If you need a new benchmark to measure just how broke you are, try "asset poverty." Asset-poor households would be unable to survive for three months at the federal poverty level if some crisis caused them to lose their source of income. As Robert mentioned earlier, asset poverty is the subject of a new study conducted by the Corporation for Enterprise Development (CFED) and funded by the Communities Foundation of Texas (CFT) and the Thomson Family Foundation. It's also a frightening problem in Dallas, affecting some two out of five people, or 39 percent of the city's residents.
"These numbers should shock us," said Mayor Mike Rawlings this morning at a packed press conference at the CFT headquarters. "They should make us sit up and take notice."
The mayor seems preoccupied with income inequality these days; earlier this week, he presented his 10-point plan for revitalizing southern Dallas . Today, he told the CFT audience, "In America, we're moving into a society with two classes: those with assets and those without. For the first time in Dallas, we understand where that divide is. Four out of 10 people in Dallas are at that level. ... Too many of us are one paycheck from falling into dire straits. We have to think about that."
Just to put things into perspective:Tthe amount needed to sustain someone for three months at the federal poverty level is $4,362. That means 39 percent of Dallas residents wouldn't be able to scrape that amount together if they lost their income, even if they sold the house and the car. Given that half of low-income residents also don't have health insurance, that means that many people are just one medical emergency away from utter financial devastation.
Sarah Cotton Nelson, the chief philanthropy officer for CFT, said that before this new study was conducted, the data on poverty in this region was at least a decade old. The new information makes a few things starkly clear: The rate of asset poverty in North Texas is at least three times the national average, and it's disproportionately affecting black and Latino families. While 21 percent of the white population struggles with asset poverty, it affects fully 50 percent of the black and Latino populations.
According to Ida Rademacher, the VP of policy and research at CFED, that means even families who currently earn a livable income aren't far at all from falling back down the ladder if catastrophe strikes. "There's a 45 percent chance that African-American families who are solidly middle income will be in the lowest income bracket just one generation later," she said.
Rademacher also said assets like bank accounts, insurance and home ownership are important not just financially, but socially and psychologically. Having a bank account, she said, "promotes long-term thinking and planning." Research shows that children who have a college fund, no matter how piddly, are four to seven times more likely to go to college. "They feel they have skin in the game," she said.
The mayor and Rademacher both explicitly drew links between asset poverty and lack of education. "Over 50 percent of high school degree-only households are asset poor," Rademacher said.
The link between between education and asset income, Rawlings said, "is so highly correlated you can't miss it." He wants better "financial literacy" education for high school students. "I'm amazed our children can graduate from high school with no clue of what a bank loan is or what a credit rating is."
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Other factors for keeping people in asset poverty include being a single parent, renting instead of owning, or being "unbanked" or "underbanked." Unbanked people have no checking or savings accounts, meaning they have to use check cashing places, which generally charge high fees for their services. "Underbanked" people have accounts, but continue to rely on what Rademaker called "alternative financial services" -- check cashers, payday loans, rent-to-own plans and pawn shops. Eighteen percent of Dallas residents are unbanked. (Incidentally, that's something the Budget, Finance and Audit Committee heard about a few weeks ago: A city program called Bank On Dallas now exists to teach people about savings and financial literacy.) And a full 68 percent of Dallasites have subprime credit; with poor "financial resumes," they struggle even harder to get out of poverty, Rademacher said.
What wasn't immediately clear is just what to do with this terrifying data. This is a new, brutally depressing spin on the old problem: If you're poor, you stay poor, and the odds stacked against you get higher and higher as the social safety nets we've built deteriorate (something Rademacher pointed out as well).
Representatives from the Federal Reserve Bank of Dallas, the United Way and the YWCA talked about the importance of financial counseling, to teach good savings practices, to help improve credit scores and to stay away from predatory services. But as Megan McTiernan, executive director from the Thomson Family Foundation pointed out, "This doesn't change overnight. This is entrenched poverty." On March 29, CFT will hold a workshop for nonprofit agencies who serve the working poor, to teach them how to use the data from the new study.
"I am committed to working together on these issues," Rawlings said. "If we make progress in Dallas on any one issue in the next 10 years, may this be the top of our agenda."