Pamela A. MacLean
Poverty in the United States is on the rise. Nearly half the households in the country have almost no savings and more than a quarter have no assets to fall back on in a crisis, making them "asset poor," according to a 2012 study by the Corporation for Enterprise Development.
The nation saw the poverty rate for individuals rise to over 15 percent in 2010, the highest in two decades. The federal census tracks people living below the official poverty level ($22,350 for a family of four) but it does not account for households that have a car or house but not enough liquid assets to cover a crisis, such as loss of a job. The new study takes "liquid asset poverty" into account and found that 43 percent of American households are "liquid asset poor."
The measure of asset poverty is important to measure not only income but also the vulnerability to financial shocks, such as major illness or loss of a job or divorce. The assets needed to live at the poverty level for three months varies from families but a family of three would need at least $4,632.
The report found that in Alabama 65 percent of the households are liquid asset poor, which means families did not have cash, retirement funds or other assets that could be liquidated quickly in a crisis. Also high in that list were West Virginia and Mississippi at 56 percent each and Georgia at 57 percent. In Nevada 45 percent were asset poor, which means families may have a house that would not be liquidated to meet day-to-day needs.. In some of the largest states, the asset poverty rate is high. For example in New York it is nearly 36 percent, California nearly 31 percent and Texas nearly 28 percent.
"Growing numbers of families have almost no savings or other assets to see them through if they lose their jobs or face a medical crisis," said Andrea Levere, president of CFED. "Without savings, few will be able to build a more economically secure future, including buying a home, saving for their children's college educations or building a retirement nest egg."
Along with the drop in incomes for many Americans is the widening wealth gap between the richest and poorest households, Levere said.
The report points out that one in five jobs is a low wage position and 46 percent of employers do not offer health insurance. For aging workers, 55 percent of all workers do not have or participate in a retirement plan.
Access to credit is crucial in a time of crisis for a family. Poor credit can force individuals to turn to the predatory short-term credit market and payday lending. But the report shows that more than half, 56 percent of consumers have subprime credit scores. This is a growing concern as more employers and landlords check credit scores as part of applications for jobs and rental housing.
The housing crisis has widened the poverty gap. Between the end of 2008 and 2011, home foreclosure rates increased by 50 percent, increasing the homeownership gap between white households and minority households. By 2010, 73 percent of white households owned homes. But just 47 percent of minority households owned homes, according to CFED.
The study also mapped 12 policies states could adopt to improve financial security and opportunity. The report shows how each state stands on each of those policy choices.
The policy choices include providing financial education in schools; offering tax credits to working families; increasing job quality standards to provide basis leave benefits in case of illness; provide college savings incentives; assist first-time homebuyers; protect consumers from predatory short-term loans, improve access to health insurance and protect against foreclosure.