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The Financial Diaries: How American Families Cope in a World of Uncertaintyby Jonathan Morduch and Rachel Schneider
A well researched analysis that shows that many who are poor are poor for short periods. And that public assistance and other financial instruments are not well-suited for this dipping in and out of poverty, and to keep people on solid financial footing permanently. Key passages: "We asked household how quickly the money in their bank account would be spent. On average 72% of the money in their bank accounts was intended for needs within the next 6 months. 83% would be spent within a year. Only 10% was being saved for needs three or more years away. In other words, the households were saving, but not for the long term. Money comes in, but it goes out “soon” for the necessities of life." "Unsteady income means dipping in and out of poverty - not in poverty the whole year. When have to reapply for food stamps and dipping in and out, it becomes cumbersome." "Most poor household in our data were not, in fact, poor during the entire study year. Only 8% of poor households were always below the poverty line. The other 92% saw their incomes rise above that line an average of three months during the year." "If your interest is in aiding those were poor right now, the persistently poor should command much of your attention. But if your interest is also in aiding all those who will be poor this year, or reducing the national poverty rate, focus must expand to include the tens of millions of households that are sometimes poor." "When poverty is the result of volatility and illiquidity, public assistance should be provided with a less onerous application process that relies on broader, yet more easily gathered, data. Applying for public benefits today is often clumsy and slow. It can require standing in lines, filling out extensive forms, parsing complicated eligibility criteria the vary for each type of public benefit, and answering burdensome follow-up questions. This is expensive not only for applicants but also for taxpayers." |
