Against the backdrop of economic expansion and one of the greatest stock market rallies that Wall Street has ever known, it’s easy to imagine that the rising tide of prosperity has lifted all boats — or at least all bank accounts for working Americans. And, indeed, many have benefitted by building wealth, paying down debt, and taking steps to secure their financial future.
A glimpse beyond the leafy neighborhoods of upwardly mobile America, however, reveals a painful truth: 40 million households in low-income communities have been left behind.
While the overall U.S. poverty rate declined and incomes rose rapidly in 2015 and 2016, the most recent data available, many of America’s poorest households fell deeper into poverty, according to a Pew Research Center analysis of U.S. Census Bureau data.
The share of the U.S. poor population in “severe poverty,” which is defined as those with family or individual incomes below half of their poverty threshold, reached its highest point in the last 20 years in 2016, rising to nearly 46 percent from 40 percent in 1996.1
According to the federal government, the poverty level for 2019, which is used to determine eligibility for public assistance, is $25,750 for a family of four in the 48 contiguous states and the District of Columbia. The poverty line is $32,190 in Alaska and $29620 in Hawaii.2
The challenges run deep
Families that live at or below the poverty line face countless challenges that hinder their ability to help themselves. They struggle to find affordable housing near public transportation, child care that can accommodate unpredictable work schedules, and jobs that pay sick leave, a particular problem for single moms and a population that disproportionately presents with chronic illness.
Many who live in the communities left behind also lack social capital, the term used to describe the support that many receive from their network of peers, including caregiving reciprocity, job recommendations, help navigating the educational system, and guidance on asset accumulation.
Importantly, low-income households also often lack access to traditional banking services that might help them to save for unexpected emergencies — or a down payment on a home. Loans with favorable interest rates are unavailable or difficult to qualify for, making it tough to establish credit or start a business to boost their income. ( Learn more: Watering the financial desert )
As a result, many are forced to rely on alternative financial tools, such as pawnshops, high-interest payday lenders, and family money pools to make ends meet, all of which perpetuate the cycle of debt. ( Learn more: Tanda, hui, or ayuuto? The money pool way )
Geography
The geographic distribution of impoverished communities has also shifted dramatically.
According to the Pew Research Center, the South continues to be home to many of the nation’s lowest income households, but to a lesser degree than it did half a century ago when President Lyndon B. Johnson launched the War on Poverty.
In 1960, half (49 percent) of poor Americans lived in the South compared with 41 percent in 2010. Today, the communities that are left behind are primarily concentrated in large urban centers such Chicago, Los Angeles, and New York.
Steps to combat poverty
The solutions are not simple. Politicians and pundits disagree on how to combat poverty in a meaningful way.
Some advocate strengthening the social safety net with public programs such as welfare, food stamps, and unemployment insurance. Others seek bigger tax credits, a higher minimum wage, or job training. Most, however, agree that education (both academic and financial) plays a pivotal role.
In this, businesses can help. Banks, lenders, and other financial service providers can prioritize underserved communities. They can work with local leaders to optimize resources and help families navigate the public and private programs that already exist.
MassMutual Foundation’s Live Mutual Project, for example, is a community and social impact program designed to empower households in underserved communities. MassMutual collaborates with local leaders to coordinate resources and build the capacity of these organizations to better support their ability to help families living in poverty secure their future and protect the ones they love, while raising awareness of the many barriers to economic opportunity.
By leveraging the company's free term life insurance program, LifeBridge , children of income-eligible families would be able to pay for their education if their insured parent or guardian passed away during the term of the policy. MassMutual pays the premiums for these $50,000, 10-year term life insurance policies.
MassMutual also brings interactive financial literacy education to middle and high school students in low-income communities across the country through its FutureSmart program, a partnership with EverFi. FutureSmart is on track to reach more than 2 million students and their families by the end of 2020.
Together, businesses and community leaders can make a difference, helping households in poverty achieve financial well-being and creating sustainable solutions that ensure that no community in America is left behind.
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1 Pew Research Center, “Americans deepest in poverty lost more ground in 2016,” Oct. 6, 2017.
2 U.S. Department of Health and Human Services, “2019 Poverty Guidelines,” 2019.