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Homeasset povertyThe Millions of Small Reasons for Remaking the Economy

The Millions of Small Reasons for Remaking the Economy

The Millions of Small Reasons for Remaking the Economy

February 20, 2019; KTVZ (Central Oregon)
NPQ’s webinar series on “remaking the economy” focuses on innovative, emerging models of inclusive and equitable economic development and the ways communities throughout the country are integrating them. A major part of the case for remaking the economy is that the current system leaves millions behind, and nearly every metric of economic inclusivity points to the need for a dramatic shift. It is imperative that nonprofits lead the way in charting this new course—and not just a moral imperative, but one deeply connected to their missions to the communities they serve.
In order to fully realize this new, inclusive economy, as NPQ has reported many times, nonprofits must embrace this charge. A new report by Oregon State University expands on the case for a new economy by shedding light on how asset poverty impacts children in America. The report is sobering on many levels, and nonprofits that work with low-income communities should reflect on the findings.
The long-term impacts of income poverty on children have been extensively researched and documented. Among the disturbing consequences:
According to the American Psychological Association, child poverty is linked with a range of negative developmental conditions and outcomes, including poor academic achievement, school dropout, abuse and neglect, behavioral and socio-emotional problems, physical health problems, and developmental delays.
Over time, child poverty contributes to chronic stress, lower levels of working memory, a weak foundation for later learning, behavior, and health, and poor adolescent and adult outcomes, according to the Urban Institute’s research report, Child Poverty and Its Lasting Consequences.
Perhaps most concerning is that poverty impacts a child’s brain development, leading to long-term behavioral and cognitive difficulties.
Despite proclamations last year by the White House Council of Economic Advisors that the war on poverty was “largely over and a success,” the reality about poverty in America is different. According to the US Census’s September 2018 report, Income and Poverty in the United States, 12.3 percent of Americans live in poverty, which represents nearly 40 million people. Of this, 15 million children live in families with incomes below the federal poverty threshold, representing 21 percent of all children in America.
Against this backdrop, OSU’s first-of-its-kind report explores the impacts of asset poverty on children and quantifies the rates of asset poverty in children in various developed countries. Differing from income poverty, asset poverty is defined as “a measure of the liquid savings households to cover basic expenses for three months if they experienced a sudden job loss, a medical emergency or another financial crisis leading to a loss of stable income.” In other words, asset-poor families lack sufficient financial assets to maintain their current living standard for three months should they lose all income. When looking at this definition, over 40 percent of American households fall under this measure.
Asset poverty is important, given that income and assets are how families manage their financial health. While the impacts of income poverty are well documented, the body of research on asset poverty is relatively new. There is a growing base of evidence that suggests that parents with greater asset holdings presage better academic achievement, higher educational expectations, lower likelihood of repeating a grade, higher rates of college enrollment, and higher likelihood of college graduation for their children. Furthermore, research is now exploring how asset holding affects psychosocial well-being, family stress, parent-child interactions, and child psychology. Finally, a family’s asset holdings partially explain inequalities in health outcomes in ways that income does not. With these trending research findings, the issue of asset poverty is too important for nonprofits concerned about families to ignore.
An interesting note is that OSU’s research is comparative, in that the researchers looked at six countries and accounted for asset poverty in families and in children. These countries include the United States, Australia, the United Kingdom, Italy, Finland, and Norway. Both the United States and Australia have the highest rates of child asset poverty at 62.9 percent. While the report doesn’t measure households by race, it is important to note that Latinx and black families have disproportionately high asset poverty rates, making asset poverty a racial justice issue as well.
Of importance is that the researchers recognize that family structures shape children’s poverty risk. Given the wage inequality that women in the United States face, and the high incidence of single-parent households headed by women in the US compared to other countries, asset poverty among single mothers is high, and the inequalities compared to other groups is glaring. The mean wealth of single-parent households was $125,294 less than that of married-couple households, even after accounting for education level, age of children, and receipt of inheritance. Furthermore, the median wealth of married couples with children in the United States was $96,000 compared to $6,000 for single-mother households. Coincidentally, $6,000 is approximately the amount that the average American family would need to have available to live on for three months, as NPQ reported earlier this month. Given the low median wealth and assets of single mothers in particular, the researchers note the need for further research on asset poverty, specifically how the factors associated with single-parent households translate into high poverty risk.
As nonprofits explore ways to integrate their programs and services into efforts that advance an inclusive economy, they should be aware of how asset poverty impacts the communities they serve. While some nonprofits focus on financial literacy and asset building, those that focus on children’s well-being, educational attainment, and behavioral health should note the role that both income and asset poverty play in the outcomes of the children they serve. OSU’s research expands our understanding of the impact that poverty has on America, and is an important perspective for nonprofits to understand and explore.—Keenan Wellar

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