, and even caring for their own health can all cause severe levels of financial insecurity.

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As a provider of a financial product that can potentially help smooth out some of the volatility in people’s lives, our Build Card credit card product, I know there are some ways that financial products can enable people to dampen the effects of certain kinds of volatility (seasonal earnings for example). I am also struck by some of the opportunities beyond financial services. There is innovation across a host of sectors that can address these challenges, and, I am convinced that one of the most important things we could do to help people manage income volatility is redesign and strengthen the social safety net.

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As you may remember, our inaugural issue is Income Volatility. And for the last several months we have been hard at work with our Advisory Group, convening participants, and survey respondents trying to come to convergence about how we understand the scope and scale of the problem and its impact on specific populations. This has led to one brief that synthesizes the current research and a second, forthcoming brief (late September 2016) that lays out the policies, products, and practices that might reduce volatility or mitigate its worst effects. So make sure to come back to our site to check it out.

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Income volatility can affect all socioeconomic groups, but it particularly hits those with low incomes and little or no savings; for them, shocks like health problems or divorce can be especially devastating. Volatility could be mitigated if employers made more regular payments for part-time or contingent workers with irregular schedules, if Earned Income Tax Credit (EITC) payments were made quarterly instead of annually, and if Unemployment Insurance were expanded to cover such workers. However, these are Band-Aids for a problem that stems from low incomes and underemployment.

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As it was in the first gathering, social networks were a touchstone of conversations. We began with a roundtable where each person described a time they had found themselves with “no money.” Some of the anecdotes were humorous, stories of lost wallets and missing credit cards. Others were tales of a few weeks between jobs or before the start of graduate school. Almost uniformly, the people in the room described how a close friend or family member had bailed them out of illiquidity. That’s the power of social networks in dealing with income volatility and financial shortfalls. Assets are often the focus of how households develop resilience to shocks, but the primary asset that people fell back on in these situations wasn’t financial or physical but social. Social networks are an asset that deserves attention as we think about how to address income volatility.

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One of the most important things that we could do to reduce income volatility for contingent workers and workers with ever-changing schedules would be to build on San Francisco’s scheduling law requiring more predictable hours. In addition to predictable hours, people need more consistent schedules, with a contractually set number of work hours on specific days and times, and more consistent income. Giving workers at least two weeks’ notice about their schedules helps, but it does not do enough to help workers mitigate the variability in their income and schedules. Having a steady schedule—working 15 hours every Monday and Wednesday, for example—enables you to plan for child-care needs only once, work out a schedule for a second job, and know what your weekly income will be.

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I think there’s potentially quite a bit to be done. To the degree that income volatility is associated with low-wage work, education and training programs in TANF and UI could be reformed to provide greater coverage for low-wage workers with less job experience, who, along with part-time, temporary, and contract workers, are often ineligible for both programs. Greater coverage would provide an income buffer as well as training opportunities for more stable employment, and TANF could be improved to be more responsive during economic downturns. TANF was pretty unresponsive during the recent recessions of the 2000s.

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Women have greater earnings volatility because they are more likely to shift between full- and part-time jobs or leave the workforce, to have fluctuations in the number of part-time hours they work, and work in sectors with less stable, lower-income jobs. By contrast, men have greater annual earnings volatility in their full-time jobs and were hit more strongly than women by job losses in the Great Recession. Catastrophic events, such as a health crisis and job loss, are major causes of downward spikes in income and falling into poverty. Women are more likely to give up their jobs when a family member needs serious care. Moreover, few women, or men, particularly in low-wage jobs have paid sick or family leave, so having a health crisis for themselves or a family member can lead to job loss. This results in income swings. For older women providing care to an elderly or ailing family member, often it is very hard to find an equivalent job once they no longer need to provide care.

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Simply comparing rates of income volatility between different racial and ethnic groups without controlling for other variables reveals a small but statistically significant racial volatility gap (see table below). The gap between non-Hispanic white and Hispanic individuals is the highest, a little over a 5% difference, with Asians and members of the Other race category close behind.[3] It is worth noting that all non-white categories have above-average income volatility when compared to the sample as a whole. However, racial differences in volatility are small when compared to other key characteristics like income, work hours, and employment status. These findings are similar to those from previous studies of the SIPP (see the “Faces of Volatility” infographic), which found a statistically significant racial volatility gap but an even larger gap between income groups

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With all of the attention on the “gig economy” and the future of work in the U.S., income volatility—the idea that workers today are not only seeing their wages stagnate, but also fluctuate more than ever before—is now coming to be viewed as a key component of financial security. The U.S. Financial Diaries project pushed our understanding of this challenge forward with its groundbreaking research into the day-to-day economic lives of Americans living on the financial edge. The JPMorgan Chase Institute harnessed its unrivaled access to “big data” to paint a similar picture of unstable income and consumption among its customer-base. And new surveys from the Pew Charitable Trusts and the Federal Reserve corroborate the story.

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In our inaugural year, EPIC is focusing on the issue of income volatility. A remarkable group of leaders have committed their time and expertise as advisory group members, convening participants, and survey respondents to help us understand the dimensions of this complicated problem and build a comprehensive solutions framework. Since November, the EPIC process has already resulted in engaging a diverse group of labor economists, practitioners, job quality advocates, fintech entrepreneurs and innovators, researchers, government officials, financial service industry executives, policy thought leaders, journalists, and employers From these contributors, we have added new insights to the evidence base which has resulted in a more nuanced, accurate understanding of the causes and impact of income volatility. Now we hope to build on this consensus by designing a research and policy agenda that will allow innovators and policymakers to produce breakthrough solutions.

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Findings from the US Financial Diaries and other new research provide compelling evidence that growing numbers of low- and middle-income American households are experiencing high levels of financial uncertainty and volatility. Before these studies, when Bureau of Labor Statistics data came out each year, familiar headlines spoke of long-term trends in wage stagnation, and increasing disparities between top earners and everyone else. On the face of it, a combination of wage stagnation and income volatility seems implausible. But annual data masks as much as it reveals about the working conditions experienced by US households. During the same three decades when annual wages have stayed flat, the structure of work has shifted dramatically, and it is accelerating even faster with the rise of the gig economy. Unlike the stable jobs and steady incomes more common during the middle of the last century, millions of American workers are piecing together incomes with contingent and part-time work, trying to layer multiple jobs to make ends meet. Annual earnings may be flat year-over-year, but the process of earning those dollars is an exhausting pursuit that crowds out other parts of life, not least planning for the long term.