What Are We Missing When We Talk About Poverty?
By Alicia Atkinson on 12/05/2013 @ 04:00 PM
As a Psychology major in college I was assigned to take Rotters’ 1966 “Locus of Control” test in my Child, Family and Community class my senior year. The thirteen-item questionnaire evaluates whether you have an “external” or “internal” locus of control. Those who score low, or “internals,” believe that the events in their life are primarily consequences of their own actions. “Externals,” those with high scores, place less importance on their own behavior and believe the events in their life are generally outside of their control.
My score categorized me as an “external,” which Rotter claims could be a sign of hopelessness and even depression; however, when asked to explain the reasons for my responses, I said that I knew the circumstances of our lives did not always come down to how hard we work but rather start simply from where we are born. Children who are born into families experiencing poverty grow up in poor housing conditions, poor education systems, poor health and sometimes violent communities and are more likely to experience poverty in adulthood.
Opportunity Nation recently released their new Opportunity Index which illustrates the strong affect a ZIP code can have on the future of a child. The Index looks at economic, educational and civic factors that contribute to upward mobility and creates an overall “opportunity score” for each county in each of the 50 states. This, as well as similar research, illuminates how much your destiny is outside of your control.
Despite research outlining the stark differences in accessing opportunity in our country, mainstream rhetoric often puts the blame on individuals for their circumstances. While many Americans are quick to point their finger on others, we hardly take into account the opportunity and privilege many of us have accessed in our lives. At the 2012 Assets Learning Conference, Cory Booker opened up the conference and openly acknowledged the privilege in his life, saying, “My dad would look at my brother and I and if we ever got proud, he would say ‘Boy, don’t you dare walk around here like you hit a triple, you were born on third base.’”
Americans are often uncomfortable acknowledging their privilege because we are raised to believe we did it all our own. This might seem like a harmless practice because we want children to believe they are in charge of their own destiny and that their hard work will pay off. (Or in other words, the United States tends to raise “internals.”) However, this philosophy feeds an overall feeling of inherent meritocracy and a deep sense of entitlement that hard work will always pay off and result in success.
Despite broad and deep notions that we have succeeded without assistance, history demonstrates that policy has stepped in to help certain individuals get ahead while leaving others behind. For example, the Homestead Act of 1862, which was one of first government-sponsored asset-building policies, was largely unavailable to African-Americans due to racism and the lack of assets needed to purchase the land being granted. Similarly, there have been historic differences in access to credit and many decades of residential segregation, such as redlining that has decreased equity in housing for families; we see today that homeownership rates for white families are 28.4% higher than the homeownership rates for black families. These policies allowed certain individuals to begin to build wealth, which led to years of intergenerational wealth transfers. New research from the Institute on Assets and Social Policy shows that among individuals receiving an inheritance, whites receive about ten times more wealth from family members than African-Americans.
Although many families and individuals do not want to admit it, their families’ wealth holdings were increased by government-sponsored policies. Acknowledgement of the historical access to asset-building policy is not often highlighted in the mainstream media; rather we are much more likely to hear about people who beat the odds. As long as this dominates the mainstream rhetoric, we will not see the importance of designing policies that allow families to access wealth-building vehicles.
The way we frame and view individuals’ plight into poverty greatly influences how we believe assistance should be delivered. If you believe you hit a triple then you probably find it hard to believe why others can’t do the same and therefore would most likely not support programs that provide opportunities for families to gain financial stability. However, if you can sit and recognize the fortunate events in your life, you may be able to begin to view others’ situation with more compassion and understanding. Policies that support Individual Development Accounts and Child Savings Accounts provide much needed opportunity to low-income families to purchase houses, invest in small businesses and save for education. All in all, we need to start recognizing that none of us do it all on our own.
Financial Products for Immigrants & Communities of Color
By Emanuel Nieves on 11/14/2013 @ 10:30 AM
Last week, the Association for Public Policy Analysis & Management (APPAM) hosted its annual Fall Research Conference in Washington, DC. For the past four years, APPAM has included a number of panels, roundtables and other sessions that highlight new asset-based research, all of which have played a role in informing the work of the asset-building field. Organized and promoted by the Building Wealth over a Lifetime Working Group, this year’s APPAM conference included fourteen such sessions, one of which was a session I attended on Saturday titled Access to Financial Products and Services for Immigrants & Communities of Color.
The session featured both private and public sector panelists, including Sandy Fernandez of Citi Community Development, Jeffrey Cruz of the Office of Senator Elizabeth A. Warren, Lindsay Daniels of National Council of La Raza, Kathryn Glynn-Broderick of the New York City Office of Financial Empowerment and Kevin Sanada of the National Coalition for Asian Pacific American Community Development. These dynamic speakers came together to discuss how immigrants and communities of color were using and perceiving financial products and services post-recession.
Broadly, the research presented showed that most surveyed communities are actively using mainstream financial services and products, but the extent to which each does varies. Specifically, the NYC Office of Financial Empowerment found that among the three communities surveyed—Mexican, Ecuadorian and Chinese—the Chinese community had a much higher rate of being banked (95%) compared to the others surveyed (43% and 65%, respectively), which is even more surprising given they had been in the country for an average of four fewer years compared with the others. While not as dramatic, these data also showed up in the NCLR/CAPACD presentation; their research found that 90% of Asian-American/Pacific Islander (AAPI) respondents had a bank account, compared with 75% for Latino respondents.
Various factors all played a role in the use of these services for surveyed communities, including location, convenience, fees and perception, but the one takeaway that I found interesting is that for these communities, trust is a major factor in how they go about using financial products. In NYC’s study, a third of Mexican and Ecuadorian respondents cited that they chose to open an account only after an explanation by a friend or relative. In NCLR/CAPACD’s survey, 50% of Latino and 40% of AAPI respondents cited that they would turn to a friend or family member first in the event they needed emergency funds before turning to other sources, such as a pawn shop (13% of Latino respondents, 2% of AAPI respondents), auto title loan (9%, 2%) or payday lender (8%, 2%).
Overall, the session showed that while immigrants and communities of color are using mainstream financial products and services, more can and should be done to bridge the gap that remains. Fortunately, each of the organizations represented during the session are doing innovative work to bridge this gap by gleaning a deeper understanding of unmet community needs.
In Photos: Opportunity Finance Network Conference & Native CDFI Gathering
By Kim Pate on 10/18/2013 @ 11:00 AM
All week, I've had the pleasure of attending the 2013 Opportunity Finance Network (OFN) Conference here in Philly. It's been an incredible experience, and it's been great to see old friends and meet new ones from across the country.
While I'm still taking it all in, I wanted to share a few photos. This first one is the outgoing Board of the Native CDFI Network, whose mission is to be the national voice and advocate for creating access to resources for Native people. Right after this photo was taken, we elected new Board members for the upcoming year.
Here's another shot of some of the board members, this time signing the Native CDFI Network Articles of Incorporation.
Tanya Fiddler, Chair of the Board of the Native CDFI Network, opened the meeting. Tanya also sits on CFED's board, and has been a longtime friend to CFED and to me.
If you ever get the chance to head to OFN, do it. It's a great conference with a really diverse program, making it ideal even for those who don't work directly with CDFIs.
Did you attend OFN or the Native CDFI Network gathering? Share your thoughts with us below!
Mississippians Report Financial Challenges to Consumer Protection Bureau
By Bill Bynum, CFED Board Member on 10/02/2013 @ 03:00 PM
EDITOR'S NOTE: This post originally appeared on the Huffington Post and can be read here.
In this country where we place such a high value on individual freedoms, we often feel a little uneasy about government power.This is especially true when it comes to the economy, the business sector and the market. We've been taught to suspect government intervention, believing that democracy thrives when there's a "free market."
I like to frame government power in the marketplace in a slightly different way. Think of sports. The government writes the rulebook, employs the referees and insures the integrity of the game. This is the analogy I evoke for the Consumer Financial Protection Bureau (CFPB), the government agency created by Congress in 2010 after the worst economic crisis this country has seen in generations.
I serve as vice chairman of the CFPB's Consumer Advisory Board (CAB), and this week the CAB and key bureau staff met in my home state of Mississippi. The reason CFPB holds meetings at different locations across the country -- and away from Washington, DC -- is to gain greater insight into the circumstances unique to particular communities, and to spread the word about the bureau's work.
In small towns from the Mississippi Delta to the southwestern corner of the state, we heard from teachers, students, retired people, business owners, bankers, public officials and ordinary citizens. They spoke about the challenges they face when they try to borrow money to buy a house, to cover emergency medical expenses, attend college or to start a business. A big obstacle, they told us, is the closing of bank branches in small towns and low-income neighborhoods.
"When the bank told us they were leaving in five weeks, it set off a small panic," said Kenneth Broome, the mayor of Utica, Miss. "For our people, especially our senior citizens living on a fixed income, it's kind of a hardship to have to get transportation to a town further away."
According to a Bloomberg report, 93 percent of bank closings since 2008 have been in low income areas.
"When you don't have a face-to-face relationship with a bank manager and a teller, you lose something important about the American economy," said Lauren Wilkes, who co-owns a small business in Utica. "So many loans for small businesses are made based on relationships."
One of the most important ways the CFPB can have an impact on this kind of large scale, national problem is to make sure the information is available to assess whether a bank or other financial institution's actions have a disproportionate affect on vulnerable populations such as senior citizens, students, active or reserve military personnel and underserved communities.
"One of the bedrock principles at the (CFPB) is transparency," Bureau Director Richard Cordray told people at a public meeting in Itta Bena, Miss. "We have a deep respect for the power that knowledge conveys."
To advance the goal of making sure information is meaningful and available, the CFPB has recently released a set of web-based tools to provide consumers with easier access to public information collected under the Home Mortgage Disclosure Act. With access to information and rules in place for the entire sport -- banking services -- the CFPB can determine whether the playing field is level. The other way the CFPB can exert its power is to protect individual consumers.
A major contributing factor to the financial crisis was the fact that many individuals borrowed more money than they could afford to repay by signing up for mortgages that they did not fully understand. The banks should never have approved these loans.
A key provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act is the requirement that "financial institutions must ensure that borrowers can repay the loans they are sold."
In Mississippi this week, people asked for protection from predatory lenders. "I am a victim of predatory lenders," said Pauline Rogers. "They will entice you with a quick fix because they are strategically located in low income areas, but one thing they will never give you is a future." Mississippi has the highest per capita concentration of payday lenders in the nation. The allowable fees for a small dollar loan in the state are higher than those in neighboring Tennessee.
At Hope Credit Union, where I serve as CEO, we have assisted more than 400,000 people through responsibly structured financial services since 1994. One example is consolidating eight payday loans for a member who had taken out the loans in quick succession, to cover an emergency car repair. A small degree of effort and responsible judgment by any of the eight lenders would have revealed that she could not repay the debt by her next payday. Not surprisingly, it did not take long for rapidly accumulating renewal fees to create an inescapable debt trap.
Fortunately, the CFPB is working hard to understand how these and other abusive financial practices impact lives across the country, and is establishing and enforcing rules that protect every individual equally.
Someday soon, let's hope that whether a person is suiting up for a team in Itta Bena, Mississippi or in New York City, the rules will be fair to all who play the game.
Follow Bill Bynum on Twitter: www.twitter.com/HopeCUbill
Census Poverty Report: America’s Working Poor Still Waiting for Recovery
By Lebaron Sims on 09/18/2013 @ 10:30 AM
Though the nation’s GDP has bounced back in the last six years, millions of Americans have yet to recover from the economic crisis.
Today the U.S. Census Bureau released its 2012 Income, Poverty and Health Insurance Coverage report and data, and the state of play for working Americans is as bleak as at the post-recession crest.
Median household income remained a full $4,500 (8.3 percent) below its pre-recession point, in real terms. The official poverty rate was 15%, representing 46.5 million Americans living below the poverty line. These trends are no different than 2011, highlighting the lasting effects of the Great Recession and the long road to recovery most Americans have yet to traverse. These findings only reinforce the importance of America’s safety net programs, like Social Security and the Supplemental Nutrition Assistance Program (SNAP).
Low- and moderate-income families have seen the largest proportional losses in family income over the last six years, and, as these latest Census Bureau data reiterate, little has changed over time.
Average family income for the lowest fifth of the income distribution (less than $20,600) has declined steadily since the 2001 recession, with that decline accelerating to greater than three percent annually after 2007. Families earning between $20,600 and $39,764 have seen annual declines in family income greater than two percent, and, like those in the lowest quintile, have watched their incomes slide downward since 2001.
The historical data on poverty rates by age serve as a brilliant illustration of our nation’s misplaced priorities regarding assistance programs. By the official poverty measure, 21.8% of all American children—over 16 million boys and girls—lived below the poverty level in 2012. In fact, only the age cohort 65 years and older has seen *any* decline in the poverty rate since the recession hit in late 2007. This disparity can be attributed, at least in part, to the success of Social Security and Medicare, the transfer programs in place specifically for older Americans. The importance of this safety net cannot be understated—without it, over 15 million more seniors would live in poverty. This protection, however, should not come at the expense of programs that assist low-income families.
The cuts to the SNAP already in effect, and the more extensive ones proposed by the House GOP as an addendum to the Farm Bill, would devastate low-income households that rely on these benefits to stave off poverty. The Census Bureau estimates that SNAP alone keeps 4 million low-income parents and children above the poverty line. The House GOP’s proposed cuts would almost entirely erase this benefit. In addition, the federal Earned Income Tax Credit keeps 3.1 million children out of poverty. Though neither estimate is included in the official poverty estimates released yesterday, both are included in the Census Bureau’s Supplemental Poverty Measure (SPM), to be released October 30.
Today’s data release only underscores the importance of America’s safety net. Until household incomes recover fully from the recession—which they continue to show no signs of doing in the immediate future—programs like Social Security, Medicare, SNAP and Medicaid are all keeping millions of children, working families and seniors out of abject poverty. Now, more than ever, is the time to strengthen our policies, and lend a hand to families working to climb out of poverty.
All-In Nation: Making the America that Works for All
We were delighted last month when the Center for American Progress (CAP) and Policy Link released All-in Nation: An America that Works for All. The book, edited by Vanessa Cárdenas and Sarah Treuhaft, is an eloquent explanation of how strong communities of color are the linchpin to a vital economic future in the United States. We were also extremely pleased to see that saving, college access, education, homeownership and so many other issues typically left out of the conversation were thoughtfully included in this treatise on inclusivity.
All-in Nation is noteworthy for how it advances the conversation about asset-based strategies that create pathways for economic security. As one example, we love the recommendation that Congress turn certain tax deductions into refundable tax credits as a method for incenting saving. Likewise, the proposal for a savings tax credit to be used for a variety of purposes such as retirement savings or health care is one that Congress ought to seriously consider if they want to move the dial on our country’s burgeoning racial wealth gap. It’s policies like these—moveable, meaningful and manageable—that actually have the potential to make a difference when it comes to ensuring fair financial footing for communities of color.
All-in Nation also gains kudos for including in its pages descriptions of many of the collaborative efforts to close the racial wealth gap and advance America’s assets agenda that are springing up around the country.
An additional example to consider is the Asset Building Policy Network, or ABPN. Made possible through support from Citi, who is also a member, the ABPN is a coalition of the nation’s preeminent civil rights and advocacy organizations—including CAP and PolicyLink—committed to improving economic opportunity and security for low- and moderate-income families and communities of color. The ABPN engages in policy advocacy, such as authoring several comment letters to federal agencies, which has resulted in action by the agencies that supports ABPN issues. The Consumer Financial Protection Bureau, for example, directly quoted the ABPN’s comment letter on financial education. ABPN members have also collaborated to conduct research, including the recent collaboration among member organizations National Council of La Raza, National Urban League and National CAPACD to study the financial access challenges facing low-income people of color in the financial marketplace.
These examples, and the broader message of All-in Nation, reaffirm one of CFED’s core values: collaboration. As a special organizational calling and competency, engendered by a conviction that our success requires the varied talents and contributions of many, that a rich diversity of race, gender, background and perspectives and a commitment to learning from others strengthens our work, collaboration has defined our work since the beginning.
As Dr. King reminded us some 50 years ago, change doesn’t roll in on the wheels of inevitability; it comes through continuous struggle. That struggle is as important now as ever before; CFED’s own research finds that about two-thirds of households of color find themselves living in asset poverty, meaning they lack the resources necessary to sustain themselves at or above the poverty line in the event that an emergency like illness leaves them without their primary source of income.
While we cannot undo past discrimination, we can change the trajectory of its future. This is the call that organizations like CAP and Policy Link and coalitions like the ABPN are heeding every single day. Books like All-in Nation are precious moments when that call is amplified, so we hope you’ll read it as soon as you have the chance.
The Affordable Care Act & The Unbanked, Part II
By Lucy Mullany, Guest Contributor on 08/21/2013 @ 10:00 AM
EDITOR'S NOTE: This is the second blog in a two-part series on the Unbanked and the Uninsured. Special thanks to Lucy Mullany at IABG for sharing on the Assets & Opportunity Network blog.
In our first blog of this series we discussed the unique challenges facing unbanked households when they try to pay for health insurance.
An estimated 36% of currently uninsured households in our state have no checking or savings accounts and are effectively “unbanked.” The problem is that the vast majority of insurance companies require individuals to pay their monthly premiums via automatic withdrawal from a checking account. This means if you don’t have a checking account, you can’t get insurance.
In an effort to address this challenge, the Department of Health and Human Services released proposed rules that would require insurers to accept a menu of payment options, including paper checks, cashier's checks, money orders, and prepaid debit cards.
In response to these proposed rules, IABG submitted a letter in partnership with 78 other organizations engaged with CFED's Assets & Opportunity Network. The letter includes recommendations on how the Department and other state and federal agencies can ensure that a pathway to safe banking opportunities is a part of ACA implementation. The recommendations include:
- Deductions from Paychecks: Automatic withdrawals from payroll help facilitate on-time payment. Similar to retirement savings or social security deductions, payroll deductions for insurance purchased on the exchange will ensure regular on-time payments.
- Ability to Pay in Advance: If open enrollment in states across the country were aligned with tax time, consumers could pay for their premiums via their tax return. The Department of the Treasury should explore mechanisms for streamlining payments through resources consumers receive at tax time. Many Volunteer Income Tax Assistance (VITA) sites work with the unbanked population and can facilitate community outreach for this payment option.
- Use of Navigators: Navigators should be required to provide payment information to each consumer who is purchasing health insurance via the Marketplace. Navigators can be key ambassadors of this information. We recommend creating FAQs on payment options for this formerly uninsured population.
- Website Development: Each state will have either its own website or they will be referring people to the federal website to access the Marketplace. Payment information should be provided on the website and should be sent to consumers via email or traditional mail upon purchasing their insurance. Given that immigrants make up a significant percentage of the unbanked community, this information should be accessible in a variety of languages.
Pathway to Safe Banking
While we support efforts to ensure that the unbanked have access to health insurance through the marketplaces, we also strongly believe that DHS should use this as an opportunity to provide pathways to safe affordable banking. Being banked will facilitate on time payments which will ensure continuity of coverage and access to health care. While the alternative payments proposed by the Department are important to improve access to health care, they are costly and not a long term solution. IABG will continue to work with healthcare advocates to implement changes that will create a pathway to banking.
The Affordable Care Act & The Unbanked, Part I
By Lucy Mullany, Guest Contributor on 08/20/2013 @ 10:00 AM
EDITOR'S NOTE: This is the first in a two part blog series on the Unbanked and the Uninsured. Many thanks to Lucy Mullany of the Illinois Asset Building Group for permission to share this timely blog series.
When the Affordable Care Act (ACA) goes into effect this October, Illinois residents who don’t have a bank account could find themselves without access to new healthcare opportunities.
Under the Affordable Care Act, 957,440 Illinois residents are expected to qualify for tax subsidies that can be used to purchase insurance through new health care exchanges. However, an estimated 36% of uninsured households in our state have no checking or savings accounts and are effectively “unbanked”. The problem is that the vast majority of insurance companies require individuals to pay their monthly premiums via automatic withdrawal from a checking account. This means if you don’t have a checking account, you can’t get insurance.
As Illinois works to set up health exchanges, the question of how unbanked households will purchase insurance has largely been overlooked. In an effort to address this challenge, the Department of Health and Human Services released proposed rules that would require insurers to accept a menu of payment options, including:
- Paper Checks
- Cashier’s Checks
- Money Orders
- Prepaid debit cards
- Electronic funds transfer from a bank account
- Automatic deduction from a credit or debit card
IABG believes insurance companies should be required to accept alternative payment options in order to ensure that thousands of our residents are not denied health insurance as the ACA is implemented in Illinois. However, we also believe that we need to go further.
One in four Illinois households are either unbanked (with no checking or savings account) or underbanked (they may have a bank account, but still use alternative financial services like check cashers and payday loans). With individuals signing up for health insurance in communities across the state, this is a great opportunity to connect them with programs and services that help families become financially secure. These include community Volunteer Income Tax Assistance (VITA) programs, Bank On initiatives, and financial counseling services.
While existing programs are helping a percentage of households that need their services, with support from government leaders, they can leverage the implementation of the ACA to help even more residents safely connect to the financial mainstream.
IABG is working with other advocacy leaders engaged with CFED's Assets & Opportunity Network to develop recommendations on how the Department of Health & Human Services and other state and federal agencies can insure that a pathway to safe banking opportunities is a part of ACA implementation.
In part 2 of this blog series, we will share these recommendations and ask for your support in moving them forward. If you have feedback please contact Lucy Mullany.
Facing Challenges In The Health Insurance Marketplace
By Daniella Levine, Guest Contributor on 07/16/2013 @ 02:30 PM
EDITOR'S NOTE: This opinion piece originally appeared in the Miami Herald and you can read it here.
On Oct. 1, the federal government will open up a new health-insurance marketplace where an estimated 1.7 million Floridians will have new health-insurance options and financial assistance to help them purchase coverage.
However, many of the uninsured households in our state may face challenges purchasing coverage unless the marketplace adopts alternative payment methods. Many do not have checking or savings accounts and are effectively “unbanked.” The problem is that insurance companies often require individuals to pay their monthly premiums via automatic withdrawal from a checking account. No account, no insurance.
Federal officials at the Department of Health and Human Services have proposed requiring insurers to accept a menu of payment options, including cashier’s checks, money orders and prepaid debit cards so that families without checking accounts won’t lose the opportunity to purchase the insurance required by law.
Those proposed rules should become the law of the land.
But we shouldn’t stop there. We must also find ways to address the larger problems that prevent these households from joining the financial mainstream. More than one in five households in Miami are considered unbanked. An additional 21.4 percent are “underbanked,” meaning they may have a bank account, but still use alternative financial services like check cashers and payday loans. These numbers place Miami as the most unbanked and underbanked large city in the United States. Families have little opportunity to save for the future, build credit and turn their hard-earned cash into valuable assets.
We have witnessed firsthand the impact of programs and services that help families open bank accounts and achieve long-term financial security. Through the Prosperity Campaign, a flagship initiative of Catalyst Miami that has spread throughout the state, lower-wage individuals and families connect to quality healthcare programs and services, establish financial security and improve their quality of life. This past year, 845 people received financial literacy training, 2,831 were assisted with benefit enrollment and over 5,000 residents attended our free tax preparation sessions. These programs reach a mere handful of the households they could potentially help. Our government leaders need to play a stronger role in connecting residents to the financial mainstream by using public awareness campaigns to inform residents about the dangers of high-cost payday loans. They can also help bring together area banks, credit unions and community organizations to extend their services to the unbanked and underbanked residents of our community.
The gap in access to financial services is symptomatic of the wealth gap in our nation. If policymakers are to successfully increase health-insurance access, expanding opportunities to join the financial mainstream should be a key part of that effort.
Catalyst Miami is proud that its Prosperity Campaign has assisted many thousands and brought in millions in new revenue to our community. We will be joining efforts to promote use of the Affordable Care Act marketplace and increasing our financial counseling services to promote greater financial capability for our low and moderate income residents. Contact us at www.catalystmiami.org to see how we can assist you to increase your health and wealth.
Daniella Levine is President & CEO of Catalyst Miami.
Income Inequality Exists...But It Doesn’t Have To
By Lebaron Sims on 07/11/2013 @ 04:00 PM
Income inequality is real. It’s personal. It’s expensive. And it was created. Yet, despite it all, income inequality is fixable.
That’s the lesson the Economic Policy Institute hopes to share with its exciting new site Inequality.is. The interactive tool enables users to put their own socioeconomic position into context, illustrating where each of us land on the inequality spectrum. I took the time to test out the site (several times over the course of several days; I also tweeted about it a couple times – it’s really really cool, everybody), and was surprised by the results.
Where does income inequality come from? How was it created? Former Secretary of Labor (and champion of the 99%) Robert Reich shows up to narrate a splendid short film detailing the rise of income inequality since the 1970s. Reich puts the shift in incomes from the bottom upwards squarely on the shoulders of the country’s policymakers, who fostered an increasingly skewed income distribution through tax, trade, and labor policies designed to limit the power of American workers and redistribute it among the nation’s elite. This divergence is decades in the making, and, as Reich puts it, we were all complicit.
So, where do we fit in?
As an African-American male in my mid-20s with a graduate degree, I make, on average, around $15,000 less than a White male, and $4,000 more than an African-American female, of the same station. That said, the gender and racial earnings gaps – though malign – pale in comparison to the wage stagnation facing all workers over the past several decades. The White male in the above example, while making far more than me or my sister, still earns a full $26,000 less than he would if wages had kept pace with productivity over the past three decades.
Wealth inequality has followed a similar trajectory, and is far more insidious. According to recent estimates published in EPI’s State of Working America 12th Edition, the bottom 80 percent of the wealth distribution collectively holds slightly over 11 percent of America’s total wealth, a 41 percent decline from 1983. In contrast, the top one percent of the distribution holds 35 percent of the nation’s wealth – over three times the collective wealth of the bottom 80 percent. It is through wealth – which is directly related to the income distribution (obviously) – that power and influence are attained, and it continues to become increasingly concentrated among fewer and fewer households.
A favorite econo-blogger of mine, Noah Smith, helps put the influence of policy on inequality into better context, in a Chris Brown-quoting post at his Noahpinion blog. (In case you couldn’t tell by the previous sentence, irreverence in this blog abounds. There is also a prominent picture of Chris Brown. Discretion is advised.) Conducting a thought experiment using a zero-tax economic model popular among the House GOP, Smith shows just how extreme income inequality is in the United States. To purchase a Honda Civic, the average Wal-Mart clerk (working full-time, earning roughly $25,000/yr) would need to save money at a 25% rate for three years at the very least; the CEO of Phillip Morris, saving at the same rate, would need only five hours. (The thought experiment continues from there. I recommend you read it immediately. No – finish my post, then read it.)
So, what to do about the chasm between the rich and the other 300 million plus that populate our nation? Didn’t you say income inequality was fixable? Thankfully, EPI includes several suggestions in their presentation, and provides links to resources – research, publications, and contacts – to get you started on the road to reform. Combating income inequality alone is insufficient, however. CFED works to help working families build and sustain wealth, and offers policy prescriptions at the federal, state, and local levels – as well as publications and resources – to help households achieve financial stability and mobility.
Four Lessons Gleaned from the Children & Youth Finance International Summit
By Bob Friedman on 06/03/2013 @ 01:00 PM
One hundred million children in more than 100 countries with financial education and services by 2015.
When Jeroo Billamoria first suggested that goal for Child and Youth Finance International, the global facilitator toward this grand goal, I thought, frankly, it was crazy. Even if you could achieve anywhere close to those numbers, the actual access, education and services received by many might be minimal.
But then, I like round numbers, aspiration and inspiration, especially around a worthy goal. And worthy, this goal is. One-third don’t even have a legal identity in this world, let alone the integrity, respect, freedom and opportunity all people—including all children—deserve. Children and youth, worldwide, are even more likely to be poor than their elders, and they, arguably even more than their parents, will need financial understanding, savings and education to traverse the daunting economic gauntlet of the 21st Century global economy. Even if we accomplished a fraction of Jeroo’s goals, the journey would be worthwhile.
I agreed to join the Board of CYFI (pronounced Sci-Fi, to further endear it to children of all ages). After all, who can say “no” to Jeroo?
No one, it turns out: 400 adult delegates from 102 countries and 100 children and youth from more than 40 countries participated in the second Child and Youth Finance International Summit, May 7-9 in Istanbul, Turkey. The delegates represented powerful international, national, governmental, financial, educational authorities, internationally recognized NGOs as well as leading researchers, practitioners, and children and youth. It was about as diverse a group as one could imagine along all dimensions. But, it was clearly unified by one shared goal and value: to include the world’s next generation(s) with economic citizenship, financial education, financial access and financial services. Clearly, there is a global movement for child and youth financial inclusion. To be sure, the call for 100 million of the world’s children to be reached with financial education and services is fairly undefined and allows the possibility that not all counted will have received meaningful access, inclusion and empowerment. But, just as importantly, CYFI’s goal is articulated in a call for both financial education and financial services, including at least an account. CYFI commissioned a global consortium of leading researchers in the field to consolidate international learning, and concludes that a combination of education and services is necessary and effective, whereas financial education alone seems to have little effect.
Many takeaways from CYFI’s International Summit are worth mentioning here.
Global Learning is Crucial and Timely: While we in the US have much to teach (SF K2C, SEED, etc. draw interest can allow us to glean crucial insight), we have much to learn from developments and innovations on all other continents, including from developing and poor countries where the numbers of savings programs, institutions, and child and youth participants are much more numerous and where the use of technology and especially the mobile phone is far ahead. Among the countries where model initiatives are blossoming from which we can learn: Kenya, Uganda, Ghana and Nigeria in Africa; Philippines, Thailand, India and Sri Lanka in Asia; Brazil, Colombia and Mexico in South America; and Egypt and Turkey in the Middle East and North Africa. For example, the Government Savings Bank of Thailand, established 100 years ago to promote savings, has established 738 school banks with 1,392,000 accounts, 122 mobile service centers, and 54,682 village and community funds.
Scholarship/Resources: CYFI’s Research Committee (led by many of our friends including Margaret Sherraden, Deb Adams, Lew Mandell, Willie Elliott, Fred Ssewamala, Trina Shanks and Mat Despard) produced and released at the Summit two documents well worth anyone working on CSAs reviewing, including Children & Youth as Economic Citizens: Review of Research on Financial Capability, Financial Inclusion, and Financial Education, and its companion report, which reviews and summarizes leading programs across the globe. In addition, CYFI has issued Child and Youth Friendly Banking Product Certificate Guidebook, the National Implementation Guide: Child and Youth Finance Initiatives at the National Level Guidebook and Beyond the Promotional Piggybank: Towards Children as Stakeholders. Among the significant departures included in these documents, I note several. First, the inclusion of social education and a rights perspective in economic citizenship that is the stated goal of CYFI—“that all children and youth realize their full potential as economic citizens.” Second, though financial education is undoubtedly the most practiced element of financial capability, inclusion and empowerment, there is little evidence that financial education alone is effective, and there is too much variation in what is meant by it. Third, a conversely, there is significant evidence that financial education and inclusion together have significant savings, economic, social and financial effects. Fourth, there is a hunger for and need to establish a unifying theory, set of measures, definition of different kinds and doses of financial education, and (among researchers at least) impact evaluation which separates financial education, financial inclusion and the combination. Finally, Lew Mandell and Trina Shanks agreed to produce a paper accumulating what evidence exists justifying the combined effect of education and services together.
The Business Case is Weak (and maybe not the right case to make): I went to a session on Building the Business Case for CYF where there was no case really presented, certainly no cost benefit or ROI from a financial institution perspective. Lew Mandell, chair of the session, turned to me as someone else pointed this out, to invite me to talk about K2C and how the use of batched accounts might lower costs. I do think there are reasons and ways to reduce the cost of financial inclusion to financial institutions (e.g., by universal enrollment, use of mobile and other technology, offloading financial education to the education system, finding more effective and simpler products and distribution systems) and to increase their returns (e.g., longer-term tracking, government deposits, etc.). But, as the session progressed, I began to think that the better frame is societal ROI, since the returns are longer-term and not capturable by a financial institutions or business entities. The potential returns are huge—in skilled workers, entrepreneurs, savings, investment, productive work and more—but the real case for universal financial inclusion is like the case for universal public education—a rightful pursuit by government and society.
The Importance of Child and Youth Voice and Inclusion: During the final session of the Summit, people talked through an address by the head of the UNCTAD. But when José—an eight-year-old from Peru, shorter than the podium—talked, without notes, pausing professionally for the translator to provide an English version, there was not a sound other than his calm strong voice in the room. I cannot do justice to his exact words, but here’s some of what he said:
- “I don’t want to see any children working the streets."
- “I don’t want to see any children going hungry for want of food."
- “All kids should be able to afford books and clothes so that other kids won’t make fun of them."
- “You should only use savings in the case of emergencies."
- “We should recycle."
- “We should learn how to make chocolate and sew."
- “We kids can and should teach each other.”
The 100 kids who attended had their own sessions and made six recommendations to the adult delegates, including:
- Financial education should be available to all kids and compulsory.
- Adults should give their old cell phones to the kids of the world.
- All kids should have access to bank accounts without expensive fees or minimum deposits.
- All kids should have access to entrepreneurial training and jobs.
- Adults should speak to and treat kids as equals and with respect.
Perhaps most important, they noted, all the above should be done ASAP.
The involvement of the kids was important, and their voices were the most powerful we heard.
For CYFI's Summit Summary and Findings, click here.
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How Can Democratized Wealth Build Assets?
This afternoon, we had the pleasure of attending “Democratizing Wealth and a Sustainable Future,” a New America Foundation event featuring University of Maryland Professor and Democracy Collaborative Co-founder Gar Alperovitz.
Video streaming by Ustream, Courtesy of New America Foundation
Building on some of the arguments put forth in his new book, What Then Must We Do? Straight Talk about the Next American Revolution, Alperovitz discussed democratized wealth as a linchpin component of a new economic politic. Under this new system, a more inclusive American economy would require:
- Systemic changes (i.e., changes to the structures in place that enable increasing and unsustainable levels of wealth concentration),
- Political changes (i.e., changes to how we understand the importance of democratized wealth)
Alperovitz provided a myriad of examples of wealth democratization, ranging from worker-owned businesses and credit unions where stakeholders actually get a vote, to models such as the Cleveland Clinic Model which focus on sustainable community development. As we listened to these examples, we couldn’t help but be reminded of how these models mirror, in a number of ways, the integrated service delivery models that are being pioneered by leaders in the assets field.
Take, for example, Haven for Hope in San Antonio. This 37-acre residential campus provides communal living facilities, employment assistance, financial education and training, and other asset-building services, all in a convenient one-stop center. The rationale behind Haven for Hope is that by embedding these services together, they can be delivered and taken up more effectively than when offered individually.
This logic seems similar to the rationale for the development around the Cleveland Clinic. As Alperovitz discussed, the idea in that community was to locate cooperatively owned businesses near “anchors” such as hospitals and universities that weren’t likely to leave the community, thereby creating long-term economic growth with the added benefit of giving residents easy access to health care and education services. Again, the logic supposes that bringing services together makes them more effective than when offered separately.
Our question, then (and perhaps unsurprisingly), is how we might bring democratized ownership models together with asset-building strategies to supercharge the effectiveness of both. In other words, how could the idea of cooperative ownership be integrated into a one-stop shop like Haven for Hope as a method for empowering low-income individuals to create their own pathways to economic mobility? Certainly, this is a complex question, but we’d love to hear your ideas.
As always, many thanks to the folks at New America Foundation for yet another thought-provoking event!
Thelma Small: Financial Education at Any Age
By Veronica Weis on 05/07/2013 @ 04:00 PM
EDITOR'S NOTE: Thank you to the Real$ense Prosperity Campaign of the United Way of Northeast Florida for submitting this inspiring tax time story.
This year, Thelma Small of Jacksonville, Florida attended a Super Saturday event held on March 2 by the Real$ense Prosperity Campaign of United Way of Northeast Florida. At 82 years young, Thelma is living proof that improving your financial education and participating in free tax preparation services can happen at any age.
Thelma got her taxes prepared by trained Real$ense volunteer, Stephonie Holmes, and attended a financial education workshop. She was also able to access her credit report through the event. The best part? All of the services were free and the whole process took just a couple of hours.
One of Thelma’s daughters has been using Real$ense for several years. She’s the one who encouraged her mother and sister to this year’s event. Real$ense has really turned into a family affair for Thelma and her daughters.
“Rosalind Brown helped me,” said Small. “I would definitely come back to Real$ense, it’s a great service. I got lots of great information and my taxes are done!”
It's the Economic Mobility, Stupid!
By ThinkProgress on 05/02/2013 @ 04:00 PM
The conservative trickle-down approach to the economy assumes that maximizing rewards for those at the top is the path to both growth and prosperity for the society as a whole. If inequality rises, that does not matter, runs the conservative argument, because absolute levels of prosperity will rise for everyone even if the top gains more.
The progressive approach to the economy is radically different. This approach posits, based on a mass of accumulating evidence, that inequality is not a benign byproduct of growth, but rather a toxic barrier to both middle class prosperity and strong growth in general. In other words, high levels of inequality interfere with the both the quality and quantity of growth experienced by a society. Hence the idea that an economic agenda must concentrate on lifting up the middle class to generate both broadly-shared prosperity and fast growth. The two goals are inextricably linked and one cannot be attained without the other.
Of course, the progressive agenda may be the correct one, but that does not mean it can be easily sold to the public and politicians. It would require a serious reorientation of national priorities and considerable investments in areas like education and infrastructure–spending that is likely to meet considerable resistance in the current environment. Therefore, the question of how to frame the agenda in the political marketplace is key.
One obvious approach is to frame the agenda directly as a means of reducing inequality. Call this the redistributionist approach. This approach is not without merit. Start with awareness of and views about economic inequality.
There is no doubt Americans are aware of rising inequality. In the Pew Research Center’s 2012 American Values survey, respondents were asked if they agreed that today the rich get richer while the poor get poorer. About three-quarters (76 percent) agreed, while just 23 percent disagreed. And the public believes it’s not just the poor who are losing ground to the rich—it’s the middle class as well. In the same survey three-quarters (76 percent) also say the gap between the standards of living of the middle class and the rich grew over the last decade, compared to just 16 percent who think it narrowed.
No wonder that a poll from October 2011 conducted by Pulse Opinion Research for The Hill found that two in three Americans believe that the middle class is now shrinking. And in a Democracy Corps post-2010 election survey, the public endorsed the idea that America is no longer a country with a rising middle class by 57-36. Finally, an October, 2007 poll conducted by political scientists Benjamin Page and Lawrence Jacobs for their book, Class War: What Americans Really Think about Economic Inequality, found 81 percent of the public saying that the gap in wealth between wealthy Americans and the middle class has grown over the last 25 years, compared to just 10 percent who said it has remained the same and 8 percent who said it had gotten smaller.
Of course high awareness of inequality does not necessarily mean that Americans disapprove of it. But further data show that Americans’ high awareness of inequality is indeed matched by high levels of disapproval. For example, in a Pew poll in December, 2011, 61% said our economy unfairly favors wealthy Americans, while only 36% thought the system was “generally fair.” And in an ABC News/The Washington Post poll from January of this year, 55% of Americans said that economic unfairness that favors the wealthy is a bigger problem than overregulation by the government that hurts economic growth. Only 35% of respondents believed the latter was the bigger problem.
Moreover, in an October, 2011 nationwide survey conducted by Greenberg Quinlan Rosner Research and the Center for American Progress Action Fund, the public expressed the following views:
- 81 percent of those surveyed agreed that “Regular people work harder and harder for less and less, while Wall Street CEOs enjoy bigger bonuses than ever,”
- 75 percent agreed that “Our economy works for Wall Street CEOs but not for the middle class. America isn’t supposed to only work for the top 1 percent”
- 72 percent agreed that “right now, 99 percent of Americans only see the rich getting richer and everyone else getting crushed. And they’re right.”
In earlier data from the Page/Jacobs survey, 72 percent agreed that differences in income in America are too large, compared to only 27 percent who disagreed. And 59 percent disagreed that large differences in income are necessary for America’s prosperity. In an October 2008 Gallup poll, 58 percent thought money and wealth should be more evenly distributed among a larger percentage of the people, compared to 37 percent who thought it was fairly distributed.
None of these survey findings are idiosyncratic. Careful academic reviews of public opinion on inequality over time by sociologists Lane Kenworthy and Leslie McCall indicate that Americans have typically been aware of inequality, sensitive to its increase over time and generally disapprove of the levels it has reached on our society.
So, beyond a shadow of a doubt, the public is both aware of rising inequality and disapproves of it. Naturally enough, given these sentiments, the public would also like to see something done about this problem. In a November 2011 poll from the Public Religion Research Institute, 60 percent agreed that “our society would be better off if the distribution of wealth was more equal.” And 63 percent believed that “we need to dramatically reduce inequalities between rich and poor, whites and people of color and men and women.”
But it does not follow from all this–awareness, disapproval and the felt need for action–that the public would necessarily be happiest with a direct attack on inequality as implied by the redistributionist frame. On the contrary, in the February, 2009 Pew economic mobility survey, by an overwhelming 71-21 margin, respondents though it was more important to ensure everyone has a fair chance of improving their economic standing than to reduce inequality in America.
That preference for economic mobility over direct mitigation of inequality is also suggested by results of another question in the same survey. By 71-27, Americans agreed that greater economic inequality means that it is more difficult for those at the bottom of the ladder to move up the ladder. That is what Americans object to most vigorously about economic inequality: that it makes economic mobility more difficult. In other words, for most Americans what we have is not an inequality crisis but a mobility crisis. This is confirmed by results of a recent series of focus groups on inequality conducted by Greenberg Quinlan Rosner. Participants tended not to connect their economic difficulties with wealth and income inequality but bemoaned, more than anything else, the rising cost of middle class expenses like housing, transportation, medical care and college relative to lagging wages and salaries. This middle class squeeze, which prevents them from moving ahead in life, is what primarily concerns them.
The mobility crisis touches something very, very important to Americans. Americans retain a deep faith in their personal ability to get ahead even in adverse circumstances, provided they have a fair opportunity to do so. Here are some results from a survey I helped conduct for the Economic Policy Institute in March, 2006. That poll found that 69% thought they had already attained the American Dream or would attain it in their lifetimes (note: this figure was actually higher–75%–in a CAP poll conducted in February, 2009 after the financial crisis had hit). And while 60% rated themselves between poor and middle class now on a 10 point economic scale (1-5), 59% said they would be between middle class and wealthy (6 to 10) within 10 years. Finally, while 80% described themselves as working class, middle class, or lower class today, 44% believed it was very or somewhat likely that they would become wealthy in the future.
This personal optimism can and does co-exist with negative views about the overall state of the economy. In the EPI poll, respondents were asked whether economic uncertainty and inequality or success in achieving the American Dream characterizes the economy today. Here is the choice posed by the question:
- Most people today face increasing uncertainty about employment, with stagnant incomes, paying more for health care, taxes, and retirement, while those at the top have booming incomes and lower taxes
- Our economy faces ups and downs, but most people can expect to better themselves, see rising incomes, find good jobs and provide economic security for their families. The American dream is very much alive.
By 2:1 (64%-32%), respondents selected the first statement about increasing uncertainty as coming closer to their views. But of that group that said that increasing uncertainty, rather than achieving the American Dream, characterized the economy, an amazing 63% nevertheless thought that they themselves would achieve the Dream.
This personal optimism and aspirational outlook is broadly shared across social groups. For example, 69% of the white working class and 74 % of the white middle class believed they have reached or will reach the American Dream, as did 67% of women, 72% of men, 66% of blacks, and 74% of Hispanics (blacks and Hispanics were less likely than whites to believe they had already attained the Dream, but made up for it by being more likely to believe they will attain it in the future).
This aspirational outlook helps explain a stunning finding from the Page/Jacobs survey. A whopping 97 percent agreed (including 85 percent who strongly agreed) that everyone in America should have equal opportunities to get ahead. This is as close to a consensual viewpoint as you find in American public opinion, suggesting the power of a mobility, rather than redistributionist, frame for the progressive economic agenda.
The mobility frame has a strong connection in the public mind to the need for government action. In the 2011 Pew economic mobility survey, an overwhelming 83 percent said they wanted the government to either provide opportunities for the poor and middle class to improve their economic situation or prevent them from falling behind or both. In the same survey, education, a central part of the progressive economic agenda, loomed especially large as a way the government should help provide those opportunities. Ensuring all children get a quality education was rated the highest among options to help people get ahead (88 percent rated it as one of the most important/very important). And improving the quality of elementary and secondary education and making college more affordable were two of the top four options for preventing downward mobility (84 and 80 percent, respectively, one of the most effective/very effective).
Other options that rated highly in this or the 2009 Pew economic mobility survey included promoting job creation, providing basic needs to the very poor, reducing the costs of health care, helping small businesses and business owners, more job training programs and education for adult workers, making it easier to save for retirement and early childhood learning programs. All these mobility-promoting steps are central, of course, to the progressive economic agenda.
In conclusion, the mobility frame lends itself to an “aspirational populism” that makes explicit the argument that current levels of inequality are not just unfair but directly interfere with mobility and economic growth. Not only is there a growing body of economic evidence for the argument but it accords well with the common sense of voters. And perhaps the common sense of an increasing number of politicians. As the President himself has remarked (April, 2012 speech in Florida):
"In this country, prosperity has never trickled down from the wealthy few. Prosperity has always come from the bottom up, from a strong and growing middle class. That’s how a generation who went to college on the GI Bill — including my grandfather — helped build the most prosperous economy that the world has ever known. That’s why a CEO like Henry Ford made a point to pay his workers enough money so that they could buy the cars that they were building. Because he understood, look, there’s no point in me having all this and then nobody can buy my cars. I’ve got to pay my workers enough so that they buy the cars, and that in turn creates more business and more prosperity for everybody."
That about says it all.
The Best Way to Spend 3 Extra Minutes
By Sean Luechtefeld on 05/01/2013 @ 03:00 PM
Our friends at the Urban Institute just released this powerful three-minute video explaining just how pervasive the burgeoning racial wealth gap is. It uses CFED's findings in our Upside Down report to illustrate how, despite spending $400 billion on asset-building incentives, the federal government still fails to reach the populations who need support in building wealth and financial security. Seriously, this will likely be the three most powerful minutes you'll spend today.
We Got 99 Problems...
Insights from behavioral economics can transform the way we design programs in the asset-building field, and we’re interested in learning how. That’s why CFED, ideas42 and the Citi Foundation launched the Behavioral Economics Technical Assistance (BETA) Project and issued a request for proposals (RFP) in late 2012 from organizations interested in piloting behaviorally-informed interventions. Working with the selected pilot sites, we hope to also develop technical assistance tools for other organizations in the field.
Through the RFP process, we received 99 proposals from organizations across the country. Today, we released a brief that examines themes among these 99 proposals, explores common challenges and lays out next steps for the BETA Project.
With 99 applications from a diverse set of organizations, you might expect an infinite range of different problems and program challenges. Interestingly, we found that many of the problems organizations reported are quite similar. Almost all of the problems fell into four broad categories:
- Low take-up of a program or service. For example, many programs offer financial education classes or credit counseling, but have problems convincing individuals to enroll in these programs.
- Clients fail to follow through on intentions. For example, many programs work with individuals to create “action plans” or similar roadmaps to help people achieve their financial goals. Yet individuals do not follow through on these plans.
- Clients have trouble prioritizing savings or changing savings habits. For example, some organizations were interested in leveraging tax time to help people save, since individuals often get a windfall tax refund.
- Clients have difficulty making economically beneficial financial decisions. For example, many organizations are trying to help individuals manage and repair credit, usually through one-on-one financial counseling.
Although many of the problems identified in the proposals were similar, we believe that the underlying reasons why these problems exist could be very different for each organization.
For example, take the problem of getting more people to sign up for a financial education class. If the class has a good curriculum, and has led to successful outcomes, why is it hard to get people to sign up?
It’s easy to assume that the underlying reason for this problem is about the advertising and promotion of the program, and that if more people knew about the program, more would sign up. However, the reality could be that people know about the program and had the intention to sign up, but did not act upon it. In this case, it would not matter how effective a new advertising campaign is—the problem was not the advertisements.
All behaviorally informed interventions start with a statement of the problem. Over the coming months, the BETA Project will share lessons from our three selected test sites: Neighborhood Trust Financial Partners (New York), Cleveland Housing Network (Cleveland) and Accion Texas (San Antonio). We’ll start by analyzing the original problem statement provided by each of the sites in their application:
Designing effective solutions ultimately depends on how we represent the problems. That means that we must disentangle the core challenge from preconceptions or hidden assumptions. Stay tuned for lessons on how we take these original problem statements and refine them into the core challenges that can be addressed by behavioral diagnosis and design.
By sharing insights from these sites, we hope more organizations will come to appreciate how accounting for client behavior in the context of service delivery can greatly impact program outcomes.
Click here to read the full brief.
Income and Wealth in America Across Generations
By Sean Luechtefeld on 03/11/2013 @ 12:45 PM
EDITOR'S NOTE: We received notification of this first-of-its-kind tool from the folks at the Pew Charitable Trusts. We think it's a great way to show the cross-generational economic mobility of American families. Credit to the Pew Charitable Trusts for the content of this blog post.
This interactive tool by The Pew Charitable Trusts’ economic mobility project displays not only which Americans are more likely to exceed or fall short of the income and wealth held by their parents, but—for the first time—by how much. It provides a unique way to analyze absolute mobility in America and drill down into the specific effects of education level, race, and number of earners present in a household. Select findings include:
- 83 percent of Americans exceed their parents’ family income by at least $1,000.
- Half of Americans exceed their parents’ family wealth, and 47 percent have at least $5,000 less wealth than their parents.
- Having a college degree is associated with absolute upward mobility at all income and wealth thresholds and is especially important for upward wealth mobility from the bottom.
- Blacks are less likely to experience absolute upward income and wealth mobility than are whites.
- A greater proportion of dual-earner families surpass their parents’ family income than do single-earner families.
To check out this exciting, interactive new tool, visit the Pew Charitable Trusts' website.
The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide
By Tatjana Meschede, Guest Contributor on 03/06/2013 @ 11:00 AM
EDITOR'S NOTE: CFED invited Tatjana to offer this guest blog post on IASP's groundbreaking new study on the burgeoning racial wealth gap.
Wealth inequality has become central to the debate over whether our nation is on a sustainable economic path. New research by Brandeis University’s Institute on Assets and Social Policy (IASP) shows the dramatic gap in household wealth that now exists along racial lines in the United States. The IASP study, “The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide,” followed 1,700 working-age households over what is now a 25-year period – from 1984 to 2009. This approach offers a unique opportunity to understand what happens to the wealth gap over the course of a generation and the effect of policy and institutional decision-making on how average families accumulate wealth.
This new study found the wealth gap almost tripled from 1984 to 2009, increasing from $85,000 to $236,500. The median net worth of white households in the study has grown to $265,000 over the 25-year period compared with just $28,500 for black households. The dramatic increase in the racial wealth gap has accelerated despite the country’s movement beyond the Civil Rights era into a period of legal equality and the election of the first African-American president. The resulting toxic inequality now threatens the U.S. economy and indeed, American society, the study concludes.
Setting out to determine what is driving the disparity today, IASP was able to statistically validate five fundamental factors that together account for two-thirds of the proportional increase in the racial wealth gap. Those five factors include the number of years of homeownership; average family income; employment stability, particularly through the Great Recession; college education; and family financial support and inheritance. While marriage is another factor that was studied, its impact is quite small. Unmistakably, the rise in racial wealth inequality cannot solely be attributed to personal ambition and behavioral choices, but rather reflects policies and institutional practices that create different opportunities for whites and African-Americans.
The report recommends that policymakers take steps such as strengthening and enforcing fair housing, mortgage and lending policies; raising the minimum wage and enforcing equal pay provisions; investing in high-quality childcare and early childhood development; and overhauling preferential tax treatments for dividend and interest income and the home mortgage deduction.
CFED Awarded $125,000 Grant from Capital One for Innovative Asset-Building and Microenterprise Services Initiative
By Kristin Lawton on 02/08/2013 @ 11:16 AM
Funding will be used to advance the financial security and upward mobility of low-income entrepreneurs.
CFED announced a $125,000 grant today from Capital One Financial Corporation to support work to identify new scalable opportunities to help disadvantaged entrepreneurs achieve upward economic mobility. The grant will facilitate a partnership between CFED and several microenterprise organizations, including Accion Texas, Inc., the California Association for Micro Enterprise Opportunity (CAMEO), the Enterprise Development Group (EDG) in the Washington, DC metro area, and others. Through these partnerships, CFED will promote emerging practices that service providers can implement to ensure that their clients have access to the financial products and skills they need, and are actively using them to make their businesses stable and sustainable.
“Accion Texas, CAMEO, and EDG, all high-performing, innovative leaders in serving low-income entrepreneurs, will be able to elevate their promising practices and cross-pollinate ideas that can help clients achieve financial security and upward economic mobility,” said Andrea Levere, CFED president. “Capital One’s leadership and support is making it possible to extend the project’s impact beyond our four active partners and reach the wider field of microenterprise practitioners, policymakers and financial institutions.”
The Capital One grant will fund a number of the project’s core activities and products in 2013 including:
- In-depth interviews with key staff at the four partner organizations to learn about their clients’ specific financial capability and product needs, and the operational opportunities and obstacles that affect capacity to deliver new solutions.
- Small group convenings to share our findings and identify ways to replicate effective innovations.
- The development of public education materials, such as an Emerging Practices Guide, a Policy Analysis Report, and several Field Innovation Briefs to be disseminated to policymakers, practitioners, financial institutions and other key stakeholders to make them aware of field developments and opportunities to support promising approaches.
“CFED is a leading national intermediary with decades of experience that combines expertise in both microenterprise and asset building to create synergies in support of microenterprises and the self-employed,” said Daniel Delehanty, senior director, Community Development Banking at Capital One. “Through Capital One’s Investing for Good program, we continue to work with organizations like CFED to help microentrepreneurs grow their businesses through capacity building and integration of innovative financial capability training and support that ultimately helps to create more jobs and stimulate local economies.”
About Capital One
Capital One Financial Corporation, headquartered in McLean, Virginia, is a Fortune 500 company with more than 900 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia, and the District of Columbia. Its subsidiaries, Capital One, N.A. and Capital One Bank (USA), N. A., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. We apply the same principles of innovation, collaboration and empowerment in our commitment to our communities across the country that we do in our business. We recognize that helping to build strong and healthy communities - good places to work, good places to do business and good places to raise families - benefits us all and we are proud to support this and other community initiatives.
CFED Applauds Reappointment of Richard Cordray to Head the CFPB
By Kristin Lawton on 01/24/2013 @ 04:23 PM
Washington, D.C. — With Richard Cordray as Director, the CFPB has provided essential protections that can change the financial lives of all consumers, with particular focus on the underserved and vulnerable citizens of this country. CFED applauds President Obama for his renomination of Cordray to a full term as director.
CFED is eager to continue working with the CFPB to protect consumers, enhance the financial capability of those struggling to get ahead in a challenging economy and fully participate in the financial mainstream so they can buy homes, attend college, start and grow businesses and achieve financial self-reliance.
Richard Cordray is an excellent choice to lead CFPB. His years of public service have led him to develop deep expertise in consumer protection. As the Attorney General of Ohio, Cordray was a national leader in fighting foreclosure scams. He has won praise from consumer advocates and bankers alike and will provide a much needed "financial cop on the beat" to protect consumers, grow our economy and avoid another financial collapse.
CFED empowers low- and moderate-income households to build and preserve assets by advancing policies and programs that help them achieve the American Dream, including buying a home, pursuing higher education, starting a business and saving for the future. As a leading source for data about household financial security and policy solutions, CFED understands what families need to succeed. We promote programs on the ground and invest in social enterprises that create pathways to financial security and opportunity for millions of people. Established in 1979 as the Corporation for Enterprise Development, CFED works nationally and internationally through its offices in Washington, DC; Durham, North Carolina; and San Francisco, California.
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