A.L.I.C.E. Report

Published: September 29, 2015

We are currently having conversations with community leaders regarding how this report relates to our community. A.L.I.C.E. is an acronym for Asset Limited Income Constraint Employed. It relates to those who are working but still having financial difficulties.


Across Indiana, 37 percent of households struggle to afford the basic necessities of housing, child care, food, health care, and transportation.

Indiana, one of the many states in the region of the Midwest often termed the 'Rust Belt', has
faced difficult economic times during the Great Recession. Yet the Indiana poverty rate of
14 percent obscures the true magnitude of financial instability in the state. The official U.S.
poverty rate, which was developed in 1965, has not been updated since 1974, and is not
adjusted to reflect cost of living differences across the U.S. A lack of accurate measurements
and even language to frame a discussion has made it difficult for states - including Indiana -
to identify the full extent of the economic challenges that so many of their residents face.

This Report presents four new instruments that measure the size and condition of
households struggling financially, and it introduces the term ALICE - Asset Limited, Income
Constrained, Employed. The Report includes findings on households that earn below the
ALICE Threshold, a level based on the actual cost of basic household necessities in each
county in Indiana. It outlines the role of ALICE households in the state economy, the public
resources spent on households in crisis, and the implications of struggling households for the
wider community.

Using the realistic measures of the financial survival threshold for each county in Indiana,
the Report reveals a far larger problem than previously identified. Indiana has 352,042
households with income below the Federal Poverty Level (FPL) but also has 570,300 ALICE
households, which have income above the FPL but below the ALICE Threshold. These
numbers are staggering: in total, 922,342 households in Indiana - fully 37 percent
and more than double the number previously thought - are struggling to support

ALICE households are working households and pay taxes; they hold jobs and provide
services that are vital to the Indiana economy in a variety of positions such as retail
salespeople, laborers and movers, team assemblers, and nursing assistants. The core issue
is that these jobs do not pay enough to afford the basics of housing, child care, food, health
care, and transportation. Moreover, the growth of low-skilled jobs is projected to outpace that
of medium- and high-skilled jobs into the next decade. At the same time, the cost of basic
household necessities continues to rise.

There are serious consequences for both ALICE households and their communities when
these households cannot afford the basic necessities. ALICE households are forced to make
difficult choices such as skipping preventative health care, healthy food, or car insurance.
These "savings" threaten their health, safety, and future - and they reduce Indiana's
economic productivity and raise insurance premiums and taxes for everyone. The costs are
high for both ALICE families and the wider community.

Who is ALICE?

Thirty-seven percent of households in Indiana struggle to afford basic household
necessities. Based on the most recent data from 2012, 352,042 households live in
poverty and another 570,300 are ALICE households. Between the two categories, 922,342
households in Indiana have income below the ALICE Threshold.

ALICE households exist in all age groups. ALICE exists even in households headed by
someone in the prime earning years of 25 to 64 years old. In fact, this age group represents
the largest segment of ALICE households, underscoring the fact that many jobs in Indiana do
not pay enough to allow families to afford the most basic household budget.

ALICE and poverty-level households are spread across all counties in Indiana. All
counties in Indiana have more than 21 percent of households living below the ALICE
Threshold. In addition, more than two-thirds of Indiana's municipalities have more than 20
percent of households living below the ALICE Threshold.

ALICE households represent a cross-section of Indiana's population. Contrary to some
stereotypes, ALICE households have a wide range of demographic compositions. As in
Indiana's overall population, more than 81 percent of the state's ALICE households are White
(U.S. Census terminology). However, due to wage discrepancies that disproportionately
affect certain groups, it is not surprising to find female-headed households, Blacks,
Hispanics, people living with a disability, and unskilled recent immigrants over-represented in the population living below the ALICE Threshold.

What is the gap between ALICE's household income and the
cost of basic expenses?
ALICE households are working or have worked. However, ALICE and poverty-level
households earn only 36 percent of the income needed to reach the ALICE Threshold for
basic economic survival.

Public and private assistance is not enough to lift ALICE households to economic
stability. The income of ALICE and poverty-level households in Indiana is supplemented with
$13.9 billion in government, nonprofit, and health care resources. Despite this assistance,
ALICE and poverty-level households remain 23 percent short of the income needed to reach
the ALICE Threshold.

What causes the prevalence of ALICE households?
The cost of basic household expenses in Indiana is more than most jobs can support.
Indiana's cost of living is beyond what most jobs in the state can provide to working
households. The annual Household Survival Budget for the average Indiana family of four is
$46,495 and for a single adult is $17,026. These numbers highlight how inadequate the U.S.
poverty rate is as a measure of economic viability, at $23,050 for a family and $11,170 for a
single adult. The annual Household Stability Budget - one that enables not just survival, but
self-sufficiency in Indiana - is almost double the cost of the Household Survival Budget for a family of four ($82,740), and $22,836 for a single adult.
Indiana became less affordable from 2007 to 2012. Despite the Great Recession and the
low rate of inflation, the cost of basic housing, child care, transportation, food, and health
care in Indiana increased by 10 percent during this 5-year period.
Economic conditions worsened for ALICE households from 2007 to 2012. Housing
affordability, job opportunities, and community support worsened in all counties in Indiana
through the Great Recession as measured by the Economic Viability Dashboard, a new index
that tracks these three economic measures. Two years after the end of the Great Recession,
conditions have improved slightly but have not returned to 2007 levels. Finding both housing
affordability and job opportunities in the same location remains a challenge for ALICE

Indiana's housing stock does not match current needs. Across the state, there are not
enough rental units, that are affordable: there are 60 percent more renters with income below
the ALICE Threshold than there are rental units that they can afford. In addition, while there
are housing units where ALICE households could afford the mortgage, these households
often lack sufficient resources for a down payment or do not qualify for a mortgage.

What are the consequences of insufficient income for
ALICE families and their communities?
To manage their day-to-day survival, ALICE households often utilize short-term
strategies that are detrimental in the long run. When ALICE households do not have
enough income, they have to make difficult choices to reduce their expenses. For example,
if a family cannot afford child care in an accredited facility, they may substitute with an
overworked neighbor or an inexperienced relative, jeopardizing their child's safety and
learning opportunities. Other short-term strategies such as skipping preventative health care,
home and car maintenance, or a bill payment may have long-term consequences such as
poor health, fines, and larger bills in the future.

The number of families with children is declining in Indiana. Higher income is especially
important for families with children because of their greater budget costs. Without job
opportunities in the state, some families have moved, and others have delayed having
children altogether. From 2007 to 2012, the number of married-couple families with children
in Indiana fell by 8 percent.

ALICE households pay more for goods and services. ALICE households face higher
expenses from both basic cost of living increases and the use of alternative financial products
to finance routine and extraordinary expenses. During the Great Recession, despite the low
inflation and the decrease in cost of most goods and services, the cost of basic household
necessities continued to rise. Without access to mainstream borrowing, many ALICE
households in Indiana resort to using riskier, more expensive financial options, such as "Buy
Here Pay Here" car loans.

The whole community suffers when ALICE has insufficient income. When ALICE
children are not ready for school, they add a burden to the educational system. When ALICE
children are not ready for school, they add a burden to the educational system. When ALICE
households cannot afford preventative health care, they are more likely to place future
burdens on the health care system, increasing insurance premiums for all. When ALICE
workers cannot afford an emergency, let alone invest in their neighborhood, communities
may experience instability, higher taxes, or a decline in economic growth.

What challenges do ALICE households face in the future?
In line with the national trend, low-income jobs dominate the economy in Indiana now
and will continue to dominate in the future. As a result of changes in the job market over
the last three decades, the Indiana economy is now more dependent on low-paying service
jobs than on higher-skilled and higher-paying jobs. Sixty-nine percent of all jobs in Indiana
pay less than $20 per hour ($40,000 per year if full-time), and more than half (51 percent)
pay less than $15 per hour ($30,000 per year if full-time).

Occupations with projected job growth have low wages and require minimal
education. The most projected new job openings are in service jobs with wages below $20
per hour and requiring a high school education or less. These jobs - including construction
trade workers, home health aides, food preparation workers, and motor vehicle operators -
are projected to grow at triple the rate of medium- and high-skilled jobs over the next decade
across Indiana.

More seniors will become ALICE households. With an aging population that is working in
lower paid jobs or has used their savings and retirement to weather the economic downturn,
more Hoosiers will fall below the ALICE Threshold as they age.

More ALICE households will become family caregivers. At least one-third of Indiana's
ALICE households currently include caregivers - family members caring for ill or elderly
relatives. That number will increase as the population ages, adding additional burdens to
the budgets of ALICE households in both direct costs and lost wages, and reducing future
employment opportunities.

What would improve the economic situation for ALICE
Public and private intervention can provide short-term financial stability.
Short-term intervention by family, employers, nonprofits, and government can mitigate crises
for financially unstable households and possibly prevent an economic spiral downward. For
example, providing a month's worth of food for a family may enable a father to repair his car's
transmission and get to work. If a family's primary earner cannot get to work, he might lose
wages or even his job. Without regular income, the family cannot afford rent or mortgage
payments and risks becoming homeless.
Increasing the amount of housing that ALICE can afford without being housing
burdened would provide stability for many Indiana families. The housing units that are
affordable to ALICE households are often far from jobs or older and in disrepair. Structural
changes that make quality affordable housing more available would ease the housing burden

on many Indiana families.
An improvement in income opportunities would enable ALICE households to afford
basic necessities, build savings, and become financially independent. Reducing the
number of ALICE households requires a significant increase in the wages of current jobs or in
the number of medium- and high-skilled jobs in both the public and private sectors in Indiana.
Structural economic changes would significantly improve the prospects for ALICE and enable hardworking households to support themselves.

Improving Indiana's economy and meeting ALICE's challenges are linked; improvement for
one would directly benefit the other. The ALICE Threshold, the Household Survival Budget,
the ALICE Income Assessment tool and the Economic Viability Dashboard presented in this
Report provide the means for Indiana stakeholders - policy makers, community leaders,
and business leaders - to better understand the magnitude and variety of households facing
financial hardship. These measures and tools, and the enhanced understanding that they
provide, can make more effective change possible.

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