It’s been 21 years since the publication of Michael Sherraden’s Assets and the Poor, the book that put asset poverty on the U.S. policymaking map. That was cause for celebration last week in Washington D.C., where the New American Foundation hosted a symposium to talk about what more might be done to help Americans—particularly low-income and minority ones—build savings and other assets. The researchers, advocates, funders, and government officials in the room covered a large variety of topics, including child savings accounts, the “teachable moment” of tax time, behaviorally informed product design, asset limits in public benefits programs, universal individual retirement accounts, mortgage lending practices, and the puzzling persistence of the racial wealth gap.
It was a rich and multi-faceted conversation, but what may have struck me the most was the work being done by the state of Delaware, which is quickly expanding its program of free financial coaching to low- and moderate-income residents. This is very much in the tradition of cities such as New York and San Francisco, which have gotten well-deserved attention over the past few years for steps they are taking to bolster the financial stability of their populations. Efforts range from expanding the use of low-cost bank accounts to counseling people about how to budget and avoid taking on unnecessary debt. A number of municipalities have come together to form Cities for Financial Empowerment, and the ones at the head of the movement, like New York, are now pushing to integrate financial counseling into other government services, such as workforce development, homeless prevention, and community courts.
What stands out about Delaware’s work is its aggressive engagement with private employers. Governor Jack Markell spoke at the conference, highlighting the partnerships the state has formed with companies such as ShopRite Supermarkets, Walgreens drug stores, the Christiana Hilton hotel, and race track Dover Downs. The point is two-fold. First, if you want to reach low-income residents, setting up shop at low-wage workplaces is a pretty smart way to do it. Second, it’s entirely in the interest of employers to make sure that their workers are financially stable. When the Society for Human Resource Management recently asked HR professionals about the impact of employees’ personal financial challenges on work performance, 22% cited a “large impact.” Sixty-one percent noted “some impact,” while 16% responded “slight impact,” and only 2% observed no impact at all. In general, stress about finances distracts workers and reduces productivity. At the low-end of the income spectrum, the effects can be even more pronounced. When an employee can’t make it into work because his car breaks down and he doesn’t have enough money in a bank account for repairs, that’s as much a problem for his company as it is for him.
Looping places of employment into the financial empowerment endeavor is particularly exciting because it reproduces one of the main structures that has historically helped individuals stay financially sound. For decades, middle-class workplaces have been promoting and providing mechanisms for financial responsibility. In ways that probably don’t even dawn on most middle-income workers, their firms guide them to good financial decision-making by surrounding them with retirement plans, credit unions, tuition reimbursement, employee assistance programs, and health, disability and life insurance. These are key pathways for individual-level decision-making, but just as importantly, the institutional nature of such programs and services sets a social norm about the appropriateness and importance of their use.
When Jonathan and I started working on the financial literacy white paper we wrote earlier this year, one of the first things we asked ourselves was how the two of us had wound up making what we considered to be good financial decisions. I said then and still strongly believe that messages from the institutions I’ve been surrounded by my entire life have played an outsized role. Many incredibly useful financial empowerment efforts focus on individual behavior—but taking a step back to consider the larger institutional context of that behavior is a brilliant next step.