Posted on Aug 07, 2020, 5 p.m.
The current case of palpable poverty: a high percentage of Americans are on the brink of financial disaster with 77% low to moderate income households dipping below the asset poverty threshold according to a recent study conducted by Oregon State University.
This means that in the event of job loss or income loss, such as is currently being experienced across the nation, these families do not own enough financial assets to keep from falling below the poverty level status within three months.
Asset poverty rates were compared among American and Canadian citizens for this study, which is published in Social Policy & Administration. Findings revealed that while Canadians generally are doing better than Americans in this regard, those living in Canada still have their fair share of issues as well with almost 62% of low to moderate income households also falling below the asset poverty level.
The study authors suggest that these statistics particularly have never been so relevant as they are right now due to COVID-19. Some of the extreme measures being taken in the name of public health by some officials such as the extended lock downs and restrictions are exacerbating already struggling populations who were already barely getting by on a minimum wage that does not line up with what it actually takes to get by in the present day. What’s more is that a lot of these jobs will not even be there soon as more and more employers are announcing permanent closures.
Compared to the previous year homelessness has increased by 3%, and despite overall decreasing 12% since 2007 this marked the third straight year of a national level increase in America.
“The fact that the U.S. safety net is so connected to work, and then you have this huge shock to employment, you have a system that’s not prepared to handle such a big change to the employment system,” says lead study author David Rothwell, an associate professor in OSU’s College of Public Health and Human Sciences. “It results concretely in family stress and strain, and then that strain and stress relates to negative outcomes for children and families.”
Financial assets such as stocks, bonds, and mutual funds were primarily focused on for this study as opposed to houses or real estates assets as financial assets are much more liquid and available for quick cash when it is needed. Nationally representative financial surveys conducted in both countries between 1998-2016 were utilized, specifically focusing on low to moderate income homes, which are any household in either country within the bottom 50% of income distribution.
The asset poverty rate in Canada during 1998 among these households was 74% and America’s was 67%. Moving forward to 2005 both countries experienced nearly identical poverty rates, and since then the asset poverty rate continued to improve in Canada while it has worsened in America.
Canada in general spends more money on financial assistance to families than America does, with Canada typically providing cash benefits and America using SNAP. 96% of the low to moderate income homes in Canada received some kind of cash benefit transfer in 2016, while in America that number was 41%. Canada has a generous welfare policy which is associated with greater rates of asset poverty, and as the country has implemented stronger policies leading to less public assistance the asset poverty rate is actually improving in the country.
The authors note that the relationship between welfare payments and asset poverty is only correlational not causal. Additionally it is difficult to compare the two nations in this regard because of how vastly differently their welfare programs are set up.
“What stands out there is, so few American families receive any type of transfers at all, compared to other countries, and small adjustments to an already minimal safety net was not related to asset poverty in this study,” Rothwell says.
Within America many welfare programs have become poverty traps according to the study authors. Programs such as Medicaid often encourage people not to save money because if they do those assets will mean that they will have less access to assistance. Whereas in Canada residents there rarely have to worry about access to healthcare being denied.
“If you have someone who’s low-income and they are working hard trying to save money but you’re telling them that they’re going to lose benefits if they save over some given threshold, that’s a disincentive to accumulate wealth,” Rothwell notes.
Those with less education, single parents and minorities are also subject to much higher rates of asset poverty which is likely due to discriminatory laws and policies that make it harder for those in these groups to earn wages that would enable them to be able to save money and afford to become homeowners, let alone simply be able keep up with their monthly bills.
“This is the story of COVID, as I see it — it’s just exposing these existing inequalities, and the people who are most vulnerable going into the crisis are magnified in their vulnerability getting through it,” Rothwell concludes.
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