Asset Outcomes Index

Financial Assets

The indicators in the financial assets grouping provide direct state-level estimates of household wealth accumulation, asset poverty, and the distribution of assets between various population groups. These are first-time estimates of wealth indicators that have never been available at the state level. To generate these important estimates, the Corporation for Enterprise Development (CFED) commissioned researchers Robert and Jon Haveman. The Havemans produced the estimates used in the Report Card using data collected from the Survey of Income and Program Participation (SIPP), which is released periodically by the U.S. Census Bureau. However, as the weighting scheme in the SIPP has been developed to provide a sample that is representative of demographics at the national level and not at the state level, the Havemans used the data from the March Current Population Surveys to rescale the weights. Three years of data were used to create an adequate sample size. The rescaling was designed to make the sample of observations present in the SIPP data set consistent with the Current Popuation Surveys on the basis of race, gender, and broad income status.

Homeownership Capital

The homeownership capital measures in the Report Card assess how many of a state's residents own their own home, the average level of wealth accumulated in homes, and the extent to which homeownership is a source of equity for all of the state's residents. Measures of homeownership capital are included in the Report Card because home equity is the single largest source of wealth for most Americans. According to the Census Bureau, home equity accounts for the largest share of net worth in U.S. households, totaling 44.4% of measured net worth.

However, while the primary objective of the Report Card is to measure the value of homes in the form of home equity, no direct measures of home equity exist at the state level. Therefore, the measures included in this grouping are all proxies for both the overall level of home equity and the extent to which different population groups have accumulated home equity. Also, the reader will note that no measure of housing affordability is included here. While we recognize that being able to afford a home is a prerequisite for accumulating home equity, we could find no straightforward measure of homeownership affordability that did not raise more questions than it answered. However, one can assume that affordability is accounted for to some extent by some of the measures included here (especially the various measures of homeownership rate).

Human Capital

The human capital measures in the Report Card assess the education and skill levels of a state's population from early childhood through adulthood and the extent to which human capital (in the form of education and skill levels) has been accumulated among different population groups. Measures of human capital accumulation are included in the Report Card because “human capital theory” argues that people can be viewed as an economic asset in which increased investment in health, skills, and knowledge provide future returns for the economy through increases in labor productivity. Moreover, for individual workers in a global information-age economy, education levels now determine economic prospects. For example, the weekly earnings payoff difference between a high school graduate and a college graduate has more than doubled between 1980 and 2000.5 Thus, human capital is not only an asset in itself, but also (at higher levels) results in higher wages that can be saved to accumulate wealth.

Measuring actual levels of human capital presents significant methodological problems. Therefore, the human capital indicators used in the Report Card represent a proxy for human capital accumulation and distribution.

Business Capital

The business capital measures in the Report Card gauge the rate at which a state's residents own their own businesses, the extent to which business ownership has been achieved across various population groups, and the level of business wealth accumulated by a state's nontraditional entrepreneurs (especially women and minorities). Measures of business capital accumulation are included in the Report Card because, according to data from the Survey of Consumer Finances, equity in unincorporated businesses made up the second largest share (17.7%) of total household wealth in 1998.7 Moreover, business formation has traditionally been a route into the middle class for large numbers of U.S. households, including immigrants. In the United States, business ownership also confers a certain amount of respect upon the business owner. Direct measures of business capital accumulation are difficult to find and are nonexistent at the state level. Therefore, the measures used in the Report Card are proxies for business capital formation and its distribution among nontraditional business owners, such as women and minorities:

Bank Access

The bank access measures in the Report Card gauge the level of participation of a state's residents in the mainstream financial system. These measures are included in the Report Card because research on saving in low-income households8 finds that the ability to accumulate assets depends on a number of factors, including income and savings incentives, but also access to financial products. According to the Office of the Comptroller of the Currency, 78% of “banked” individuals have savings, compared with only 30% of the “unbanked.” Moreover, of the unbanked who saved, only 40% held savings in formal instruments—in most cases, the bank account of another person. The other 60% of the unbanked save in informal ways, including holding cash, jewelry, and gold. The two measures used in the bank access grouping are also first-time estimates of financial inclusion that have never before been available at the state level. CFED commissioned researchers Robert and Jon Haveman to create estimates for these two measures.

Asset Protection

The asset protection measures in this grouping indicate the extent to which a state's residents, including low-income parents and children, are covered by either private or publicly provided health insurance. These measures are included in the Report Card because health insurance provides protection against the kind of large medical costs that can result in the loss or depletion of household assets. Research shows that medical costs are a major cause of bankruptcy. In a recent study of 1.1 million personal bankruptcies in 1999, 326,441 were directly caused by illness or injury to a family member, while substantial medical bills were a contributing factor in 267,575 cases.

While there are many forms of insurance that protect families and personal property, including health insurance, life insurance, and property insurance, the measures in this grouping include the most readily available insurance data, which is largely in the field of health insurance.