Strengthening the Assets of Low Income Households

Poverty cannot be understood and defined solely as a lack of income. Families also need assets, which are the building blocks of long-term economic security and the “rungs” needed to climb the economic ladder. They need to be able to rely on responsible financial services that help build and not destroy those assets. Thus, any comprehensive strategy to combat poverty must include strengthening the assets of low-income families, from home equity, to savings to pensions and retirement accounts.

People who are asset-poor live on the edge of financial disaster. They are the families who, in the face of unexpected crises, such as layoffs or serious illness, will deplete their savings and other assets within 12 weeks while living at the poverty level.

More than twice as many families are asset-poor than are income-poor in the United States. And, while our nation suffers from income inequality, the inequalities in asset ownership are even more dramatic. The lowest-earning 40 percent of U.S. workers take home 10 percent of the nation’s wealth, but they own just 1 percent of the assets. These inequalities are even starker when broken down by race and ethnicity. A typical African American family earns 66 cents in income for every dollar earned by a white family, but owns just 7 cents for every dollar of white wealth. For Latinos the ownership figure is slightly higher at 11 cents.

If asset building is about making sure there is opportunity for all, closing the racial and ethnic wealth gap may be one of the paramount civil rights issues of our age.

The JCPA calls for the federal government to help families create long-term financial assets. To that end, we call on the federal government to support:

• Improved access to post-secondary education, whose role as a path out of poverty cannot be overstated. This can be achieved through expanding Pell grants, tax refund credits linked to educational savings and savings programs such as Child Savings Accounts and Individual Savings Accounts. Federal government support should include expanding opportunities for “income contingent” repayment plans and efforts to limit predatory private student loans.
• A comprehensive housing policy that provides opportunities for low-income families to experience home ownership that is sustainable. It is important that such policies not undermine sound lending practices. Federal guarantees of home mortgages, analogous to student loans, should be considered for selected, qualified individuals. Homeownership provides the largest source of wealth for most Americans, and skyrocketing rate of foreclosures has put many families at risk of poverty.
• More access to credit and savings opportunities that facilitate micro-enterprise development. Entrepreneurship is a form of sustainable development that can increase the assets of an entire community and create local jobs.

The community relations field should:

• Educate the Jewish community and the general public on asset-poverty and policies and programs to address it;
• Work in coalitions to promote opportunities for homeownership, entrepreneurship and access to post-secondary education; and
• Urge Congress to support legislation to promote not just poverty-reduction, but a ladder of opportunity through asset-building resources, responsible credit and safe financial products for low-income and asset-poor families.