Policies to promote economic stability, asset building, and child development

Children and Youth Services Review 36 (2014) 15–21

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Policies to promote economic stability, asset building, and child development Melinda Lewis a,1, Reid Cramer b,2, William Elliott c,⁎, Aleta Sprague b,2 a b c

University of Kansas, 1545 Lilac Lane, 312 Twente Hall, Lawrence, KS 66044, United States New America Foundation, 18999 L Street, N.W., Suite 4000, Washington, DC 20036, United States University of Kansas, School of Social Welfare, 1545 Lilac Lane, 309 Twente Hall, Lawrence, KS 66044, United States

a r t i c l e

i n f o

Article history: Received 27 December 2012 Received in revised form 22 September 2013 Accepted 16 October 2013 Available online 25 October 2013 Keywords: Assets CDAs Income shocks Asset shocks Asset poverty Asset policy

a b s t r a c t This paper makes the case that the pattern low-income families walk into is a present time-oriented or consumption-based welfare system, with attendant incentives and disincentives; in contrast, the pattern higher-income families walk into is future-oriented or asset-based. These two divergent systems do not deliver equitable educational outcomes for children. To ensure that higher education can play an equalizing role in the U.S. economy, the nation needs a better welfare system for the poor, one that builds on the asset-accumulation structures that serve the needs of advantaged families. This new institutional approach would undo the current system of educational advantages for higher-income children over low-income children and, in turn, redress educational inequalities in America. In order to create a level playing field welfare policies are needed that enable low-income families to accumulate assets. In this paper we discuss policies that might help low-income families accumulate assets, including modifications to existing income supports, as well as the development of complementary asset-based institutions. © 2013 Elsevier Ltd. All rights reserved.

1. Introduction Today, U.S. households encounter two divergent welfare systems. Low-income families primarily interface with a consumption-oriented welfare system that discourages asset accumulation. This discouragement works explicitly, through asset limits in means-tested programs, and implicitly, by sending the message that income flows, rather than accumulation of wealth, are key to combating poverty. In sharp contrast, the asset accumulation of higher-income families is facilitated through tax incentives for savings, homeownership promotion, and other institutional structures (Boshara, 2003). These different channels result in dramatically different outcomes, including for children. Savings has a range of well-documented benefits for children's development and educational outcomes (Adams, Nam, Williams Shanks, Hicks, & Robinson, 2010; Elliott, Destin, & Friedline, 2011). Even small amounts of savings may promote families' economic stability (Elliott, 2013a, b; Gray, Clancy, Sherraden, Wagner, & Miller-Cribbs, 2012), reduce the risk of food insecurity and other threats to development (Adams et al., 2010), and lay the foundation for college attendance and economic mobility (Elliott, Destin, & Friedline, 2011).

⁎ Corresponding author. Tel.: +1 785 864 2283; fax: +1 785 864 5277. E-mail addresses: [email protected] (M. Lewis), [email protected] (R. Cramer), [email protected] (W. Elliott), [email protected] (A. Sprague). 1 Tel.: +1 785 864 1047; fax: +1 785 864 5277. 2 Tel.: +1 202 986 2700; fax: +1 202 986 3696. 0190-7409/$ – see front matter © 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.childyouth.2013.10.012

However, the current social safety net for low-income households largely prioritizes short-term, income-based programs without sufficiently aligning these efforts with asset development initiatives that have the potential to increase families' lifelong financial security (Sherraden, 1991). Furthermore, current policies that promote longer-term asset accumulation, such as tax expenditures linked to homeownership and retirement security, are most readably accessible by families with higher incomes. Consequently, we suggest that a bifurcated welfare system comprised of income-based programs for poor families and asset-based programs for higher-income families may provide higher-income children with an educational advantage over low-income children (Elliott, 2013b). Ultimately, these resulting educational advantages may exacerbate inequalities in America, closing off the most powerful ladder for economic mobility in today's economy: higher education (Urahn et al., 2012). In this paper, we build on Elliott and colleagues' analysis of economic stability and children's human capital development (Elliott, 2013b; Elliott, Nam, & Friedline, 2013) and make suggestions for modifying related policies and programs accordingly. These studies build on Michael Sherraden's early work in Assets and the Poor (1991). It provides further evidence of a need to level the playing field with policies that mitigate the potentially negative effects of asset poverty, which, in turn, may undermine children's educational attainment. Understanding this connection between asset poverty and educational outcomes is critical to laying a policy foundation for asset-based welfare, since evidence has shown that education is one of the key paths to economic mobility in America (Haskins, 2008; Hertz, 2006). This makes poverty not just

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an immediate economic concern, but also a threat to long-term human capital development. Therefore, to the extent to which educational achievement is compromised by economic insecurity, the education path cannot be said to provide poor children with the same opportunity for economic mobility that it is does for higher-income children (Haskins, 2008; Hertz 2006). This raises questions about what can be done to restore education as the ‘great equalizer’ in our society and exposes the intersections between welfare and education policy. Two key findings suggest that there is a need to replace the bifurcated welfare system with a dual-pronged welfare system consisting of both consumption-based and asset-based programs. First, results generally indicate that children living in poorer families that disproportionately rely on consumption-based welfare programs like SNAP (Supplemental Nutrition Assistance Program, formerly known as Food Stamps) and are asset poor have less-favorable educational outcomes than children living in higher-income families who are more likely to be asset sufficient (Elliott, 2013b). Second, results consistently indicate that income is a protective factor against economic instability (McKernan, Ratcliffe, & Vinopal, 2009). It is interesting to note, and surprising to the authors, that generally speaking income and asset shocks appear to have very little direct impact on children's educational outcomes (Elliott, 2013b). Instead, in regards to human capital development (including academic achievement and attainment), economic instability per se appears to matter less than asset poverty does (Elliott, 2013b). This apparent inconsistency is reconciled through an understanding of how income and assets are differently leveraged by individuals and families for consumption and capital development, respectively, and how households can effectively use asset stores to smooth out temporary reductions in income. Here, minor income shocks are defined as a drop in income of 25%, while a 50% decline in income would be considered a major income shock. Previous research has shown that income shocks are related to food insecurity and economic hardship (McKernan et al., 2009), so nothing here should be construed as suggesting that income-based policies can or should be ignored. Certainly, if children's basic needs are not met, policies that focus on human capital investments are likely to be less fruitful (e.g., Maslow, 1954). However, asset poverty, defined as inadequate assets to maintain a family above the poverty line for a period of three months (Haveman & Wolfe, 2004), suggests longerterm economic deprivation and, importantly, often places households within the realm of means-tested income maintenance programs. While remedying the persistent and corrosive asset poverty in which many low-income children struggle to survive warrants particular policy attention, there is evidence to suggest that if basic needs are not met, families are more likely to save to meet these needs or save for the purpose of smoothing out income shocks rather than for human capital development (e.g., Xiao & Noring, 1994), which could blunt the effects of policies designed to improve child well-being through asset accumulation. Therefore, similar to Sherraden (1991), we suggest that a combined approach of income and asset-based policies is needed. An approach to poverty alleviation that focuses on both income and asset-based policies recognizes that if we are ever to truly eliminate poverty we have to do more than provide the poor with the power to purchase enough goods to meet minimum subsistence needs; we must also provide them the opportunity to invest in the development of human capital, especially for their children. A fundamental tenet of the American Dream is that parents should be able to see progress both in their own lives and in the lives of the next generation. Educational attainment plays a key role in whether or not children have a real opportunity for economic mobility (Haskins, 2008). With these principles in mind, we present specific asset-based policy interventions that could support low-income families and enable their children's development and educational access. These policy changes include those which would ameliorate the consumption-oriented welfare system's bias against asset accumulation by low-income families, as well as those which would develop complementary asset structures to profoundly alter the financial trajectory of

disadvantaged Americans. While these policy recommendations, separately or in the aggregate, are not intended to suggest that there is not a need for direct subsidization of human capital — in the form of investments in early childhood education and improvements to the K–12 system, for example — it is the contention of the authors that promoting asset accumulation may be a particularly valuable enterprise for improving child outcomes, and one that could, in turn, improve the ability of children to benefit from other educational opportunities. The theory and evidence regarding precisely how assets affect children's educational expectations and, in turn, how those expectations drive academic engagement and, ultimately outcomes is still evolving. However, the outsized effects of even small amounts of savings on educational outcomes suggests that these psychological, attitudinal, and behavioral effects largely explain this relationship (regarding educational outcomes and small-dollar accounts, see Elliott, 2013a; regarding assets and identity-based motivation theory, see Elliott & Sherraden, 2013). Even at levels entirely inadequate to finance human capital development directly, assets affect educational outcomes. For example, research finds that a low- and moderate-income child who has school savings of $500 or more is about five times more likely to graduate from college than a low- or moderate-income child with no savings account, even though these small-dollar accounts could not even pay for books at most institutions (Elliott, 2013a). Instead, assets, particularly those explicitly designated for college, seem to signal to children that higher education is a likely part of their future, potentially triggering greater academic involvement and superior achievement (AEDI, 2013; Zhan & Sherraden, 2011), important components of educational success regardless of the quality of the overall educational context. Therefore, the following recommendations do not comprise an exhaustive list of the policy changes that could positively impact the lives of American children; however, there is emerging evidence from field research and theoretical applications to suggest that they could bridge the gaps in asset-based and consumption-oriented welfare approaches and, in the process, level the playing field for those currently disadvantaged. Finally, these paths through which to complement income supports with asset approaches should be considered just that—complements— and not replacements for critical investments in the increasingly threatened safety net. While there is evidence that assets work in ways different than income flows (Elliott, 2013b) to influence children's well-being, there is no question that, as stated above, meeting individuals' basic needs is an essential precondition for facilitating longer-term capital development. Converging the asset-based and consumption-focused welfare systems for wealthier and low-income Americans should be understood as an effort to increase equity, not an attempt to replace core supports with empty promises to let poor people ‘save their own money’. The asset-based welfare system works for advantaged Americans because it facilitates their efforts, reinforcing the idea that institutions are designed to support individuals' progress (Sherraden, 1991). Equitably including lower-income families in similar structures is about bringing to disadvantaged children these same opportunities. 2. Eliminate asset limits in public assistance programs The current consumption-based welfare model fails to recognize that living at the poverty line is not enough for human capital development to take place, absent opportunities for asset accumulation. So, while higher-income households enjoy sizeable savings incentives through preferential tax treatment of 529s (state-sponsored college savings programs), retirement accounts (such as 401(k)s and IRAs), and traditional home mortgages, low-income households face what functionally amounts to a steep marginal tax on their savings, where additional dollars in savings cost them dearly in public assistance benefits. The Supplemental Nutrition Assistance Program (SNAP/food stamps) offers an example of how consumption-based welfare can work at cross purposes to long-term human capital development. SNAP is

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meant to increase the food purchasing power of low-income households. SNAP helps narrow the consumption gap encountered by many lowincome working families and individuals on fixed incomes by providing families with additional purchasing power that allows them to live at the poverty line and buy enough food to meet minimum adequate dietary requirements (Lee, Mackerty-Bilaver, & Chin, 2006). However, consumption-based programs have traditionally discouraged asset accumulation through asset tests (Sherraden, 1991). Most meanstested benefit programs impose a cap on the level or resources a household can have and remain eligible. These limits often require families to remain firmly in asset poverty; in the Temporary Assistance to Needy Families program (TANF/cash welfare), for example, asset limits in some states are as low as $1000 per household. The SNAP asset test ($2000 per household, or $3250 if the household contains an elderly or disabled member) is set at the federal level; however, states have wide discretion to increase or eliminate these limits. For most families in states where asset tests are still in place, liquid assets exceeding these thresholds can result in the denial of an application or closure of an existing case. While low-income individuals certainly face real constraints on their ability to save, there is some evidence that these asset limits are themselves an impediment to asset accumulation (see, Nam, 2008). For example, research shows that loosening of vehicle asset tests increases vehicle asset holdings among SNAP recipients (McKernan, Ratcliffe, & Nam, 2007). In addition to the potentially negative effects of this asset poverty on child well-being, restricting asset accumulation may also work against the objectives of the anti-poverty safety net in the U.S.: to support individuals until they can regain economic self-sufficiency. Families receiving assistance who can grow or maintain a small savings cushion are less financially vulnerable and thus less likely to return to public benefits in the future. There are administrative considerations, as well, as eliminating asset tests streamlines the application process and reduces paperwork. Therefore, removing asset limits not only supports families' long-term economic security, but also increases program efficiency, which, in turn, could constrain administrative costs, important in a climate of continual budget cuts and related threats to safety net programs for the poor. Looking specifically at the connection between child well-being and asset accumulation, there has been some policy recognition of the need to remove savings disincentives. For example, SNAP has eliminated assets held in 529s from consideration when determining program eligibility, although many states still include them when calculating eligibility for Temporary Assistance for Needy Families. Importantly, though, since most low-income families are not utilizing 529s as their vehicle for saving for college but, instead, saving in traditional, non-restricted products such as checking or savings accounts (Sallie Mae, 2009), the utility of this policy concession is muted. 3. Support children's and matched savings accounts While a significant step in the right direction, even wholesale elimination of asset tests alone is not enough to stimulate investment in human capital development by low-income families. The reality of constrained incomes and patterns of separation from financial institutions also depress asset accumulation in poor families, necessitating access to asset accumulation programs designed specifically for lowincome households. This approach must recognize that not all poor people come to poverty in the same way and that, therefore, inclusive asset-building policies must both reduce barriers to saving and provide intentional opportunities and incentives to save. Rank and Hirschl's life course work on poverty sheds some light on this. For example, Rank and Hirschl (2001) find that about 50% of Americans between the ages of 25 and 75 will experience at least one year below the poverty line. Similarly, they find that about 50% of Americans between the ages of 20 to 65 will use SNAP at least once in their lives (Rank & Hirschl, 2009). This suggests that not only the near poor but also wealthier families fall into poverty and use programs like SNAP. In the context of the shifting

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of financial risk from institutional structures to individuals in U.S. social and economic policy choices, these episodes of poverty may only increase (Hacker, 2008). However, these formerly economically-secure families likely have several advantages over their formerly near-poor counterparts, which will allow them to bounce back from poverty much more quickly. First, these families might already have established relationships and experience with mainstream banks and might already have been investing in their child's human capital development. Moreover, they may possess more human capital themselves, making it more likely that they will be able to find a high paying job again. The previously wealthy who fall into poverty might already have assets, the knowledge needed to accumulate additional assets, and access and connections to the mainstream financial markets. Further, they likely have already and continue to benefit from asset programs such as 401(k) plans and home mortgage tax breaks. For them, protecting their existing assets—through the elimination of asset limits in meanstested programs—and allowing them to begin to accumulate assets again might be all that is needed. However, the working poor or the near poor who have grown up in poor families might need programs designed specifically to help them to accumulate assets. One obstacle that the working poor and near poor face is that they have very little income left to save after they meet all of their expenses. They may lack money for deposits needed to open and maintain accounts, are less likely to work at jobs with employer-sponsored retirement plans or to have access to mainstream financial institutions, and in general lack the financial knowledge that families who come from wealthier backgrounds have. Sherraden (1991) proposed Individual Development Accounts (IDAs) as a way to help low-income families build assets and enter the financial mainstream. IDAs are matched savings (e.g., deposit $1 and receive an additional $1) accounts designed for the poor that usually include some form of financial education. A provision of the Personal Responsibility and Work Opportunity Act of 1996 (PRWORA), which established TANF, allowed states to use part of their TANF block grant money to fund IDAs. Further, it disregarded savings in IDAs as an asset in determining eligibility for welfare. Thirty states have included IDAs in their state TANF plan.3 IDAs provide an innovative way to help build assets among the poor and the framework for expansion is already in place. Shortly after PROWRA, the Assets for Independence (AFI) Act, which was passed in 1998 (P.L. 105–285), established a federal grant program for asset programs like IDAs. There are over 200 AFI-supported IDA programs across all 50 states (U.S. Department of Health & Services, 2012). Through AFI, families save in IDAs toward expenses like home ownership, microenterprise, or postsecondary education or training and participate in financial education classes. Notably, savings or liquid assets accumulated through families' IDAs do not count against eligibility for SNAP, thus paving the way for additional rollback of strict asset limits in public assistance programs. However, even the best of policies have their limitations and, thus, areas for improvement. While IDAs intend to bridge present-oriented and consumption behaviors and futureoriented and asset building behaviors, accounts are usually only available to families for three- to five-year saving goals. By nature of federal budget constraints and many poor families' short-term consumption needs, perhaps a saving horizon of three to five years is a start in a larger effort to assist these families in making and meeting long-term, futureoriented, saving goals. A more progressive approach would provide these families with the supports to save over the long-term, leveraging compounding interest over a longer time horizon and the power of assets to shape attitudes and behavior to realize greater impacts from savings efforts. Sherraden (1991) also proposed Child Development Accounts (CDAs) as a way to create an inclusive and accessible opportunity for lifelong savings and asset building. CDAs, or Children's Savings Accounts (CSAs) 3 For more information, see the Center for Social Development website at http://csd. wustl.edu/AssetBuilding/Pages/IndividualDevelopmentAccounts.aspx.

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are also matched savings accounts, but are targeted at children. Unlike with IDAs, children are typically unable to access money saved in CDAs until they reach age 18. Sherraden proposed CDAs as universal accounts beginning at birth, consistent with current consensus on best practices for asset accumulation policies for children: universal, progressive, asset-building, and lifelong (Cramer & Newville, 2009). CDAs have been more closely linked to children's human capital development than IDAs, given the potential of savings to support improved educational outcomes for disadvantaged children (Zhan, 2006). While no national CDA policy has been adopted in the United States, a number of legislative proposals have been developed, such as America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act, Young Savers Accounts, 401Kids Accounts, Baby Bonds, and Portable Lifelong Universal Savings Accounts (Cramer, 2010). These policies have champions across the political spectrum. The ASPIRE Act is probably the most recognizable of the proposals and can serve as a placeholder for what a large, universal children's savings account effort would look like. ASPIRE would create Lifelong Savings Accounts for every newborn, with an initial $500 deposit, along with opportunities for financial education. Children living in households with incomes below the national median would be eligible for an additional contribution of up to $500 at birth and a savings incentive of $500 per year in matching funds for amounts saved in accounts. When account holders turn 18, they would be permitted to make taxfree withdrawals for costs associated with post-secondary education, first-time home purchase, and retirement security.4 Outside of United States, several countries have initiated policy efforts with CDAs to include Singapore, the United Kingdom, South Korea, and Canada.5 While the political and economic contexts obviously differ considerably, there is evidence within these countries' experiences to support the contention that families in and near poverty can save, that asset accumulation can be a valuable and viable complement to income supports, and that helping families build assets can address some of the particular risks faced by poor children. In the absence of federal policy to create vehicles for universal access to savings, state and local innovations are proliferating. For the most part, these programs utilize asset accumulation as a tool with which to facilitate superior educational outcomes, as in San Francisco's Kindergarten to College initiative and the nascent College Savings Account Program in Cuyahoga County, Ohio. Several states have leveraged their existing 529 college savings programs to create more equitable opportunities for lower-income households (Clancy, Lasser, & Taake, 2010), such as North Dakota and Maine, which both offer accounts to all children at birth, and the several states with some matching component to multiply the deposits of savers in or near poverty. Collectively, these public investments in asset-based approaches to supporting child well-being can inform policy development, as policymakers and others committed to reducing poverty in the United States explore options to take asset-based welfare to scale. In some cases, this scaling would require technical changes to institutional structures such as 529s, which need national administration, low initial deposit requirements, and automatic enrollment in order to increase participation among the low-income households currently underrepresented (Goldberg, Friedman, & Boshara, 2010). Policies such as 529s represent a significant investment of federal tax expenditures to augment the savings effort of American households; ensuring this tax-preferential treatment of college savings has encouraged more than $179 billion in college as of 2012 (College Savings Plan Network). Effectively leveraging these resources offers a tremendous opportunity to close the gaps in educational attainment among advantaged and disadvantaged children. 529 plan administrators themselves, looking for ways to improve participation among underrepresented populations, are among those 4 A description of the ASPIRE Act and its provisions can be found in Cramer and Newville (2009). 5 For more information on these and other CDA programs see Loke and Sherraden (2009).

examining policy changes such as refundable tax credits for deposits (Clancy et al., 2010). As states explore options to increase equity, important lessons are emerging, such as the importance of universal enrollment, particularly in light of recent research suggesting that even opening an account with little to no money may still increase the odds of college enrollment (Elliott, 2013a). In part because of tangible savings constraints and in part likely due to the legacy of messages absorbed as participants in consumption-based welfare policies, opt-in enrollment in opportunities such as Maine's matching program is sometimes low, while programs that automatically open accounts for children, such as in San Francisco, see nearly universal participation. Universal accounts, of course, do not have to mean that everyone has exactly the same experience. Automatic enrollment should be combined with concerted outreach to and special incentives for low-income households. In many ways, CDAs need to provide low-income children with access to some of the same educational asset effects that wealthier children enjoy from their families. To get there, we have to acknowledge the barriers they face to saving and build incentives and program structures that can help overcome them.

4. Incentivize savings: At tax time, through prizes, and in tiered accounts In addition to IDAs and CDAs, the Earned Income Tax Credit (EITC) is widely considered one of the largest federal policy efforts to lift children out of poverty. The EITC has undergone several expansions since it was added to the Internal Revenue Code by the Tax Reduction Act of 1975, most notably during the Clinton administration. The EITC offers a refundable tax credit to supplement wages and offset taxes for lowincome working families using a phase-out approach (Phillips, 2007). In 2012, the benefit for married couples with two children was reduced by 21 cents for every dollar of income earned above $22,300 and was completely phased out when earnings exceeded $47,162 (Lewis & Beverly, forthcoming). To benefit from the EITC, poor families must have worked and endured poverty in the year preceding their tax filing, filed their tax returns, and known about their eligibility for the tax credit. Families who jump through these hoops seem to have higher labor force participation rates than other poor households (Blank, 2002; Blank, Card, & Robins, 2000), though this does not necessarily translate into economic sufficiency (Acs, Coe, Watson, & Lerman, 1998). However, even the EITC effectively has asset tests (Chen & Lerman, 2005), as investment income is subject to a separate, lower, threshold, when determining eligibility ($3000/year in 2012). Assets earned from income continue to be counted against families when determining their benefit levels during the phase out. Reducing or eliminating this asset test would encourage families to build assets and not penalize them for doing so, perhaps improving economic sufficiency in the process. There are other opportunities to leverage the EITC for asset accumulation, in addition to removing the savings constraints. Families that file their taxes and receive returns are in a position to receive an influx or windfall of money at tax time. This has led researchers and policy makers to consider policy options like the Financial Security Credit and Bank On USA — policy proposals that would respectively reward saving money from tax refunds and open bank accounts for low-income families if enacted at the federal level (Black & Cramer, 2011; Cramer, Black, & King, 2012). While these policy proposals would not fully address the issue of a bifurcated welfare system, they offer additional possibilities for helping poor families become asset sufficient. In the 2013 tax season, around 27 million households are likely to file for the EITC. In 2012, the average value of the EITC was $2200 per household with a potential maximum of $5891 (IRS, 2013). Both the number of families that engage in this process and the significance of the resources they receive make the tax time moment a powerful savings opportunity.

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Alongside efforts to align tax policy and asset-based welfare approaches are other emerging innovations in the effort to stimulate savings, including prize-based savings incentives and a role for tiered account structures. In the former, the costs associated with providing incentives for meeting savings or developmental milestones are controlled by randomizing the receipt of the awards, through the institutionalization of a prize structure. There has been at least some discussion in Congress about regulatory changes within financial services that would be needed in order to make prize-based incentives possible, and there is some research into the appeal of prizes as incentives for saving and other human behaviors (Tufano, De Neve, & Maynard, 2011). With tiered account structures, low-income households' savings for longterm capital development would be matched at higher levels than emergency or short-term savings, but savers would have access to at least some of their savings on a more immediate basis, thus giving them practical experience in using money to overcome obstacles, while potentially reducing resistance to the idea of diverting limited resources to savings (Elliott, 2012). 5. Strengthen unemployment insurance benefits There are also policy implications for human capital development related to unemployment insurance, particularly for the children of families experiencing joblessness. Unemployment insurance is an income-based program that is not targeted at low-income families. That is, eligibility criteria for unemployment insurance are not determined by asset tests or financial need more generally, but instead by a worker's earnings history and current period of unemployment. Under federal law, unemployment can be paid up to 39 weeks (26 weeks of regular benefits followed by 13 weeks of extended benefits). On average states usually pay about 67% of a family's average pretax weekly wage (Albert & Skolnik, 2006). Government statistics report that the average period of unemployment in July 2013 was 15.7 weeks or just less than four months (Bureau of Labor Statistics, 2013). However, evidence suggests that unemployment insurance is currently unsuccessful at fully mitigating the negative effects on human capital development caused by a job loss within a family, such as lower rates of college graduation among children (Elliott, 2013b). While, as individuals find employment, their households may be able to recover financially, the effects of their periods of asset poverty on their children's educational outcomes may be much longer-term and, ultimately, far more costly (Elliott, 2013b). To more effectively promote human capital development, then, unemployment insurance benefits may need to be higher, in order to prevent families' dependence on public assistance or need to spend through their assets. Most families would not be able to meet their weekly expenses on only 67% of their normal income. They would have to either rely on public assistance programs or spend through the assets they have accumulated. However, it is very unlikely that families have enough assets to maintain their normal standard of living over the course of extended periods of unemployment, so they are likely to still experience an income shock. The economic instability wrought by a period of unemployment, particularly when families' economic standing is not preserved through a strong safety net, has multiple, compounding effects on children's educational experiences, including diversion of assets towards subsistence and greater likelihood of educational disruption (Elliott, 2013b). Furthermore, utilizing public assistance would, as explained above, often require that they spend through the assets they have accumulated. In the aggregate, families have just over a 60% chance of experiencing periods of liquid asset poverty (defined as a family's ability to replace 75% of their monthly income for one month) during relatively good economic times (and a similar chance of experiencing net worth poverty); these odds would surely increase during an economic downturn (Elliott, 2013a). In turn, asset poverty may be associated with poor educational achievement (Elliott, 2013b). Given this, safety-net policies, such as unemployment insurance need to ensure the effects of economic cycles are not felt for generations,

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through the depressing force of asset poverty on children's educational outcomes. Reforming unemployment insurance so that it protects against these long-term erosions of human capital may help to bridge the conceptual divide between asset-based and consumption-focused welfare programs. By extension, this could help to reframe poverty as an institutional failure with widespread and long-term implications for all of society, leading, ultimately, to the potential for broader political will to prevent and combat it. 6. Increase support for affordable housing Recent studies have shown that stable housing is essential to childhood health and development (Haurin, Parcel, & Haurin, 2001). Children in housing-insecure families are more likely to experience hunger, hospitalizations and developmental delays (Cutts et al., 2011). Consequently, we suggest, in order for the anti-poverty safety net to effectively promote children's human capital development, it must adequately support families' access to safe and affordable homes. In tandem with wealth-building opportunities that might ultimately lead to homeownership, we suggest that this access can have significant impacts on a family's long-term financial security. The asset-building field has historically focused on homeownership as one of the key pathways to long-term financial security. And indeed, for many families, the home remains their largest asset (Rank & Hirschl, 2010), which compels savings by requiring mortgage payments and provides opportunities for leverage and appreciation. Some studies have found connections between homeownership and child well-being directly, including relationships between homeownership and educational attainment (Aaronson, 2000). Other studies suggest that housing affects child wellbeing primarily through conditions of stability, which can be secured outside of an ownership arrangement (Leventhal, 2010). While housing policy for low-income households not pursuing homeownership provides insufficient assistance, inadequate coverage, and inefficient disincentives to accumulate assets while renting. Current policies that subsidize homeownership, conversely, such as the mortgage interest deduction, disproportionately benefit higher-income families (Poterba & Sinai, 2008). The rash of foreclosures during the most recent recession and increased prevalence of negative home equity has attracted new attention to questions about whether homeownership is the best option for all families — and policymakers have an opportunity to respond to these changed circumstances. A more equitable system would also support and create asset-building incentives for renters. One example of this type of assistance is the Department of Housing and Urban Development's (HUD) Family Self Sufficiency (FSS) program. Through FSS, families in public housing have both the incentive to increase their work-related income and the opportunity to build savings. Traditionally, families in public housing or receiving vouchers must pay 30% of their income as rent, and thus their rent increases in step with their earnings. In FSS, participating families must still pay higher rent as their income rises, but the amount representing each increase is deposited into an escrow account held in their names. Participating families are supported with case management services that help them identify concrete goals and benchmarks to lead to self-sufficiency. FSS has proven to be effective at increasing low-income families' asset holdings, though it is currently underutilized and underfunded (Sard, 2001). With greater support, FSS can be an important tool to build low-income families' assets and ensure that welfare programs also serve as a springboard to economic stability and greater asset holdings. Beyond FSS as a tangible example of a promising policy option, there is the more fundamental case to make regarding the need to provide equitable opportunities for asset accumulation to those for whom geography, family circumstances, the current housing market, or entrenched institutional barriers make homeownership an improbable or even undesirable path. Addressing these disparities would help to expose the extent to which current U.S. policy subsidizes the

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asset accumulation—and, therefore, the long-term economic security and, we argue here, the human capital development—of more advantaged households, while largely relegating low-income families to the inadequacies and illogical disincentives of consumption-based welfare. 7. Conclusion In concluding, we should note that minor changes to these policies and programs might translate into only minor benefits for families. As long as low-income families primarily survive in a policy context that only minimally protects them against the deepest deprivations of consumption, while already-advantaged households enjoy the seemingly invisible supports of potent asset-accumulation vehicles, U.S. welfare policies will serve to foster continued inequity. These disparities will have not only immediate effects on the well-being of children and families, but through the relationships between assets and educational progress, will continue to foster divergent outcomes far into the future. Truly smoothing out periods of economic deprivation and investing in human capital development are massive obstacles for the long-term economic security of poor families and deeply embedded in society by broader structural forces. The approaches adopted should fit the obstacles they intend to address. If we are serious about improving the economic sufficiency of poor families and ultimately improving their children's educational outcomes, much more comprehensive and progressive approaches should be adopted. As we have seen from previous research, the costs of income shocks, asset shocks, and asset poverty are high for families and their children (Elliott, 2013a; Elliott et al., 2013; McKernan et al., 2009). The costs to the U.S. economy are also high. Recent estimates suggest the annual costs of child poverty to the U.S. economy is upwards of $500 billion and represents about 4% of the gross domestic product (GDP; Holzer, Schanzenbach, Duncan, & Ludwig, 2007). In light of the apparent relationship between economic insecurity, asset poverty, and children's educational outcomes, and in the context of the U.S.' need to position itself for global economic competitiveness by improving its college graduation rates (Carnevale & Rose, 2011), the future costs of poverty may be even greater. More comprehensive and progressive approaches should be welcomed, then, if they are able to reduce costs to families and their children and to the U.S. economy. References Aaronson, D. (2000). A note on the benefits of homeownership. Journal of Urban Economics, 47(3), 356–369. AEDI - Assets and Education Initiative (2013). Building Expectations, Delivering Results: Asset-Based Financial Aid and the Future of Higher Education. In W. Elliott (Ed.), Biannual report on the assets and education field. Lawrence, KS: Assets and Education Initiative (AEDI). Acs, G., Coe, N., Watson, K., & Lerman, R. (1998). Does work pay? An analysis of work incentives under TANF. Washington, DC The Urban Institute (Retrieved from http://www. urban.org/UploadedPDF/occa9.pdf) Adams, D., Nam, Y., Williams Shanks, T., Hicks, S., & Robinson, C. (2010). Research on assets for children and youth: Reflections on the past and prospects for the future. Children and Youth Services Review, 32(11), 1617–1621. Albert, R., & Skolnik, L. (2006). Social welfare programs: Narratives from hard times. Thomson Brooks/Cole. Black, R., & Cramer, R. (2011). Incentivizing savings at tax time: $aveNYC and The Saver's Bonus. Washington, DC New America Foundation (Retrieved from http://www. newamerica.net/sites/newamerica.net/files/policydocs/Black_Cramer_Incentivizing_ Savings_at_Tax_Time_3_11.pdf) Blank, R. (2002). Evaluating welfare reform in the United States. Journal of Economic Literature, 40(4), 1105–1166. Blank, R., Card, D., & Robins, P. (2000). Financial incentives for increasing work and income among low-income families. In R. Blank, & D. Card (Eds.), Finding jobs: Work and welfare reform (pp. 373–419). New York, NY Russell Sage. Boshara, R. (2003). American stakeholder account (Issue Brief). Washington, DC New America Foundation. Bureau of Labor Statistics (2013). Unemployed persons by duration of unemployment. http://www.bls.gov/news.release/empsit.t12.htm (Available from) Carnevale, A. P., & Rose, S. (2011). The undereducated American. Washington DC Georgetown University, Center for Education and the Workforce.

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