As we at Woodstock Institute remember Dr. Martin Luther King, Jr.’s legacy, we also must reflect on how much still needs to be done to achieve his vision of a society where the family into which you are born and the color of your skin do not determine your destiny. At this time, it is fitting that we think about the ways in which our work on financial justice issues can help to reduce inequality of opportunity and outcomes for lower-wealth people and communities, and for people and communities of color.
The Brookings Institution recently published an alarming blog by Richard V. Reeves (Five Bleak Facts on Black Opportunity) showing that over half of children born into lower-income African American families are likely to remain in a lower-income quintile. Even more disturbing is the projection that even African Americans born into higher income quintiles are at high risk of slipping back into lower quintiles. And the wealth of African American families are at levels below where they were in 2007. (Reeves’ video Is America Dreaming? on social mobility is a must-see.)
There are many reasons for these disturbing projections and many necessary solutions. Woodstock Institute does not work in all of the areas that require changes to address these issues, but our work in several areas can help to make a difference. For example:
1. Homeownership . For many American families, homeownership is their largest asset. While homeownership is not appropriate for or desired by everyone, our research and advocacy helps to ensure that all creditworthy people who want to be homeowners have that opportunity. We are working to ensure that they have access to safe, fair, and affordable mortgage loans. Our research has documented unequal access for people of color and for women to affordable, conventional mortgage loans and the disproportionate impact that toxic mortgage loans, foreclosures, and vacant properties have had in communities of color. Our advocacy for the creation of the Consumer Financial Protection Bureau (CFPB) and support for its strong rules on mortgage loans and servicing and strong enforcement of fair lending laws will expand fair access to mortgage credit and fair treatment from servicers. Those initiatives will increase chances for lower-income borrowers and people of color to build wealth and establish homes in communities that provide educational, cultural, and other advantages that boost economic mobility. Our advocacy with community partners for banks to meet their obligations under the Community Reinvestment Act to serve the banking and credit needs of low- and moderate-income people and communities helps to ensure that everyone has access to safe and affordable bank accounts and other products, mortgages, and small business loans, and to promote investments in underserved communities.
2. Retirement Savings. After home equity, retirement savings tend to be the next biggest asset for American households. Our research has documented that half of all private-sector workers in Illinois lack access to an employment-based retirement savings plan and, as a result, likely have little or no retirement savings. Most of the workers who lack such access work for smaller employers and at lower wages than workers who have access to employment-based retirement accounts. Although individuals can purchase Individual Retirement Accounts (IRAs) on the open market, few do. As a result, we face an impending retirement tsunami of older Americans with little or no retirement income to sustain them except for Social Security benefits. Our Coming Up Short report and advocacy with Illinois Asset Building Group, AARP, and others, resulted in Illinois becoming the first state to pass a law which creates a Secure Choice Savings Program. That program requires most employers that do not offer a retirement plan to automatically enroll workers and send payroll deductions to a Secure Choice Roth IRA account that the worker keeps regardless of job changes. Several other states are pursuing similar laws, which, if adopted, will result in millions more workers having retirement savings, thereby supporting local economies and reducing burdens on government. Eventually, these state innovations will push the federal government to adopt a similar plan that goes beyond the Obama Administration’s laudable but voluntary myRA plan.
3. Higher Education. For people born into lower-income families, often their best chance for upward economic mobility is acquiring postsecondary education or training. Our work on the Illinois Children’s Savings Account Task Force helped to lay the groundwork for future consideration of a statewide or local program that creates an account for all children to pursue that goal. Already, several states, counties, and cities have adopted such programs and research has shown that having an account in a child’s name dramatically increases the likelihood that the child will attend and graduate from college. In the meantime, our advocacy to expand access for lower-income families to participate in Illinois’ Bright Start 529 college savings plan will make it easier for more families to save for higher education and raise their children to expect to attend college. New ideas such as covering the cost of two years of community college with a fee on liabilities for financial firms with more than $50 billion in assets and higher taxes on very high income individuals (announced as part of President Obama’s State of the Union address) deserve serious consideration if we are truly to be a land of opportunity for all. Our research and advocacy on student loan debt will highlight issues that trap a disproportionate number of students of color in debt from poor quality for-profit schools that do not increase their chances to move up the ladder. Our advocacy will help protect college students from high-cost campus cards. Future research will explore how student debt impacts borrowers’ ability to build wealth through homeownership and retirement savings.
4. Safe and Affordable Financial Products and Services. The poor pay more for nearly everything, including financial services. Our research has consistently shown how high-cost consumer financial products, such as payday loans, installment loans, prepaid and payroll cards, auto title loans, and overdraft, are targeted to lower-income people and tend to trap them in cycles of debt. Our trainings help people understand how they can submit complaints and stories to the CFPB about their experiences with financial products and providers and how they can participate in the process of creating new rules that protect consumers. Our research and advocacy with financial institutions, regulators, transit agencies, and others has resulted and will result in increased consumer protections, decreased costs, and better disclosures that promote competition and comparison shopping in a healthier marketplace. As a result, workers and benefit recipients will keep more of their money and be in a better position to save for emergencies, education, entrepreneurship, down payment, retirement, or other goals.
These are just a few examples of how Woodstock Institute seeks to reduce inequality of opportunity and outcomes and to advance economic security and mobility through our financial justice research and advocacy. I hope that you will engage with us and support our efforts. Please contact me, visit our website, and join our mailing list for information about upcoming events, trainings, and opportunities to engage in advocacy on behalf of low-wealth people and communities of color.