How States Can Benefit
Now, more than ever, states are constrained by tight fiscal resources. In an age where new ideas travel at web speed, state policymakers must sift through more suggestions, more demands, and more proposed programs than ever before. What makes this suggestion—that poverty policy embrace asset building as well as income maintenance—any better than the other myriad of proposals out there? What makes it worthy of a state’s scarce resources?
Since the time of Adam Smith, economists have recognized the important role that assets play in the economy. In many respects, assets are recognized as a critical underpinning of household economic security, opportunity, and progress. They represent the ability to invest in the future—to build skills to earn living incomes, to acquire the security of a home, to enter the marketplace with a new idea or venture, to invest in one’s children or oneself.
More recent scholarship and community practice provide solid evidence that even a small amount of assets—in the form of savings, home equity, business ownership, or human capital—is critical to the well-being of lower-income families.
In fact, even though they may be just another form of money, assets have different dynamics and effects. Assets are the way resources can be moved through time. They are durable and can be leveraged—allowing for relatively great appreciation. They are flexible and can be used to survive a time without a job, meet an emergency, invest in a business, purchase a house, or finance an education. In a very real sense, it is assets that allow people to live in and for the future—they provide the reason to believe in it, the confidence to shape it, the impetus to plan for it, the investment to make it real. (This is why Michael Sherraden, director, Center for Social Development at Washington University, calls them “hope in concrete form.”)
These benefits are as important for poor families as for non-poor families. In fact, recent evaluations of asset-building demonstrations have begun to show a number of positive effects of assets on low-income children, families, and neighborhoods. These and similar studies have documented that, with budget counseling and financial incentives, the poor can and will save to change their long-term economic futures.
Furthermore, assets can:
- provide greater household stability,
- create long-term thinking and planning,
- lead to greater effort in maintaining assets,
- lead to greater development of human capital,
- provide a foundation for taking prudent risks,
- increase personal efficacy and a sense of well-being,
- increase social status and social “connectedness,”
- increase community involvement and civic participation, and
- enhance the well-being and life chances of offspring.
Every one of these benefits could be easily extrapolated to mean that asset owners may spend less time cycling on and off various public assistance programs and more time as wage earners, consumers, and productive members of the state’s economy.
