What is Asset Poverty?

Asset poverty is a measure of economic security and mobility based on household net worth.  Where net worth is defined as the total value of all assets, such as a house or a business, minus any liabilities, such as debts, a household is asset poor if it has insufficient net worth to subsist at the federal poverty level for three months in the absence of income.  Thus, an asset poor household would not have enough savings or wealth to provide for basic needs during extended periods of economic hardship, such as a sudden job loss or a medical emergency.

Why does it matter?

Poverty in the United States is officially and historically defined as the minimum amount of annual income a household requires in order to meet basic needs.  As a measure of economic well-being, it is antiquated since it is based on a household budget from the 1960s and is calculated as three times the cost of food.  Additionally, the federal poverty guidelines do not take into account modern household expenses like child care.  By focusing solely on income, income poverty tells only part of the story of family financial security because it ignores other sources of welfare, such as homeownership, business equity, or retirement savings.  Measuring wealth and assets, in addition to income, provides a more long-term and encompassing view of economic security and mobility. 

Comparing the 2004-2005 data on income poverty with asset poverty shows that twice as many households are asset poor than are income poor (22.4% vs. 10.2%).   And in spite of the 1990’s economic boom in which incomes of the poor rose enough to reduce income poverty by 3%, asset poverty actually increased by 3% during that same period.  Household data on income poverty also shows that only 8.7% of white households and 21.3% of minority households are income poor.  Yet, the data on asset poverty shows not only greater prevalence but also but also greater concentration of asset poor households.  Nationally,  minority households are more than twice as likely as white households to be asset poor (38.1% vs. 16.7%). 

Who makes up the asset poor?

State Asset Poverty

Asset Poverty in the States 

The prevalence of asset poverty and the composition of the asset poor widely vary across the 50 states and the District of Columbia.  While only 1 in 10 who live in Delaware are asset poor, nearly 4 in 10 in New Mexico live in asset poverty.  Women and minorities also make up a large segment of the asset poor (26.8% and 38.1%, respectively), but this is especially the case in New York, where four in ten (38.4%) women and six in ten minorities (58.5%) live in asset poverty.  As with most measures of economic well-being and financial security, these characteristics vary tremendously across the 50 states and the District of Columbia.