They Say The Economic Outlook Is Strong. Your Members Might Beg To Differ.

If someone were to ask how you thought the U.S. economy was doing, what would your answer be?

Using several traditional metrics, the logical response might seem to be, “Fantastic.”

After all, the unemployment rate is at a robust 4.1%, the dollar has continued to show strength, inflation is currently at 2.97%—much lower than the 40-year high of 9.1% of June 2022—and the U.S. has a gross domestic product of 3.1% when adjusted for inflation (vs. say, long-time economic superstar Germany, which saw its GDP drop by 0.2% in 2023).

But those stats don’t necessarily reflect how the average American feels about their financial state.

According to a May article in Forbes, a recent Harris poll showed that roughly half of Americans think the U.S. is in economic trouble. The majority (56%) believe we’re currently in a recession, while we’ve actually had seven consecutive quarters of growth. And while Democrats have tended to feel better about the economy over the last few years than Republicans, those numbers are slipping. Pew Research found that in May 2024, 37% of Democrat-leaning Americans felt good about the economy vs. the 44% who did in January 2024. The Republican numbers, meanwhile, dropped from 13% to 10%.

What’s got American consumers feeling so jittery? According to the Consumer Financial Protection Bureau, four things are key to a sense of financial well-being: feeling in control of day-to-day and month-to-month finances; having the capacity to absorb a financial shock; being able to set financial goals and feeling on track to meet them; and feeling one has the flexibility to make choices.

But in today’s world, there are three challenges that make it increasingly difficult for many to have the feelings of control and capacity that financial wellness requires: the high cost of care, low and stagnant wages, and lack of affordable housing options. Here, we delve into each of these challenges and highlight how credit unions are tackling them.

The high cost of care

It’s not an overstatement to say the three types of care members need most—healthcare, childcare, and senior care—are in a state of crisis. Care in each area is expensive and in short supply and many struggle to access even modest levels of the help they desperately need.

Healthcare: There are countless examples of the impact healthcare expenses have on the financial well-being of Americans. A March 2024 poll from KFF discovered the following (and, not surprisingly, healthcare is one of the top issues voters want presidential candidates to address during the 2024 election):

• Roughly half say it’s hard to afford healthcare costs and 25% reported they or a family member couldn’t pay for needed care in the last 12 months.
• Costs have led many to put off needed care and prescriptions.
• Even those with insurance face cost burdens.
• Nearly 75% say they’re somewhat or very worried about affording an unexpected medical bill—and about half would have to go into debt to pay a $500 medical bill.

Childcare: If you have a child under the age of five, you know firsthand that safe, reliable childcare is expensive and very hard to find. And if you aren’t currently a parent of young children, these stats from Time magazine will help you get up to speed. For instance, did you know that in more than half of U.S. states, one year of infant care costs parents as much as a year at a four-year public college? That in 2016, nearly two million parents changed jobs or turned down a job offer because of childcare concerns? That over half of America’s children live in a childcare desert? And that lack of childcare costs the U.S. economy more than $57 billion in lost earnings, productivity and revenue each year?

During the early days of COVID, we reported on the outsized impact women faced to care for their children as childcare and schools shut down. And although schools have since reopened, the reality remains that mothers are often the unpaid safety net when it comes to childcare.

Senior care: Americans are aging. According to the AARP, 10,000 people turn 65 every day in the U.S., and the number of older adults will more than double in the coming decades: By 2050, over 20% of the U.S population will be 65+. Unfortunately, care resources aren’t expanding at the same clip. Analysis from the Wall Street Journal found the U.S. had 600 fewer nursing homes in 2023 than it did six years earlier.

Plus, the cost to provide critical senior care is so high that seniors in need routinely don’t get the care they need. In 2020, research from the Schwartz Center for Economic Policy Analysis found that 20 million Americans (age 55+) needed help with daily tasks but 42% of them weren’t getting it. Research from Harvard’s Joint Center for Housing Studies found that nearly 70% of older adults will eventually need long-term care services, but the cost to access them puts that care out of reach for many. Consider that in 2022 almost half of US households had no money in retirement savings, long-term care services average $100/day nationwide and that government resources don’t pay for most senior care and you’ve got a perfect storm.

How credit unions are addressing the care crisis:

Commodore Perry FCU partnered with Undue Medical Debt (formerly RIP Medical Debt), a nonprofit created to help people eliminate personal medical debt. The premise behind the nonprofit is simple: it uses donations to buy medical debt in bulk, and each dollar that’s contributed eradicates roughly $100 in medical debt. The credit union’s “Anchored Against Debt” campaign aims to abolish all local medical debt.

An interesting aside, in 2021 credit union champion George Hofheimer used his epic cross-country bike journey to raise funds for the nonprofit. Hofheimer raised $40,000, which translated to a $4.1 million debt purchase and retirement of medical debt for 3,481 people from California to Florida. Yay George!

While credit unions aim to help their members achieve financial wellness, this effort must start with their own employees. Credit Union 1 recognized how childcare worries impacted its staff and built an on-site facility more than 15 years ago. The center prices its services at below market rates and having this care on site helps the credit union attract and retain employees. Although the credit union doesn’t have childcare facilities at each of its branches, it offers financial assistance to employees who work at locations without a center.

The HR director at TBA Credit Union, Abby Smith, knows from firsthand experience the challenges an employee can face when high quality childcare is in short supply. With that in mind, she’s helping TBA navigate ways they can support employees. Options considered include subsidizing childcare and getting involved in a State of Michigan program, TRI-SHARE, where the employer, the state and workers share the cost of care.

According to a survey by American Banker, Nymeo Federal Credit Union stands out for offering a variety of assistance to employees with older family members including transportation to medical appointments, meal delivery, and access to elder care. Given the pace at which the U.S. population is aging, this could become an even more popular benefit in the years to come.

Low wages

Wages that haven’t kept up with inflation are one of the biggest reasons many consumers have negative feelings about the economy.

In Bankrate’s recent Financial Freedom Survey, respondents reported that on average they would need to earn over $186,000 annually to live comfortably. Considering that this is more than double the roughly $79,000 the Census Bureau reports to be the average salary of a full-time, year-round worker—and more than triple the median earnings, which are just under $57,000—it’s not surprising that low wages are a significant area of concern for the average consumer. Especially when considering only six percent of survey respondents already earn at this level, 31 percent of respondents thought it was unlikely they would ever achieve this income and 18 percent thought they never would.

Look at the earnings for those with limited education and the numbers are even more sobering. The median income for those with less than a high school degree is $30,788; those who didn’t go beyond a high school diploma aren’t much higher at $37,290. For Black and brown workers, the numbers drop even more. When comparing earnings by race and ethnicity the U.S. Department of Labor found that for every dollar earned by white person, a multiracial person earned 81 cents, a Black person earned 76 cents, a person who was Native American earned 77 cents and someone of Hispanic heritage earned 73 cents. Only those who fell into the Asian-Pacific Islander category earned more at $1.12 for every dollar earned by a White person.

According to the Economic Policy Institute, 31 million workers—21% overall—were paid less than $17 an hour from January-December 2023. Black and brown workers were even more likely to fall into this category, with 29% of Hispanic workers under this threshold and 28% of Black workers (vs. 18% of White and 16% of Asian).

How credit unions are addressing low and stagnant wages

Since 1994, Alternatives Federal Credit Union has conducted a biannual living wage study to determine what it takes to support someone above the poverty level in its home county of Tompkins. Alternatives switched to an annual study in 2023 and has worked diligently to fine tune its methodologies to create a more accurate picture of consumer needs. Employers and organizations throughout the county have come to rely on this calculation to provide a benchmark and a starting point for discussions around efforts to raise wages for the area’s lowest-paid workers.

In Toronto, Meridian Credit Union has committed to ensuring all employees receive a living wage. The credit union relies on the findings of the Ontario Living Wage Network—which updates its research annually—to ensure that every employee receives an income that allows them to meet their basic needs. This commitment is a win for both employees and the credit union. Employees earning a living wage see improvements in their mental and physical health and their economic well-being, and the credit union sees drops in employee absenteeism and higher retention and productivity levels.

To help ensure the financial well-being of both members and the community at large, the GoWest Foundation explores how credit unions in their region leverage data from the United Way’s annual ALICE reports to learn more about the hardships their local populations face. ALICE stands for “asset-limited, income-constrained, employed” and calls attention to the sizable percentage of our population that is above the federal poverty level but still doesn’t make enough to cover monthly expenses.

Jim Morrell, CEO of Peninsula Community Credit Union tells GoWest: “Combining ALICE data and empathy mapping, our team created a persona for the target audience that we utilize to assess all of our decisions about products and services.”

Lack of affordable housing

The lack of affordable housing has hit a crisis point in our country.

The New York Times reports that home prices have jumped by 60 percent over the last 10 years (when adjusted for inflation) and that 25 percent of renters spend more than half their income on housing—versus the one-third level recommended to be financially healthy. It’s not uncommon for people to drive more than 90 minutes for their job—and this is even in smaller communities, not just big metropolises—and homeless encampments have become a common sight in cities of all sizes. According to the National Low Income Housing Coalition, we need 7 million more affordable homes to meet the needs of the country’s low-income families. It also found there’s no state or county where a person working a full-time, minimum wage job could afford a two-bedroom apartment.

When communities have insufficient affordable housing, the Coalition reports a direct impact on wages and productivity, slower GDP growth and a decreased likelihood children will thrive in school and have opportunities to learn both inside and outside the classroom. Families who struggle to find stable housing are under enormous stress, which can impact their physical and emotional health. And a lack of affordable housing often drives an increase in homelessness and strains other safety nets, like food pantries. Beyond the impact on the individual, a shortage of affordable housing makes it harder for a community to attract talent and can limit its ability to grow and thrive.

How credit unions are making a difference

Credit unions have long helped to make housing more affordable with competitive mortgage rates, but they’re also doing so much more. As we highlighted in an earlier CUInsight article, there are other ways the system can lend a hand:

• Partner with housing/land trusts and affordable housing funds. Nearly every state currently has housing trust funds that help increase the pool of affordable housing through security deposit assistance and by providing start-up funding to developers. Other options include community land trusts—which separate housing from the land it’s built on, with the trust owning the land, then renting or selling housing at below-market rates—and affordable housing funds that typically bring together governments, philanthropies and developers.
• Leverage grants to finance affordable housing. Credit unions can rely on grants from government entities—like HUD—and foundations to finance affordable housing. Self-Help Credit Union combined a government grant and its own capital to acquire, rehab, construct and offer permanent financing for more than 300 affordable housing units. Mid Oregon Credit Union used a grant from GoWest Foundation to offer interest rate subsidies for rental properties that maintained affordable rent rates.
• Offer alternative mortgage products. A number of credit unions have looked beyond plain vanilla mortgages to meet member needs. Solutions include innovative mortgages for housing co-ops, ADUs, and manufactured homes, as well as offering zero-down payment mortgages based on timely payments for rent, utilities, phone service and auto insurance instead of credit scores.

Other innovative initiatives we’ve talked about on our Remarkable Credit Union podcast include:

• Credit unions in Spokane, Washington joining forces to create the state’s first-ever land bank
• Lower East Side People’s Credit Union in NYC offering loans for Housing Development Fund Corporations
• Verity Credit Union and Express Credit Union in Seattle, Washington partnering with a nonprofit to open branches at an affordable housing cooperative that also offers wraparound services
• Coastal Credit Union in North Carolina looking at working with local electric cooperatives to address the housing crisis

If credit unions care about the financial wellness of their members, employees, and communities at large—and we know you do!—you simply can’t afford to ignore the challenges of high care and housing costs, particularly when coupled with low or stagnant wages. We know these are huge, complex challenges that some of the best minds in our country have struggled to address for years, and no single credit union can even come close to solving them on its own. But that shouldn’t stop you from trying. Even smaller-scale efforts can make a profound difference in some people’s lives. They can also have ripple effects.

The economists may be telling us not to worry, but the picture on the ground looks very different from the birds’ eye view. It’s important for credit unions to stay close to their employees and members to understand their particular barriers to financial wellness. They may feel overlooked by Wall Street, but you can help ensure they feel seen and heard.

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