Hypothesis Confirmed: Assets Promote Economic Security

While it has long been suspected that having access to assets helps families enhance their economic security, there have been few empirical studies which address this relationship. Certainly, it makes sense intuitively but when I’ve been asked over the years for a bit more data I had to respond that this was actually one of the research frontiers that required more exploration. However, I’ll be ready the next time the issue is raised because a recent article from my colleagues at the Urban Institute has weighed in on the matter.

Signe-Mary Mckernan, Caroline Ratcliff, and Katie Vinopal of the Ownership and Opportunity Project have published their findings from a very significant study which sought to address whether assets help families cope with adverse events. Their examination of the role of assets in families’ economic ad material stability used data from the 1996 and 2001 SIPP panels, which is about the best data that is available on the economic state of low-income households.

Their entire paper is worth reading, especially because they get into some detail which distinguishes the impact of different types of adverse event (such as job loss, health event, or family breakup) and different types of hardship (such as food insecurity, ability to pay bills, and general deprivation). Taken together, their results strongly suggest that the presence of assets on a household balance sheet mitigates hardship, even for families with low incomes.

Specifically: Families with assets are 23 percentage points less likely to suffer from general deprivation than asset-poor families after experiences a negative event; 9 percentage points of this difference are related to income, leaving 14 percentage points related to asset holdings. That seems to me like a fairly strong confirmation of the “assets matter” hypothesis, one that should encourage additional exploration into public policies that can help families build up the kinds of asset cushions that can make a real difference in their lives.