Asset poverty is a hunger issue

March 22, 2016
Swiping a card has replaced buying food with actual food stamps, but safety-net programs are still essential. Brian Duss for Bread for the World.

By Marlysa Thomas, Bread for the World Institute

To ultimately end hunger, the United States must end one’s vulnerability to hunger. As such, a strong safety net needs to include emergency programs such as local food pantries and SNAP (the Supplemental Nutrition and Assistance Program, formerly known as food stamps) as well as income support policies such as the earned income tax credit (EITC). But ending hunger for more than just a week or a month at a time requires much more than safety nets.

The anxiety of never being sure of where the next meal is coming from is part of living with hunger, a point captured in the federal government’s term “food insecurity.” Ending vulnerability to hunger and poverty for millions of U.S. households requires a fundamental shift in thinking -- to an approach that prioritizes the efforts of low-income households to build assets and work towards financial security.

Assets and Barriers

Building assets can help low-income families become financially secure for the future, which minimizes their likelihood of facing hunger in the future. Families with some assets are more financially secure and at less risk of hunger. Assets include a variety of resources, such as employee benefits (health care, paid leave), good credit, a few months’ worth of savings for living expenses, a college fund, or capital to buy a house or start a business. Having assets is an immense help when family members face unexpected hard times such as losing a job. A savings cushion equivalent to three to six months of expenses or the ability to refinance a house (to lower the mortgage payments and increase cash available for a family) can help prevent eviction, homelessness, and hunger. Assets are the assurance that families need to prevent them from hitting rock bottom during financial emergencies.

It is not surprising that the biggest barrier to building assets is poverty – more specifically, jobs that don’t pay a livable wage and don’t offer benefits. Another barrier is that low-income households often have poor credit and/or debt from predatory loans, such as payday loans. Low-income communities also have a harder time than others in using banks and accessing consumer-friendly financial products and credit.   

Approximately 10 million low-income working families have jobs that do not provide employee benefits. For example, 40 percent of workers in the private sector do not have paid leave. Without paid sick leave, illness means lost income for each hour missed, in a household that is already financially vulnerable. According to the Economic Policy Institute, low-income single parents will fall below the poverty line if they miss more than three days of work in a month to care for themselves or their children. Households already below the poverty line are at an even greater risk of hunger if someone gets sick.

In most states, people of color, most specifically African-American, Latino, and Native American households, are two to three times as likely to experience hunger or poverty as their white counterparts. People of color are increasingly concentrated in lower-paying jobs and are more likely to lack employee benefits. They are also more likely to have expensive medical needs (since they have less access to preventive healthcare, safe work environments, and nutritious foods), yet lack the income to pay for treatment. Fifty-five percent of African-Americans and 43 percent of Latinos have credit card debt from medical expenses because they were either uninsured or underinsured.

Few Options in Emergencies

High credit card balances or poor credit can prevent people from borrowing money in emergencies. We see that in many low-income communities, particularly in communities of color, the “solution” for accessing money in emergency times is going to a local predatory lender - a financial institution that makes loans primarily to low-income people at very high interest rates. Low-income people of color are at higher risk of being targeted for these loans. Borrowers often repay more than 400 percent of the original loan in interest alone. 

A study by the Center for Financial Protection Bureau found that the majority of low-income people who had to take out such loans could not pay for both the loan and interest and basic living expenses until their next paycheck. As a result, borrowers were very likely to take out another loan to cover the interest on their first loan. About two-thirds of those surveyed had seven or more payday loans. The median borrower paid $458 in fees alone for $350 in non-churn principal. Many low-income borrowers who need income support to pay living expenses become caught in a cycle of debt and their credit is damaged as a result — which can keep many from being approved for a mortgage, business loan, or other assets.

Lacking access and support for building assets is a hunger issue. While SNAP, the EITC, and other programs are needed and helpful, low-income families need more to fight hunger. Low-income families, and especially low-income households of color, need targeted support to help them build assets and become less vulnerable to hunger. Ending this vulnerability, however, will require expanding banking services to the many low-income households that currently lack them; a livable minimum wage; more jobs with employer-sponsored benefits (including paid sick leave and health care); stricter regulation of predatory lenders that concentrate in low-income communities; and expanding access to consumer-friendly products that help people build credit or rebuild damaged credit. All of these factors will contribute to helping low-income households build assets, save for the future, and decrease their likelihood of becoming hungry.

Marlysa Thomas is the domestic advisor for policy and programs for specific populations at Bread for the World Institute.

It is not surprising that the biggest barrier to building assets is poverty – more specifically, jobs that don’t pay a livable wage and don’t offer benefits

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