Most Americans don't have enough assets to withstand 3 months without
income

Date:
August 6, 2020
Source:
Oregon State University
Summary:
A new study found that 77% of low- to moderate-income American
households fall below the asset poverty threshold, meaning that
if their income were cut off they would not have the financial
assets to maintain at least poverty-level status for three months.



FULL STORY ==========================================================================
A new study from Oregon State University found that 77% of low- to
moderate- income American households fall below the asset poverty
threshold, meaning that if their income were cut off they would not
have the financial assets to maintain at least poverty-level status for
three months.


==========================================================================
The study compared asset poverty rates in the U.S. and Canada. Canada's
asset poverty rate has improved over the past 20 years while the U.S. rate
has worsened, but still, 62% of low- to moderate-income Canadians also
fall below the asset poverty threshold.

The implications of these findings have become starkly apparent during the COVID-19 pandemic, said David Rothwell, lead author on the study and an associate professor in OSU's College of Public Health and Human Sciences.

"The fact that the U.S. safety net is so connected to work, and then you
have this huge shock to employment, you have a system that's not prepared
to handle such a big change to the employment system ... It results
concretely in family stress and strain, and then that strain and stress
relates to negative outcomes for children and families," Rothwell said.

The study, published last week in the journal Social Policy
Administration, looked at financial assets such as stocks, bonds and
mutual funds, rather than real assets like houses and property, because financial assets are easier to cash in and use in an emergency. Existing research has found that U.S. wealth inequality is more pronounced that
income inequality.

Researchers used data from nationally representative financial surveys
in Canada and the U.S. from 1998 through 2016, looking at low- to moderate-income households, defined as those in the bottom 50% of income distribution in each country, headed by working age adults age 25-54.



========================================================================== Rothwell and co-authors Leanne Giordono from OSU and Jennifer Robson from Carleton University in Ontario, Canada, were investigating how asset
poverty changed over time in the two countries and how that change was
affected by changes in transfer share -- the portion of household income
that comes from government assistance. They chose the U.S. and Canada
because of their close geographic proximity and similar legal traditions
but significantly different welfare policies.

In 1998, Canada's asset poverty rate among low- to moderate-income
households was 74%, compared with 67% in the U.S. The two rates were
nearly identical in 2005, then Canada's kept falling and the U.S. rate
kept rising, arriving at 62% and 77% in 2016.

Canada spends twice what the U.S. does on financial assistance for
families, and much of it is spent in cash benefits, rather than in-kind benefits like Supplemental Nutrition Assistance Programs (SNAP, formerly
food stamps) in the U.S. In 2016, 96% of low- to moderate-income Canadian households received some transfer income from the government. In the U.S.,
that number was 41%.

For the most part, results showed that more generous welfare policies
were associated with greater rates of asset poverty in Canada, Rothwell
said. There, as the government reduced the amount of public assistance
families received as a proportion of their income over time, asset
poverty improved.

However, he said, this relationship between welfare generosity and asset poverty should be interpreted as correlational, not causal, and the
topic warrants further study. Because the levels of public assistance
are greater in Canada than the U.S., it's hard to extend results
from one country to the other, but when controlling for demographic characteristics, researchers found that decreasing transfer share has
no impact on the risk of asset poverty in the U.S.



========================================================================== "What stands out there is, so few American families receive any type of transfers at all, compared to other countries, and small adjustments to
an already minimal safety net was not related to asset poverty in this
study," Rothwell said. In contrast, Canadian families receive a child
benefit, a monthly cash payment of several hundred dollars to help with
the cost of raising a child.

Many safety net programs, including Medicaid and SNAP, also
disincentivize saving because they impose asset limits on people seeking assistance. Rothwell calls these a "poverty trap." "If you have someone
who's low-income and they are working hard trying to save money but you're telling them that they're going to lose benefits if they save over some
given threshold, that's a disincentive to accumulate wealth," he said.

Rothwell notes that asset poverty rates are much higher among people of
color, due to decades of discriminatory laws and policies that prevented
Black people, in particular, from buying and owning homes or securing well-paying jobs.

"This is the story of COVID, as I see it -- it's just exposing these
existing inequalities, and the people who are most vulnerable going into
the crisis are magnified in their vulnerability getting through it,"
Rothwell said.

A study coming out later this year from the same research team will look specifically at racial and ethnic asset disparities and how they impact people's health, he said.


========================================================================== Story Source: Materials provided by Oregon_State_University. Original
written by Molly Rosbach. Note: Content may be edited for style and
length.


========================================================================== Journal Reference:
1. David W. Rothwell, Leanne S. Giordono, Jennifer Robson. Public
income
transfers and wealth accumulation at the bottom: Within and between
country differences in Canada and the United States. Social Policy &
Administration, 2020; DOI: 10.1111/spol.12629 ==========================================================================

Link to news story: https://www.sciencedaily.com/releases/2020/08/200806203656.htm

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