GUEST BLOG: New Scorecard Confirms Nearly Half of Hoosiers in a Persistent State of Financial Insecurity
Monday, February 10, 2014
By Anne Guthrie: Anne is the Center for Working Families (CWF) Program Fellow at the Local Initiatives Support Corporation (LISC) in Indianapolis. In this role she assists in leveraging outcomes for the CWF initiative by developing funding, partnerships, and outcomes management to help low-income working families reach financial stability. As part of this work, she has co-led the development of the Indiana Assets & Opportunities Network.
CFED’s release of the 2014 Assets
and Opportunity Score Card
revealed that Hoosier families are in a persistent state of financial
insecurity. Almost half (43.1%) do not have enough savings to cover their basic
living expenses for three months in an event of an emergency, such as a loss of
income or health crisis. There are many reasons why Hoosiers struggle to build
enough savings for financial security let alone just make ends meet. For
instance, 58% of Hoosiers have subprime credit scores, 31% do not have a
savings account, and only 50% of Hoosiers have a retirement account. Currently,
less than 30% of all jobs pay wages necessary for self-sufficiency, and in the
near future, according to studies by the Lumina Foundation and Georgetown
University, 63% of all job openings will require some college by 2018, yet
almost half (44.7%)
of Hoosiers do not have more than a high school diploma.
These numbers are no surprise to
the Centers
for Working Families
network in Indianapolis. Centers for Working Families (CWF) are neighborhood
centers where low-income working families can access financial, employment, and
income supports to help them achieve long-term financial stability. The good
news is that this model is working; since 2011, 852 people found employment,
539 people increased their net-income, and 268 people increased their credit
scores. However, despite gaining employment, most individuals are making about
$10 an hour and are working at least two jobs just to make ends met. With no
financial cushion, a simple crisis sends a family into a cycle of debt – for
instance, afraid of losing his job, John took out payday loan (around 250% APR)
when his car broke down so that he could get to work that day.
Even for families climbing the
earnings ladder, it can become devastating when losing benefits such as child
support. According to the Institute for Working Families, this is the “The Cliff Effect” where a 50-cent increase in
hourly wages leads to the complete termination of a benefit. For instance,
Brenda works as a legal assistant making about $3,000 a month; however with two
young children she needs to make at least $3,510 monthly (child care alone is
$1,072 a month). Her benefits allow her to close this gap. When her employer
offered her a raise, she turned it down because if she lost her benefits she
would not make enough money (even with her raise) to meet all her monthly
living expenses.
Low- and middle- income families
are working harder than ever, but are failing to reach financial stability. The
solutions to this problem lay in the ability of the public and private sectors
to work together. For instance, the government can expand matched savings
accounts such as the Individual Development Account program and offer Children
Savings Accounts.
Government can also provide public benefits that encourage
family assets building
while they strive to advance their earnings. Employers can strive to increase
profits by increasing employee financial stability, such as offering retirement
accounts and paid sick days and building career ladders by
providing apprenticeships and offering credentials towards living-wage jobs.
Schools can work with local employers in creating sector-based skills training
opportunities. Financial institutions can create safe and affordable financial
products steering low-income families away from predatory lenders and connect
to local Bank
On programs.
The Assets and Opportunities Network has the opportunity to advocate
on behalf of those who are working hard, but still fall short of achieving the
“American Dream” by bringing policy, non-profit and for-profit leaders together
in restoring economic mobility for Hoosier families.
