Philadelphia residents who face financial hardship say they're often too preoccupied with meeting their basic expenses to make bigger strides in economic mobility, according to a new report on survey data from the Federal Reserve Bank of Philadelphia.
The Philly Fed's research on financial instability and life satisfaction drew from surveys of 592 lower- and middle-income residents in the city from late 2023 through last summer. All were selected from neighborhoods where the median household income was $70,000 or less and the poverty rate was at or above 10%. Among those who participated, 59 people also attended focus groups to talk about their occupational and household experiences.
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Income standards for the study were based on those set by the nonprofit United for ALICE — an outgrowth of the United Way — whose acronym stands for "Asset Limited, Income Constrained, Employed." The expanded income ranges are meant to include a broad set of essential costs when measuring financial hardship.
Instead of relying on data pegged to the federal poverty line — currently $15,650 for individuals and $32,150 for a family of four — the ALICE threshold covers people who earn more than that benchmark but not enough to comfortably afford housing, child care, food, transportation, health care, technology and taxes.
The survey revealed stark differences in the lifestyles and outlooks of people above and below the ALICE threshold. In the survey, 58% of participants fell below it.
Nearly 60% of people beneath the threshold reported not being able to pay all of their bills each month, compared with 23% of those above it. Among people below the threshold, 22% said they were not satisfied with their lives compared with only 6% of those above it.
When people in the focus groups were asked to explain what economic mobility means to them, many said they consider economic stability their primary goal and a prerequisite for any significant leap. Many also viewed mobility as cutting both ways, and nearly 90% of survey-takers below the ALICE threshold had experienced income changes of at least 10%, in either direction, during the six months they were surveyed. Some had gone through layoffs, picked up or reduced work hours, or took on additional temp work to meet financial demands.
People who fell below the ALICE threshold were more than five times as likely as those above it to say caregiving responsibilities created barriers to their work lives. They were three times as likely to be limited by health issues and more than twice as likely to be constrained by transportation access.
Although most people below the ALICE threshold said "finding a better job" would be the most helpful change in their lives, they also reported more frequently that their day-to-day struggles to overcome fluctuations in income created a barrier to upward mobility. Many reported having second jobs and "side hustles" that offered temporary help with finances, but survey-takers sometimes did not include these earnings in their reported income because they did not view the sources as stable enough to track.
“It’s hard to remember what you make; mostly you stress about what you have to spend," one focus group participant said.
Other people in focus groups said they felt their mental health improved and they could think more clearly about future planning whenever they were able to pay their bills. But some also shared frustration that their energy went into working hard without seeing it reflected in their pay. For those earning the least, a common concern was making just enough to hit a "benefit cliff" that would prevent them from receiving government assistance for food, housing and other needs.
The Philly Fed report comes amid mixed findings from the Pew Charitable Trusts, whose annual state of the city report noted the 20.3% poverty rate in 2023 was the lowest since 2000. Last year, the city's 2.4% rate of job growth outpaced the national average of 1.3% with most employment gains in education, health care, business and government. Notably, however, the Pew report found that more Philly residents are experiencing homelessness than ever before, and nearly half of the city's renters spent more than the recommended 30% of income on housing.
The Philly Fed report recommends that the ALICE threshold be used to more meaningfully measure economic hardship in future studies, and that more long-term surveys be done to understand the employment barriers people experience.
"Economic mobility was not a term that participants generally used," the report's authors said. "For many lower-income respondents, economic stability was the preferred reference point, and income was more accurately calculated by expenses covered in a month than by the dollar amount that was coming in. Future research and survey design should consider these points so that everyone is speaking the same language."
