Jan. 13, 2014
This week we’re exploring how an asset-building framework can bolster existing strategies to address poverty in the U.S. As Aleta Sprague wrote last Wednesday, “50 years after President Johnson’s [War on Poverty] speech and nearly 25 years since Michael Sherraden published Assets and the Poor, we’ve learned a few things about the role of assets and savings as an anti-poverty tool.” She enumerates these findings: the connection between asset holdings and upward mobility, better educational outcomes, and increased life stability. Some of these outcomes are intuitive, but our safety net policies since the initiation of the War on Poverty haven’t embraced the concept that lower income people can and do save or that savings can be a central part of moving out of poverty in a sustainable way.
The connection between having an emergency savings fund or a dedicated account to save for retirement and financial stability is a straightforward one. It’s relatively easy to understand how building financial assets leads to positive economic outcomes over the long term. But asset ownership is more than just a financial stabilizer – it can have important effects on broader health and social wellbeing. A mounting body of evidence helps to establish this strong positive relationship between and health and wealth.
Assets and Longevity
At the most basic level, wealth is associated with greater health. But what does that really look like? Well, a 2012 National Bureau of Economic Research study found a strong correlation between assets and longevity among older people – specifically, a given individual’s level of assets was correlated with how many more years that person lived. But lifespan isn’t the only or even best measure of “health”: the study also found that people who died with no assets at all were disproportionately likely to be in poor health during their later years. Furthermore, asset poverty in old age leaves elderly people (and their extended families) vulnerable to the negative effects of a sudden expense. These findings all speak to the value of supporting more equitable access to retirement savings across the life course so that more people have adequate personal resources to rely on as they age.
While we don’t typically think of health insurance itself as an “asset,” at its most fundamental level, health insurance is designed to protect consumers from unmanageable health care-related costs. Therefore, the success of individual plans at meeting that objective and the expansion of coverage as part of the Affordable Care Act both have important implications for asset building. As Ambika Panday of the Financial Clinic pointed out in a guest blog post, “medical debt remains the number one cause of personal bankruptcy filings. Many Americans have racked up tens of thousands of dollars of credit card debt trying to pay back medical bills or survive without a job.” In addition to increasing access to insurance and the financial protections that entails, the ACA will enable Medicaid participants to build up their savings by eliminating asset limits that cap the amount of savings applicants and participants may have.
Beyond ownership of financial assets such as a savings account, other types of assets can translate into a level of life stability that has positive health effects for children and their families. Housing is a particularly prominent example. For example, unstable housing is correlated with greater rates of hospitalization in young children. Families who were behind on rent reported forgoing necessary medical care for a child and children in these families were 52 percent more likely to be at risk for a developmental delay. Meanwhile, a survey of homeowners facing foreclosure in California, Florida, Illinois, and New Jersey found that “nearly half of them identified medical issues as being at least part of the cause” of the foreclosure. And while health problems are a frequent cause of foreclosure, they can also be a consequence: another study revealed an uptick in hospital visits in the wake of foreclosure. These studies suggest that strategies to promote stable housing, through accessible and affordable homeownership and foreclosure prevention efforts, would go a long way to addressing these health-related concerns.
The Asset Building Program has a long-standing interest in understanding the link between health and wealth. Like many policy issues, this is an area where it’s sometimes hard to discern the direction of cause and effect, so questions remain. Does having modest savings offer a buffer against health problems and if so, what level of savings is needed? In what ways does good health facilitate and enable more opportunities to build wealth? How can we utilize existing health-related systems (such as expanded access to health insurance or establishing financial coaching or other services in a health care context) to promote savings and financial stability? These are all questions worthy of further enquiry. As we take time to reflect on the 50th anniversary of the War on Poverty and envision our next steps, it’s vital to include a holistic perspective that incorporates what we’ve learned about the role assets play at mitigating health challenges.