As the presidential campaign heats up, candidates are talking a great deal about the need to support middle- and lower-income families. Republicans and Democrats alike have offered constructive ideas on this issue, illustrating bipartisan commitment to helping Americans shake off the lingering damage of the Great Recession.
Yet, while much of this discussion has focused on wages and income, a big part of achieving economic security is building assets and long-term wealth. Today, the country has largely come back from the financial crisis and unemployment is at a multi-year low, but millions of Americans continue to struggle with depressed or negative net wealth, casting a worrying pale over their financial future.
To address this challenge, the federal government should expand asset-building programs it has financed to support vulnerable constituencies throughout the country into a broader effort that helps millions of working class Americans rebuild wealth lost during the crisis.
As it does so, policymakers should draw on emerging technologies to ensure these programs work in a way that is effective, efficient, and impactful for program participants and taxpayers more broadly.
Before the crisis, most working class Americans, particularly those from African American and Latino communities, held the bulk of their wealth in their homes. When housing prices plummeted during the crisis, many Americans faced foreclosure or were forced to sell their homes at fire-sale prices. The crisis thus deprived them of their most valuable asset, leaving hard-working families underwater with negative wealth.
The consequences were stunning.
According to a 2014 report from the Center for Global Policy Solutions, the net worth of African-American and Latino households fell by 53 percent and 65 percent, respectively, between 2005 and 2009, while net wealth felt by a more manageable but still-damaging 16 percent among white households.
In dollar terms, these movements become more striking. The 53 percent decline for African American households translated into a drop in net wealth from $12,840 during the crisis to $6,081 at its peak in 2009. For Latinos, net wealth shrunk from $19,228 to $6,688 during this period. For white households, household wealth declined more modestly, from $142,335 in 2005 to $119,152 in 2009.
While the ravages of the crisis have subsided, and housing prices are coming back, people who suffered most during the recession are seeking ways to shield their economic security from the vicissitudes of the market. Instead of holding most or all wealth in their homes, they are seeking to diversify into other assets, like IRAs, 401(k)s, mutual funds, and other savings plans the value of which depends on steadier, long-term market growth, instead of short-term gyrations.
In the face of this challenge, the federal government has sought to provide support. One of the key ways it is trying to do so is through the Department of Health and Human Services' Assets for Independence Program. According to the agency, the effort provides "funding to grantees who in turn provide financial education and support for individual development accounts for eligible individuals in their service areas." The goal is to educate economically at-risk Americans on, and provide them with access to, basic financial and wealth-building tools that will allow them to diversify their assets and build a financial cushion that grows over time.
This laudable effort has been picked up in nearly every state. The ambition now should be to expand the program from the small pool of extremely vulnerable populations it has targeted to date -- such as foster children and resettled refugees -- to a broader swath of Americans, including low- and middle-income households who saw their wealth decimated in the crisis.
A major challenge in doing so is that asset-building programs are difficult to administer. Existing efforts have often lagged vision, as states and ground-level implementers lack a strong methodology of tracking participants' individual activities and implementing a customized approach that ties rewards, incentives, and earnings to financial literacy, work, and other positive behavior.
Fortunately, technological gains in recent years have made this much more possible. Software firms have developed with off-the-shelf software solutions that asset-building administrators can use immediately to track participant progress, see where they need more assistance, and report more easily and illustratively to program funders.
Such systems can also provide assessments that help case managers track the baseline needs of, and create individualized service planning and outcome attainment measures for, the individuals and families they are supporting.
So far, the use of new asset-building technology is in its infancy, and the programs it was designed to facilitate target a limited number of Americans. But, with the chorus of presidential candidates pledging to do more for aggrieved working class families, we should also be thinking about how these programs and technologies can be scaled up. Doing so could help millions of American families bounce back from the crisis and build the wealth necessary for long-term economic security.
Scott Johnson is the president and CEO of Social Solutions Global.