Assets: An Opportunity for the Working Poor
Blansett, Catherine, McKenna, Judy, Journal of Family and Consumer Sciences
Scholarship and Practice
Individual development accounts (IDAs) are designed to help low-income workers build an asset base to achieve goals and increase family well-being. In 1997, funding for the American Dream Policy Demonstration (ADD) established demonstration projects at 13 sites that are now being extensively evaluated for best practices. This article provides an overview of IDAs and examines the first year evaluation of ADD sites.
IMPACT OF POVERTY
Individuals who must live without adequate food, housing, clothing, and medical care experience constant stress as they try to obtain a basic level of goods and services. This struggle affects their children, their jobs, and their communities. Results from the National Survey of America's Families show that approximately 50% of children in low-income families (families below 200% of the poverty level) experience some worries about, or have difficulty, affording food (McKenzie and Bell, 1997). When children are poorly nourished, unhealthy, and inadequately sheltered, they are likely to have poor attendance at school, perform poorly in school, and score lower on tests of cognitive ability (Brown and Pollitt, 1996; Conger, Conger, and Elder, 1997; Sherman, 1997). Adults who regularly deal with hardship are less productive employees, have fewer effective parenting skills, and are less likely to participate actively in their communities (Arnaud, 1993; Griffin and McKinley, 1994; Haveman et al., 1994).
Education is not the only answer in addressing issues of the working poor. Braun, Bauer, and Olson (1999) found that although low-income mothers knew a variety of ways to stretch their resources, it was still not enough to make ends meet. Effective strategies include offering a variety of community resources, providing interesting and motivating educational programs, working with employers to provide work skills that will sustain good jobs, and using incentives such as individual development accounts (IDAs) to encourage and reward goal setting and asset accumulation.
PUBLIC POLICY HELPS FAMILIES ACQUIRE ASSETS
Communities throughout the nation are forging collaborative partnerships, extending the hope of self-sufficiency to thousands of working poor Americans. Through programs designed to offer individual development accounts (IDAs), public assistance recipients and the working poor are offered an opportunity to save toward the American dream of homeownership and a better future through postsecondary education or selfemployment. This paper presents a brief introduction to the background and policy that are fueling the IDA movement.
Individual development accounts present a new approach to social welfare theory. Michael Sherraden (1991), primary contributor to the theory behind IDAs, points out there have been conflicting goals in welfare policy. Traditional welfare policy emphasized basic needs and participants were penalized for any attempts to accumulate assets. At the same time, the nonpoor were subsidized through various tax programs such as the preferential capital gains policy, employer-sponsored and personally held retirement pension accounts, and tax subsidies for home ownership. To demonstrate this imbalance further, Sherraden (1991) describes the distribution of wealth in the country: the top 10% of Americans hold 40% of the national income, with the top 1% controlling 90% of the assets. National policy reinforces this inequity by subsidizing the nonpoor by over $200 billion in the form of various tax deductions. Public assistance recipients, on the other hand, have been denied benefits if their assets exceeded $1,000.
Asset-based welfare policy begins to correct this inequity. Rather than providing support for the poor based on income consumption alone, MAs support asset accumulation through matched savings accounts. The savings accounts are created specifically to save for asset goals that foster strength and self-sufficiency such as a down payment on a home, funds for postsecondary education, and funds to capitalize a business. Sherraden (1991) suggests former consumption-oriented welfare practices kept public assistance recipients just beyond the reach of self-sufficiency through a policy that mandated strict asset limitations.
Although asset-based welfare strategies are considered innovative, they are not without precedence. During the 19th century, over one billion acres of land were transferred from public to private ownership. The Homestead Act of 1862 parceled out 160 acres to pioneers willing to work the land. Subsequent land acts gave away over 200 million acres of public lands to farmers, ranchers, and timbermen (Sherraden, 1991). Assetbased strategies were seen again in the 1930s when The New Deal initiated home mortgage subsidies under the Federal Housing Administration (FHA), and land ownership supports were offered under the Farm Security Administration (FSA). These strategies began to include people with lower incomes. The 1980s saw further asset-based experiments in the form of individual retirement accounts and state-sponsored savings plans for higher education (Sherraden, 1991).
BENEFITS OF ASSETS
Findings from studies on the effects of assets hold promise for those engaged in IDA development. In a paper summarizing the findings of 25 studies addressing the personal and social effects of assets holding, Page-- Adams and Sherraden (1996) were able to provide some preliminary information. Evaluation of these studies show positive effects on a sense of personal well-being (Finn, 1994; Page-Adams and Vosler, 1995; Rohe and Stegman, 1994; Yadama and Sherraden, 1996); greater self-direction, intellectual flexibility, and future orientation (Kohn et al., 1990; Yadama and Sherraden, 1996); and a perception of greater economic security (Page-Adams and Vosler, 1995; Raheim and Alter, 1995). There are also decreased levels of marital violence (Page-Adams, 1995; Peterson, 1980), and increased levels of well-being in children in terms of positive self-esteem of adolescents (Whitbeck et al., 1991), teenage school retention, avoidance of teenaged pregnancy, and increased adolescent savings (Green and White, 1997; Pritchard, Myers, and Cassidy; 1989).
AMERICAN DREAM DEMONSTRATION PROJECT
Ten foundations were convinced that IDAs offer an incentive to reward the initiative of the working poor. Enticed by efforts based on empowerment instead of entitlement, the foundations provided $15 million to measure the potential value of IDAs. The first large-scale demonstration, the American Dream Demonstration (ADD), was initiated by the Corporation for Enterprise Development (CFED) in 1997. Thirteen sites around the country were selected for the initial demonstration. Demonstrations are located in Austin, TX; Barre, VT; Berea, KY; Chicago, IL; Fond du Lac, WI; Indianapolis, IN; Ithaca, NY; Kansas City, MO; Portland, OR; San Francisco, CA; Tulsa, OK; and Washington, DC. Of the original sites, only three had previous IDA experience. Nine of the thirteen were located in urban areas, but four served small city and rural areas. This project laid the groundwork for future programs.
The purpose of the demonstration was to provide a guide for best programs and practices, to provide a model to guide state and federal IDA policy, and to provide understanding about saving and asset accumulation. The project will continue through 2001, with an evaluation period extending into 2003. The goal of the project is to "help restore to poor people and distressed communities a reasonable opportunity to realize the American Dream of good jobs, safe homes, and small businesses" (Sherraden et al., 1999). Two thousand IDAs are expected to be established through this effort. This project has led the way for overwhelming support for IDAs.
CONGRESSIONAL SUPPORT FOR WAS
Congress is convinced of the merits of asset accumulation for the poor. Asset-based legislation has received overwhelming bipartisan support. Spurred on by the impressive implementation of the American Dream Demonstration project, the Assets for Independence Act (AFIA) was signed into law on October 27, 1998. The AFIA provides $125 million dollars over a five-year period to establish over 50,000 IDA accounts.
In addition to Congressional support, states have begun to take up the banner. To date, twenty-five states have developed and passed IDA legislation (Arizona, Arizona, Colorado, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Michigan, Minnesota, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, and Wisconsin).
Seven states have created pilot programs for IDAs or passed legislation for other asset-- building initiatives, including California, Massachusetts, Mississippi, Missouri, Montana, Oregon, and Vermont. With the passage of AFIA it is expected that more states will pass legislation and will partner with community-based organizations to get federal IDA matching dollars (Sherraden et al., 1999).
AMERICAN DREAM DEMONSTRATION PROJECT EVALUATION
The ADD demonstration has had extraordinary foresight and planning from the Corporation for Enterprise Development (CFED, www.cfed.org) and the Center for Social Development at Washington University (CSD, www.gwbweb.wustl.edu/Users/csd). An evaluation component was installed from the beginning of the program. CSD developed a Management Information System (MIS) that fosters early standardized evaluations, helping to establish program design principles that are best practices.
PULLING THE PIECES TOGETHER
Sherraden et al. (1999, p. 24) aptly suggest that when IDA programs are established, "The devil is in the details." Stability within organizations and communities and experience in working with issues of poverty provide a more solidified base from which to work.
In terms of specific program components, there is an advantage to conducting financial education programs simultaneously with saving activities. Or, at least, the education component should be added soon after the saving activities begin. It is important to get the program started as quickly as feasible without making participants jump through too many hoops. The hoops tend to discourage participants from continuing in the program. With this in mind, it is advisable to allow flexibility when implementing requirements. Finally, participants have more successful outcomes if they receive one-on-one help.
SKEPTICISM AND FEAR
In the eyes of enthusiastic program staff, IDAs are a win/win situation- communities can be strengthened and participants empowered. Not everyone shared this entrepreneurial fervor. Some high-level administrators and IDA program participants were skeptical and fearful. The new asset-based welfare approach left some administrators skeptical that this was just another government give-away program and many program participants were fearful of losing benefits. It was necessary to find ways to help key people in upper administration understand program details while, at the same time, developing a big picture of the purpose of IDAs. A one-on-one approach was needed. Program participants' fears were also allayed by a one-on-one marketing approach. This approach addressed prospective participants' fears of losing their benefits, helped them address busy schedules of juggling family and work, and provided additional understanding to back up marketing materials. Personal outreach and community awareness presentations worked best to spread the word about IDA programs.
BALANCING COMMUNITY ORGANIZATION WITH SOCIAL SERVICES
Advocates for IDAs believe IDA programs both empower individuals and families and build strong communities. A significant challenge is to find and hire program coordinators that can work successfully with people and with policy. This person must understand the day-to-day challenges met by people in poverty and understand the need to address and foster long-range goals. An unbalanced focus on either short-term goals of service and advocacy (a social service focus) or long-term development goals (a community development focus) inhibits the balanced approach needed. The social service approach may not look beyond immediate needs and the community development approach may not provide the day-to-day support and advocacy necessary to meet the long-term goals. Sherraden et al. (1999, p. 27), use the following quote from Herbert Rubin to clarify this dilemma:
The goal of all three approaches-development, services, and advocacy-is to enable the poor and poor communities to gain a material stake in the nation's wealth. Empowering people who have started in one-down positions requires a holistic approach that unites development work with the provision of social services (Rubin, 1997, pp. 65 and 83).
ESTABLISHING WAS ACROSS THE COUNTRY
In spite of early implementation challenges, IDA programs are continuing to be developed both nationally and internationally. Evaluation of the first year of the American Dream Demonstration project provides a sense of what works and what challenges are faced. Researchers and educators committed to improving the well-being of families can make major contributions to promoting and establishing IDAs. The first wave of federal grants promoting the Assets for Independence Demonstration Program began in 1999. Awards of $9.4 million from the U.S. Department of Health and Human Services funded 40 demonstration grants in 27 states with awards ranging from $6,000 to $930,000 (www.hhs.gov). New IDA projects will be funded for five years. The next wave of funding will be available in Spring 2001. The goal nationally is to establish more than 10,000 IDA accounts. (Watch the Federal Register for Project Guidelines.) The key ingredients to a competitive proposal are strong community partnerships with successful agencies serving low-income families and access to matching funding through state, local, and private funding (see www.acf.dhhs.gov/programs/ocs).
THERE IS MUCH TO BE DONE
There are numerous opportunities for faculty, students, and Extension educators to become actively involved in the establishment and integration of IDAs into the resource base of low-income families.
Educators can start by learning more about IDAs. The best resource is the Individual Development Account Program Design Handbook: A Step by Step Guide to Designing an IDA Program (1996) by Tim Flacke, Brian Grossman, Colleen Dailey, and Stephanie Jennings. The handbook offers an overview of IDAs, feasibility assessments, and design phase framework. Also included on a CD-ROM are exhibits, case studies, and IDA resources. Price: $50.00. The book can be ordered by accessing the CFED Web site at: http://www.cfed.org/.
State information about IDA programs is available at http://www.idanetwork.org/.
Most nonprofit agencies and coalitions are understaffed and limited in time and personnel. As a result, they are unable to conduct critical research to support the integration of IDAs into the selection of choices for their clients. Faculty and graduate students have a rich opportunity to offer expertise to conceptualize and carry out applied research to better understand the potential for offering IDAs to welfare recipients as they move out of poverty.
Faculty can integrate the research and program information disseminated through the welfare list serve (WELFARE@ ISV.UKY.EDU) with the research on )DAs to support the development and sustainability of these programs.
Through service learning experiences, students can learn firsthand about the financial issues of welfare recipients and the philosophy and program efforts of nonprofit agencies that offer support and education to low-income families.
This report has shown that community partnerships are important. Programs need help in identifying productive partnerships and finding funds to match participants savings from local banks, credit unions, United Ways, and private donations.
In many states, legislation needs to be refined and supported.
Nonprofit agencies often need help to deliver the financial education component of programs. State and county Extension educators can provide financial literacy classes for individuals who are committed to successfully completing their IDA savings accounts.
ONE STEP CLOSER
It appears the achievement of the American dream of homeownership, postsecondary education, and self-employment may be onestep closer for the working poor. Examination of the first evaluation report for the ADD demonstration reveals that communities are marshalling forces to provide an opportunity for the working poor to invest in their futures through establishing matched savings accounts dedicated to the fulfillment of their goals. IDA programs not only provide matching funds to add to individual efforts, they also teach sound financial principles that are relevant to participant's needs and goals.
Nonprofit organizations can increase their capacity to deliver IDA programs by utilizing the research and education strengths of family and consumer sciences professionals. All of us are needed to promote asset-- building opportunities for the working poor.
Arnaud, C. (1993). The role of housing in social integration strategies for disadvantaged young people. Community Development Journal, 28(4), 334-341.
Braun, B., Bauer, J. W., and Olson, P. (1999). Managing at the margin: Families moving off welfare. Journal of Family and Consumer Sciences, 91(4), 88-90.
Brown, J.L., and Pollitt, E. (1996). Malnutrition, poverty and intellectual development. Scientific American, 274(2), 38-43.
Conger, R. D., Conger, K. J., and Elder, G. H., Jr. (1997) Family economic hardship and adolescent adjustment: Mediating and moderating processes. In G. J. Duncan and J. Brooks-Gunn (Eds.), Consequences of growing up poor (pp. 288-310). New York: Russell Sage Foundation.
Finn, C. M. (1994). Empowerment in Habitat for Humanity housing: Individual and organizational dynamics. Unpublished doctoral dissertation, Case Western Reserve University, Cleveland, OH.
Green, R. K, and White, M. J. (1997). Measuring the benefits of home owning: Effects on children.journal of Urban Economics, 41,441-461.
Griffin, K., and McKinley, T. (1994). Implementing a human development strategy. New York: St. Martin's Press.
Haveman, R., Wolfe, B., Kreeder, B., and Stone, M. (1994). Market work, wages, and men's health.Journal ofHealth Economics, 13(1), 163-182.
Kohn, M. L., Naoi, A., Schoenbach, C., Schooler, C., and Slomczynski, K. M. (1990). Position in the class structure and psychological functioning in the United States, Japan, and Poland. American Journal of Sociology, 95, 964-1008.
McKenzie, D. E., and Bell, S. H. (1997). Snapshots of America's Families: Income and Hardship, Food Concerns and Affordability. Retrieved April 3, 2000 from the World Wide Web: http://newfederalism.urban.org/nsaf/income a5.html.
Page-Adams, D. (1995). Economic resources and marital violence. Doctoral dissertation, Washington University, St. Louis.
Page-Adams, D., and Vosler, N. R. (1995, April). Effects of home ownership on well-being among blue-collar workers. Presented at the Seventh Interna
tional Conference of the Society for the Advancement of Socio-Economics, Washington, DC.
Page-Adams, D., and Sherraden, M. (1996). What we know about the effects of asset-holding: Implinations for research on asset-based anti-poverty initiatives. Working paper no. 96-1. St. Louis: Center for Social Development, Washington University.
Peterson, R. (1980). Social class, social learning, and wife abuse. Social Service Review, 54, 390-406. Pritchard, M. E., Myers, B. IC, and Cassidy, D. J.
(1989). Factors associated with adolescent saving and spending patterns. Adolescence, 24, 711-723. Raheim, S., and Alter, C. F. (1995). Self-employ
ment investment demonstration final evaluation report. Iowa City: University of Iowa, School of Social Work.
Rohe, W. M., and Stegman, M. A. (1994). The effects of homeownership on the self-esteem, perceived control and life satisfaction of low-income people. Journal of the American Planning Association, 60, 173-184.
Rubin, H. J. (1997). Being a conscience and a carpenter: Interpretations of the community-based development model. Journal of Community Practice, 4, 57-90.
Sherman, A. (1997). Poverty matters: The cost of child poverty inAmerica. Washington, DC: Children's Defense Fund.
Sherraden, M. (1991). Assets and the poor: A new American welfare policy. New York: M. E. Sharpe, Inc.
Sherraden, M., Page-Adams, D., and Johnson, L. (1999). Start-up evaluation report: Down payments on the American Dream Policy Demonstration. A national demonstration oflndividualDeeopment Accounts. Working paper. St. Louis, MO: Center for Social Development, Washington University.
Whitbeck, L. B., Simons, R. L., Conger, R D., Lorenz, F. 0., Huch, S., and Elder, G. H., Jr. (1991). Family economic hardship, parental support and adolescent self-esteem. Social Psychology Quarterly, 54, 353-363.
Yamada, G. N., and Sherraden, M. (1996). Effects of assets on attitudes and behaviors: Advance test of a social policy proposal. Social Work Research, 20, 3-11.
CATHERINE BLANSETT, M.S.W.
Education and Human Resource Studies
Colorado State University
JUDY MCKENNA, Ph.D.
Design and Merchandising Department
Colorado State University…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Assets: An Opportunity for the Working Poor. Contributors: Blansett, Catherine - Author, McKenna, Judy - Author. Journal title: Journal of Family and Consumer Sciences. Volume: 93. Issue: 1 Publication date: January 1, 2001. Page number: 50+. © American Association of Family & Consumer Sciences Apr 2008. Provided by ProQuest LLC. All Rights Reserved.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.