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Assets for the Poor

Assets for the Poor: The Benefits of Spreading Asset Ownership

Thomas M. Shapiro
Edward N. Wolff
Copyright Date: 2001
Published by: Russell Sage Foundation
Pages: 404
  • Book Info
    Assets for the Poor
    Book Description:

    Over the past three decades, average household wealth in the United States has declined among all but the richest families, with a near 80 percent drop among the nation's poorest families. Although the national debate about inequality has focused on income, it is wealth-the private assets amassed and passed on within families-that provides the extra economic cushion needed to move beyond mere day-to-day survival.Assets for the Pooris the first full-scale investigation into the importance of family wealth and the need for policies to encourage asset-building among the poor.

    Assets for the Poorshows how institutional mechanisms designed to encourage acquisition of capital and property favor middle-class and high-income families. For example, the aggregate value of home mortgage tax deductions far outweighs the dollar amount of the subsidies provided by Section 8 rental vouchers and public housing. Banking definitions of creditworthiness largely exclude minorities, and welfare rules have made it nearly impossible for single mothers to accumulate savings, let alone stocks or real estate. Due to persistent residential segregation, even those minority families who do own homes are often denied equal access to better schools and public services.

    The research in this volume shows that the poor do make use of the assets they have. Cash gifts-although small in size-are frequent within families and often lead to such positive results as homebuying and debt reduction, while tangible assets such as tools and cars help increase employment prospects.Assets for the Poorexamines policies such as Individual Development Account tax subsidies to reward financial savings among the poor, and more liberal credit rules to make borrowing easier and less costly. The contributors also offer thoughtful advice for bringing the poor into mainstream savings institutions and warn against developing asset building policies at the expense of existing safety net programs.

    Asset-building for low-income families is a powerful idea that offers hope to families searching for a way out of poverty.Assets for the Poorchallenges current thinking regarding poverty reduction policies and proposes a major shift in the way we think about families and how they make a better life.

    A Volume in the Ford Foundation Series on Asset Building

    eISBN: 978-1-61044-495-8
    Subjects: Sociology, Economics

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Contributors
    (pp. ix-x)
  4. Foreword
    (pp. xi-xiv)
    Melvin L. Oliver

    This book edited by Thomas N. Shapiro and Edward N. Wolff is the second volume in a new series funded by the Ford Foundation and published by the Russell Sage Foundation. The series provocatively explores the strengths and policy relevance of the asset-building approach to poverty alleviation; at the same time, it points to areas in which the shortcomings of the approach may require further work. In this preface, I would like to introduce the concepts embodied in the asset-building approach and describe how it is being incorporated into the grant-making of the Ford Foundation.

    In 1996 the Ford Foundation...

  5. Introduction
    (pp. 1-8)
    Thomas M. Shapiro and Edward N. Wolff

    At the close of the twentieth century the drive for economic equality and opportunity in the United States appeared stalled. Family incomes flattened out during the last quarter of the century, bucking the historic trend in rising standards of living and expectation of the American Dream. Indeed, politicians and scholars engaged in discussion about the implications of the coming of age of first generation of Americans who will not do better than their parents. For some, however, the last few decades have produced remarkable increases in standard of living and dizzying wealth portfolios. This rising inequality amid stagnating living standards...


    • Chapter 1 The Importance of Assets
      (pp. 11-33)
      Thomas M. Shapiro

      Wealth has been a neglected dimension of social science’s concern with the economic and social status of Americans in general and racial minorities in particular. We have been much more comfortable describing and analyzing occupational, educational, and income distributions than examining the economic bedrock of a capitalist society, private property. During the past decade, however, sociologists and economists have begun to pay more attention to the issue of wealth. The growing concentration of wealth at the top and the growing racial wealth gap have become important public policy issues that undergird many political debates but unfortunately not many policy discussions....

    • Chapter 2 Recent Trends in Wealth Ownership, from 1983 to 1998
      (pp. 34-73)
      Edward N. Wolff

      Most studies in economics and sociology to date have looked at the distribution of well-being or its change over time in terms of income. However, family wealth is also an indicator of well-being, independent of the direct financial income it provides. There are four reasons for this: First, owner-occupied housing, which makes up a large portion of family wealth in the United States, provides services directly to its owner. Second, wealth is a source of consumption, independent of the direct money income it provides, because assets can be converted directly into cash and thus can be used to provide for...

    • Chapter 3 Access to Wealth Among Older Workers in the 1990s and How It Is Distributed: Data from the Health and Retirement Study
      (pp. 74-131)
      Richard V. Burkhauser and Robert R. Weathers II

      Perhaps the single greatest achievement of social welfare policy over the last three decades has been the reduction of poverty in old age. The transition from work to retirement is no longer a perilous economic transition for the vast majority of older workers. In 1966 the poverty rate for persons aged sixty-five and older was more than twice that of younger persons (U.S. Bureau of the Census, various years). Dramatic increases in the real value of social security benefits and the introduction of supplemental security income in the 1970s, along with increases in the number and value of employer pension...

    • Chapter 4 The Role of Intergenerational Transfers in Spreading Asset Ownership
      (pp. 132-162)
      Mark O. Wilhelm

      The idea that poverty can be reduced by spreading asset ownership is based on the premise that assets alter specific attitudes and catalyze particular behaviors that, in tum, lead the way out of poverty (see Sherraden 1991 for a recent and comprehensive analysis; also see the summary by Shapiro and Wolff 1997). The other ingredients necessary for escaping poverty—among them, ambition, ingenuity, independence, the desire to improve living standards, and the concern for helping offspring—are in place, but positive outcomes from these qualities cannot be realized without the possession of physical assets. Consequently, adding physical assets to the...


    • Chapter 5 Asset Accumulation Among Low-Income Households
      (pp. 165-205)
      Stacie Carney and William G. Gale

      Public policies to assist low-income households have traditionally focused on the provision of income support, job training, or certain types of consumption. More recently, several analysts have suggested both the need for and the potential benefits of assisting the asset accumulation efforts of the poor. The need stems from the perceived difficulty of fostering long-term self-reliance using income-or consumption-based assistance programs. The potential lies in promoting such independence both directly, by providing a financial cushion or nest egg, and perhaps more important, indirectly, by inculcating the values needed to generate self-reliance.

      Understanding the patterns and correlates of wealth accumulation is...

    • Chapter 6 More Than Money: The Role of Assets in the Survival Strategies and Material Well-Being of the Poor
      (pp. 206-231)
      Kathryn Edin

      In 1992, I interviewed a young black single mother of three in Charleston, South Carolina, who worked in the billing department of a local health clinic. When I first talked with Charlette Owen, she was working twenty-five hours a week at $4.68 an hour. Considering her two years of college, the pay was not much. Owen had been told that if she stuck with the job for three months, she would advance to forty hours a week and be given a pay raise (to $4.91 per hour) plus a chance to put in some overtime each week at time-and-a-half pay...

    • Chapter 7 Housing as a Means of Asset Accumulation: A Good Strategy for the Poor?
      (pp. 232-266)
      Nancy A. Denton

      Owning one’s own home, even if in reality the bank is truly the owner (Krueckeberg 1999), is fundamental to what we colloquially call the American Dream (Hughes and Zimmerman 1993; Myers and Wolch 1995). Michael Stegman, Joanna Brownstein, and Kenneth Temkin (1995) report that Americans surveyed in 1992 wanted to own their homes by a margin of three to one, preferring ownership over retiring ten years earlier or taking a better job in a place where they could only afford to rent. Furthermore, the goal of home ownership was considered important by 60 percent of those in the lowest income...


    • Chapter 8 The Un(credit)worthy Poor: Historical Perspectives on Policies to Expand Assets and Credit
      (pp. 269-301)
      Mark J. Stern

      The welfare reform law of 1996 fundamentally changed the relationship between poor families and government. In the years before it was enacted, researchers had assembled an unprecedented amount of evidence on the lives of the poor, the barriers to self-sufficiency, and the relationship of welfare to a host of other social problems. Yet in spite of this voluminous evidence on the lives and economic circumstances of the poor, when it came time to vote, the Republican majority in Congress dredged up age-old stereotypes of the poor to justify their response: poor people are lazy; they have loose morals; they deceive;...

    • Chapter 9 Asset-Building Policy and Programs for the Poor
      (pp. 302-323)
      Michael Sherraden

      There is good reason to believe that a shift to asset-based policy is presently under way in many countries. Around the world, it is quite common to find new or expanding policies based on asset accounts. In the United States, this can been seen in the introduction and growth of 401(k)s, 403(b)s, individual retirement accounts (IRAs), Roth IRAs, the Federal Thrift Savings Plan, educational savings accounts, medical savings accounts, individual training accounts, college savings plans in the states, and proposed individual accounts in social security. Some of these are public and some are “private,” but it is important to bear...

    • Chapter 10 Assets and the Tax Code
      (pp. 324-356)
      Laurence S. Seidman

      Through tax exclusions, deductions, credits, and special tax rates, middle- and high-income households, but not poor households, receive subsidies for accumulating assets. The exclusion (from household income) of employer contributions to pension funds, the deduction for home mortgage interest payments, the lower tax rate on capital gains, and the deduction for contributions to individual retirement accounts (IRAs) are important examples. This disparity in tax subsidies for asset accumulation occurs in the context of very low asset holding among the poor (Sherraden 1991) and significant inequality in wealth (Wolff 1995). More generally, middle-and high-income households are beneficiaries of a hidden welfare...

    • Chapter 11 Wrap-Up with Rapporteurs
      (pp. 357-380)

      The importance of wealth creation was given an intellectual jolt in Melvin Oliver and Thomas M. Shapiro’s (1995)BlackWealth/White Wealth: A New Perspective on Racial Inequality,and Shapiro continues this tradition in “The Importance of Assets,” the opening chapter of the present volume. After reviewing classical theoretical ideas about wealth creation, Shapiro discusses the core conceptual framework of asset building, including the legacy of history (GI Bill, Veterans Administration loans), policies of state (regarding social security and medical care), home equity, and financial inheritance, with reference, in particular, to the experience of African Americans. He informs us that more than...

  9. Index
    (pp. 381-389)