Washington, D.C.— In Arkansas today, 25.6% of households are “asset poor,” meaning they have little or no financial cushion to rely on if unemployment or another emergency leads to a loss of income, according to a report released today by the national nonprofit Corporation for Enterprise Development (CFED).
The 2012 Assets & Opportunity Scorecard ranked Arkansas 44th in the country overall for how their residents fare in terms of achieving financial security across 52 measures in five different issue areas. Many of Arkansas’ residents have jobs, but they lack adequate savings or other assets to cover expenses for three months if they lose a steady income. Asset poverty, the Scorecard’s signature measure, is a conservative estimate of financial security since it counts all assets, including those—such as a home—that would need to be liquidated to be used for day-to-day needs. A more realistic measure of the resources available to families is “liquid asset poverty,” which excludes assets such as a home or car that are not easily converted to cash. Excluding these assets, the liquid asset poverty rate increases to 50.8% of Arkansas residents.
For asset poor families, scraping by day to day is a constant struggle and investing in the future is all but impossible. “Growing numbers of Americans have almost no savings or other assets to fall back on if they lose their jobs or face a medical crisis,” said Andrea Levere, president of CFED. “Without those savings, few will be able to invest in a more economically secure future, including buying a home, saving for their children’s college educations or building a retirement nest egg.”
The Assets & Opportunity Scorecard offers the most comprehensive look available at Americans’ ability to save and build wealth, fend off poverty and create a more prosperous future. The Scorecard explores how well residents are faring in the 50 states and the District of Columbia and assesses policies that are helping residents build and protect assets across five issue areas: Financial Assets & Income, Businesses & Jobs, Housing & Homeownership, Health Care and Education.
While Arkansas does rank 3rd for average credit card debt, the state earned a “D” for Financial Assets & Income. In addition to ranking 46th in income poverty rate, the state also has among the highest proportion of unbanked and underbanked households in the country (ranking 43rd and 44th, respectively). Arkansas earned a “C” in Housing & Homeownership, ranking 7th in foreclosure rate and 11th in affordability of homes, but the high-cost mortgage loans (ranking 49th) might explain the lower homeownership rate (32nd). The state does poorly in Education, ranking 44th overall with the second-to-worst ranking in both two-year and four-year college degree rates.
The Scorecard highlights a dozen policy solutions that can help Arkansas increase opportunity and promote financial well-being for all residents. To address high rates of income and asset poverty, Arkansas should adopt a state Earned Income Tax Credit to maximize income for low-wage workers and remove the disincentives for very-low-income families to save by lifting asset limits in its public benefit programs. To help maintain homeownership as a route to the middle class, Arkansas should provide assistance to first-time homebuyers and funding for its state Housing Trust Fund. In addition, to boost two- and four-year college degree attainment rates, which are the second lowest in the country, Arkansas should expand college savings incentives through the state 529 plan.
“We cannot let the challenges facing our economy prevent us from investing in policies with a proven record of helping struggling families succeed,” said Tamika Edwards, Director of Public Policy at Southern Bancorp Community Partners (formerly Southern Good Faith Fund), a Lead State Organization for the national Assets & Opportunity Network. “As a state, we must take the necessary steps today to protect vulnerable families from further financial shocks and lay the groundwork for future prosperity.”
Nationally, the Scorecard paints a picture of a country where low- and moderate-income families continue to fall further down the economic ladder more than two years after the official end of the recession.
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More than half of consumers (56%) have subprime credit scores.
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Between the third quarters of 2008 and 2011, the home foreclosure rate increased by 50%, widening the already-considerable homeownership gap between white households and households of color. As of 2010, 73% of white households owned homes, compared with just 47% of households of color.
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One in five jobs is low-wage and nearly half of employers do not offer health insurance. In addition, 55% of workers do not have or participate in retirement plans.
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While the number of people getting four-year college degrees is up slightly, the average debt for graduating college seniors has risen 19% since 2007 to $25,250.
Levere added that the Scorecard findings are “particularly disturbing in the context of precipitous drops in incomes for many Americans and widening of the wealth gap between the richest and poorest households.
The report found growing racial gaps in asset poverty, with the number of people of color who are asset poor more than double the number of white people (43% versus 20%). The number of people of color who were found to be liquid asset poor was nearly double the number of white people (60% versus 32%).
To read an analysis of key findings from the Assets & Opportunity Scorecard click here. To access the complete Scorecard visit http://scorecard.cfed.org.
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CFED expands economic opportunity by helping Americans start and grow businesses, go to college, own a home and save for their children’s and their own economic futures. We identify promising ideas, test and refine them in communities to find out what works, craft policies and products to help good ideas reach scale, and develop partnerships to promote lasting change. We bring together community practice, public policy and private markets in new and effective ways to achieve greater economic impact.
The national Assets & Opportunity Network is a movement-oriented group of advocates, practitioners, policymakers and others working to expand the reach and deepen the impact of asset-based strategies. Network members are on the frontlines of advocacy, coalition building and service delivery.