Monday, February 10, 2014

By Anne GuthrieAnne 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.

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