The United Ways of Iowa and United for ALICE recently released a new report Alice in the Cross Currents: Covid and Financial Hardship in Iowa. The report is an update to United Way's analysis of Asset Limited, Income Constrained, Employed (ALICE) households across Iowa. It also provides major new insight into how low- and moderate-income families saw their situations change through the COVID-19 pandemic.
The report's key finding highlights the financial struggle facing many Iowa families:
According to United Way, 36% of Iowa households do not have the financial resources to afford a basic budget for financial survival.
While we often speak of people in our community who live in poverty, the ALICE report authors argue the government's official poverty measure falls short of identifying all the people struggling financially. ALICE households earn more than the Federal Poverty Level (FPL) yet still struggle to meet basic household expenses. The FPL, developed in the mid-1960s by Mollie Orshansky of the Social Security Administration, provided the first measurement of poverty in America.
The FPL operates under the assumption that a household spends about a third of its income on food. The USDA developed the Economy Food Plan that meets the nutritional needs of an individual at the lowest possible price. The FPL takes this number and triples the amount to produce poverty thresholds. There have been some changes since the inception of FPL, but these basic calculations form the poverty thresholds today.
The ALICE threshold provides an alternative--and arguably far more complete--measure of financial hardship by updating the assumptions of what financial hardship constitutes in the 21st century. Rather than a blunt tripling of an economical food basket, the ALICE Household Survival Budget includes housing, childcare, transportation, healthcare, taxes, technology (including a smartphone), and food. For a family of four, the 2021 FPL was $26,500, and the ALICE threshold was $61,308, providing a much higher threshold that better reflects financial hardship in Iowa.
Federal Poverty Limit, Iowa, 2021
ALICE threshold, Iowa, 2021
The ALICE report found 36% of Iowa households were below the ALICE threshold. A single person working full-time to exceed the threshold would have to make more than $12.10 per hour compared to $36.65 per hour for a family of four. In Polk County, 23% were below the ALICE threshold, and 9% were below the FPL.
In addition, the report sheds more light on who is struggling in Iowa communities.
Many workers in the most common occupations were below the ALICE threshold, including half of waitstaff, fast food, and counter workers.
Financial hardship was not evenly distributed across the various races of Iowa households, with 60% of Black households below the ALICE threshold compared to about 30% of White households.
The family form strongly affects financial hardship with over half of Single-Female-Headed (with children) households below the threshold compared to 14% of married (with children).
The Polk County Housing Trust Fund partners with many organizations and developers to create affordable housing for struggling families. We want to thank the United Way for its leadership and the creation of a novel measurement of financial hardship. You can find additional cost of living calculators and other local housing data in our Housing Policy Reading Room.