A new study from the Corporation for Enterprise Development (CFED) provides an overview of financial security in America, and finds that 27% of Americans are asset poor, lacking the savings to cover expenses for three months if a layoff or other emergency leads to a loss of income. A household is considered asset poor if it does not have sufficient net worth to live at the poverty level for three months in the absence of income. Asset poverty for households of color is even higher, at 44%. Since 2009, the number of asset poor families increased by 21%.
The new report gauges financial security in all 50 states across five issue areas: financial assets and income, business and jobs, housing and homeownership, and health care and education. On the whole, researchers find that American households face a great number of barriers to financial security. One in five jobs are low-wage and 46% of employers do not offer health insurance. An estimated 56% of consumers have subprime credit scores that would disqualify them from mainstream credit products. And the average debt for graduating college seniors rose 19% since 2007 to $25,250.
The authors of the report assert that asset building public policies in the United States favor middle to upper income households. The federal government uses special deductions within the tax code as a primary tactic to promote wealth building, but this approach leaves out lower income households that do not have tax liability. Furthermore, direct benefit programs often discourage recipients’ efforts to save. In 2009, more than half of all subsidies related to asset building went to the top 5% wealthiest of tax payers.
According to CFED, state-level policies have a major impact on outcomes related to financial security. The report finds that Nevada provides minimal support for asset building programs, and, as a result, Nevada has the highest rate of asset poverty among all fifty states (45%). Vermont, on the other hand, has the lowest asset poverty rate, in part because it has historically invested in state programs that supported financial stability. In order to improve outcomes for families, CFED researchers recommend focusing on state-level policies to encourage asset building among low income households.
The Assets & Opportunity Scorecard Report can be found at http://assetsandopportunity.org/assets/2012_scorecard.pdf, and individual scorecards for each state can be found at http://assetsandopportunity.org/scorecard/.