The 2019 Prosperity Now Scorecard reports that 40% of households are liquid-asset poor, meaning they lack savings to make ends meet for three months at the poverty level if their income is interrupted. Despite a growing economy, the Scorecard shows household financial vulnerability across the country, income levels not keeping up with rising housing costs, and persistent racial disparities in income, wealth, and homeownership.
One in five jobs are in low-wage occupations with median pay less than the poverty threshold for a family of four. One in five households experience modest-to-significant fluctuations in monthly income. Having savings is the best way to get through financial hardship due to income volatility or unexpected expenses, but 40% of households lack the savings or assets easily converted to cash to sustain themselves at the poverty level for three months in such situations. Overall, 13% of households fell behind on their bills in the past year. Falling behind varies significantly among demographic groups: 28% percent of working-age householders with a disability, 24% of black households, and 21% of households that earn less than $30,000 fell behind on their bills.
Twenty-nine percent of households do not have a savings account, and 42% of households do not save any money for an emergency. While 62% of white households save for emergencies, fewer than half of black and Latino households can afford to do so. Twenty-percent of households in the past year did not use mainstream credit. Almost half of consumers have credit scores below prime, meaning they cannot access credit at affordable rates. Black and Latino households are more than twice as likely to not use mainstream credit compared to white households. Black and Latino households are also underbanked at higher rates than whites and therefore turn to alternative financials services more often.
A substantial racial gap persists in income and wealth. Black households earn 61 cents and Latino households earn 76 cents to every dollar earned by white households. Compared to every dollar of white wealth, blacks own 6 cents and Latinos own 13 cents of wealth. Black and Latino households are twice as likely to experience liquid-asset poverty and income poverty as white households.
Households of color have significantly lower homeownership rates than white households. Seventy-two percent of white households own their homes compared to 41% of black, 47% of Latino, 60% of Asian, and 54% of Native American households. Homeownership has become less attainable in recent years as housing costs have increased faster than incomes. The income needed to afford a median value home in the U.S. is $72,533, while the median income of white households is $65,645, $49,793 for Latino households, and $40,232 for black households. Rent is also unaffordable for many households. Fifty percent of all renters and 54% of renters of color are housing cost-burdened, meaning they spend more than 30% of their income on rent and utilities.
The authors recommend protecting safety-net programs, such as the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), Medicaid, and Medicare, which keep low- and moderate-income families from falling into poverty. They also recommend removing features of these programs that penalize households for accruing savings. The authors propose further measures such as:
- Helping families acquire safer and more affordable mortgages by improving credit reporting and scoring through passage of the Credit Access and Inclusion Act (H.R. 435 and S. 3040);
- Supporting affordable and fair housing by protecting and implementing the Community Reinvestment Act (CRA) and the Fair Housing Act’s requirement to affirmatively further fair housing; and
- Creating opportunities for emergency and wealth-building savings by supporting programs such as Individual Development Accounts (IDAs) and passage of the “American Opportunity Accounts Act.”
The 2019 Prosperity Now Scorecard is available at: https://bit.ly/2RooT7k