Academic journal article Family Relations

The Net Worth of Female-Headed Households: A Comparison to Other Types of Households

Academic journal article Family Relations

The Net Worth of Female-Headed Households: A Comparison to Other Types of Households

Article excerpt

Abstract:

This article presents the results of a study that investigated the level of assets and debts that female-headed households have in comparison to those of married-couple households and other types of households. The empirical results revealed that the amounts of net worth of married-couple households and male-headed households were significantly larger than that of female-headed households. We discuss policy implications stemming from the findings of the study and recommend that the United States seriously consider creative policy approaches aimed at empowering low-income households such as employment-related supportive policies, microenterprise programs, and Individual Development Accounts programs.

Key Words: elasticity, female-headed households, family policy, income, net worth.

With the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L. 104-193), the federal government signaled that the responsibility for financial security rests with the nation's citizens, instead of the government. Characteristically, Temporary Assistance to Needy Families (TANF), which came into being as the result of this act, eliminated the safety net from the nation's welfare system by instituting a 2-year limit in any period of receiving cash assistance without engaging in work or work-related activities and a 5-year limit on receiving cash assistance during one's lifetime. The impact of TANF was immediately felt by female-headed families because they were the primary beneficiaries of Aid to Families with Dependent Children, which was revamped by TANF.

Although the federal government withdrew its responsibility for providing a financial safety net, it launched a new policy initiative that encouraged families to develop their net worth (or wealth) so that they can deal with the economic hardships that occur as economic conditions change. The attempt to develop Health Savings Accounts, Personal Retirement Accounts, which are carved out of the current social security program, and Personal Reemployment Accounts reflects the shift in public policy toward personal responsibility to develop one's own income security (Hubbard, 2004). Health Savings Accounts are accounts that eligible persons can put money into to save for future medical expenses. The plan was signed into law by President Bush on December 8, 2003 (P.L. 108-173). Personal Reemployment Accounts, which are being demonstrated in seven states, provides $3,000 to those who are receiving unemployment insurance benefits. This plan allows such persons to purchase job training and other services, such as child care and transportation, to get back to work quickly. The reemployed persons can retain whatever money left.

The idea of Personal Retirement Accounts, in particular, is being hotly debated across the country. The plan, as it stands now, would allow workers to carve out 4 percentage points from their current social security contributions of 12.4% to establish such accounts. The purpose of this program is to establish funded retirement accounts in the names of specific participants. Because this program entails the carving out of a portion of social security contributions, the participants will face a reduction in their traditional social security benefits. Pertinent to the topic of this article is the extent to which this program will create "personal assets," especially the accumulation of net worth while young.

Indeed, in the absence of a public safety net, both in TANF and social security, the accumulation of wealth is critical for ensuring adequate flows of income. The accumulation of wealth strengthens economic security. In general, wealth generates income, which can supplement current income. Specifically, wealth can be used as collateral to borrow money, which in turn, can be used for more investments. Further, wealth, held in the form of home equity, can increase in value and, at the same time, provides shelter (Keister, 2000). …

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