Leveraging Mobility: How Employment Builds and Protects Family Wealth and Security

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Leveraging Mobility: How Employment Builds and Protects Family Wealth and Security. February 19, 2014 Brought to you by: Center for Financial Security at the University of Wisconsin- Madison. Our Presenters. Erin Currier Director, Economic Mobility Project The Pew Charitable Trusts
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Leveraging Mobility: How Employment Builds and Protects Family Wealth and Security
  • February 19, 2014
  • Brought to you by:
  • Center for Financial Security
  • at the University of Wisconsin- Madison
  • Our PresentersErin CurrierDirector, Economic Mobility ProjectThe Pew Charitable Trustshttp://www.pewtrusts.org/Hannah ThomasSenior Research Associate, Institute on Assets and Social Policyhttp://iasp.brandeis.edu/Ray BosharaDirector, Center for Household Financial Stability Federal Reserve Bank of St. Louishttp://www.stlouisfed.org/household-financial-stability/events/?id=507Economic Mobility in AmericaErin Currier, Director, Economic Mobility ProjectFebruary 19, 201468%68%Enduring American Optimismbelieve that they are in control of their economic situationsay that they have achieved or will achieve the American Dreambelieve that their own kids will be at least as well off as they are nowsay they earn enough or will earn enough to live the kind of life they wantbelieve they will be better off 10 years from now68%61%54%All Adult Children84%Children raised at the top of the income distribution Children raised in the middle of the income distributionChildren raised at the bottom of the income distributionGlass Half Full: 84% of Americans Have Higher Family Incomes Than Their Parents70%88%93%Glass Half Empty: Americans Raised at the Top and Bottom are Likely to Stay There as Adults126%85%74%89%98%$89,700 and above$39,800 and above$59,300 - $81,700The Distance Between the Rungs of the Income Ladder Has Widened Over the Past Generation$30,300 - $39,800$44,00 - $59,300$23,400 - $30,300$28,900 - $44,000$15,600 - $23,400Less than $28,900Less than $15,600% Change in Median IncomeAdult Child GenerationParent Generation77%66%95%88%89%71%91%86%There is a Black-White Gap in Absolute MobilityWhitesRaised in top 20%**Blacks**Raised in middle 20%Raised in bottom 20%Parent Generation, Bottom 20%Parent Generation, Middle 20%32%33%53%Blacks Are More Likely to Be Stuck in the Bottom Blacks Are More Likely to Fall from the Middle56%White Adult Child GenerationWhite Adult Child GenerationBlack Adult Child Generation27%Black Adult Child GenerationKey Mobility Drivers
  • Financial Capital
  • Human Capital
  • Social Capital
  • Financial Capital – Savings and WealthFinancial Capital – Savings and WealthIncome and wealth mobility go hand-in-hand. Of those who moved up the wealth ladder:Leveraging Mobility: How Employment Builds and Protects Family Wealth and Security
  • Hannah Thomas, Ph.D.
  • February 19, 2014
  • Outline
  • Introducing the Leveraging Mobility Project and the context of the study
  • Employment Capital
  • What is it?
  • Stories of how it was important to families
  • Emerged as one of the biggest players in driving family’s accumulation of wealth
  • When it wasn’t present families couldn’t build wealth
  • Policies that can help build employment capital
  • How do working and middle class families use assets to advance security and mobility?Or, how do they struggle to gain ground in the absence of assets?The Leveraging Mobility ProjectLongitudinal Interview Study – 1998 and 20101998 sample 1802010 sample 137Half white and half African-AmericanThree cities across U.S.East CoastWest CoastMid-WestBaseline families with kids aged 3-10 years oldUnique Longitudinal Data-Set
  • 2010 families
  • Adults between 40 and 60 years old
  • Kids at end of high school, working, or at college
  • Questions included information on:
  • Education histories
  • Aspirations for future
  • Financial situation (income, wealth)
  • Work history
  • Extended family financial and non-financial assistance
  • Wealth increased as a result of:Families incomes increasingEmployment benefitsFamily assistance through financial gifts or inheritanceExtended family financial independenceRising home equityOverall Trends
  • One third of families saw their wealth depleted
  • Interaction of multiple variables
  • Health problems
  • Change in marital status
  • Unemployment
  • Decrease in income
  • Supporting kin networks
  • Characteristics of employment facilitated a pathway to accumulating wealth.Not everyone has access to the same kinds of jobs.The Role of Work in Building and Protecting WealthEmployment Capital: What is it?Income increases1998: $75,0002010: $160,000Employment capitalAccess to retirement benefits, health insurance, life insuranceLongevity and stability in positionPaid sick and vacationSeverance payMargaret DoveBuilding Wealth Through Employment CapitalAnsy AdamsEducation benefitJob promotionsTuition benefit for both kidsLaticia CurleyJob stabilityMatched retirement savingsBuilding wealth through Employment Capital
  • “Yeah, my 30 years… was [my children’s] college savings plan.”Ansy Adams
  • Retirement savings“What’s that? Dying? Expiring?”Felicia and Simon WardHealth Insurance2010- 1 in 5 families with medical debt“We can’t afford to get sick”Darline OxfordWhen Employment Capital is Missing…
  • Job Flexibility
  • “you’re always risking lying about it, or whatever you’re doing to sort of accommodate your family and be a good mom, versus working hard and making money.”
  • Sandy Doherty
  • Consistent work
  • Lori Meador used her retirement savings between employment
  • Who is missing employment capital?
  • Self-employed workers
  • Part-time workers
  • Low-wage workers
  • Certain occupations less often see employment capital
  • Incentivize and encourage long-term saving plans and health care utilization for employees across income levelsIncrease ease of access to and portability of retirement accountsEstablish minimum employment capital standardsProvide publicly run marketplaces for smaller employersRequire employment capital opportunities to be made available to all workers employed on behalf of a firm Strengthen access to worker representation in the workplacePromote job sharing and job flexibility to reduce work-family conflictsMandate a minimum number of sick and vacation daysPolicies that Build Employment CapitalLeveraging Mobility: How Employment Builds and Protects Family Wealth and Security Center for Financial Security Webinar February 19, 2014Ray BosharaDirector, Center for Household Financial Stability Federal Reserve Bank of St. Louiswww.stlouisfed.org/hfsFamily Wealth Losses from the Recession
  • Young families
  • Under 40: -43.9%
  • Age 40-61: -17.4%
  • Historically disadvantaged families
  • African-American and Hispanic (HDM): -37.2%
  • Whites, Asians and other minorities (WOM): -11.2%
  • Less-educated families
  • Less than high school degree: - 26.1%
  • High school grads: -22.9%
  • Source: Survey of Consumer Finances
  • HDM: Historically Disadvantaged Minorities
  • WOM: White or Other Minority
  • 28Thrivers vs. Strugglers – An Uneven Recovery
  • Headlines: we have more than recovered the $16 trillion of wealth lost in the recession, and that household “deleveraging”—paying down debts and rebuilding savings—is over.
  • True for one-quarter of the population, the “thrivers.”
  • Not true for “strugglers”: the three-quarters of the population who are less educated, non-white, and younger (under age 40); for some, the lost wealth may be permanent.
  • Thrivers have a disproportionate share of stock market wealth, which has contributed well over 80 percent to the recovery. Meanwhile, housing, where most strugglers have their wealth, has contributed only 12 percent.
  • This helps explain why the recovery feels sluggish to most Americans.
  • Family Net Worth, 2013Family Net Worth by Age, 1989-2013Policy Implications
  • Consider key drivers of balance sheet health—age, race/ethnicity, and education—in targeting of public resources.
  • Through employers and others, help families meet liquidity needs through unrestricted savings and quality shorter-term credit products.
  • Encourage employers to offer automatic deductions for longer-term savings, especially post-secondary education and retirement. Consider helping to pilot the MyRA proposal.
  • Work toward diversifying family balance sheets beyond homeownership.
  • Start building healthy balance sheets as early in life as possible, ideally in schools linked to 529 college savings plans.
  • Q&AErin CurrierDirector, Economic Mobility ProjectThe Pew Charitable Trustshttp://www.pewtrusts.org/Hannah ThomasSenior Research Associate, Institute on Assets and Social Policyhttp://iasp.brandeis.edu/Ray BosharaDirector, Center for Household Financial Stability Federal Reserve Bank of St. Louishttp://www.stlouisfed.org/household-financial-stability/events/?id=507Please join the Center for Financial Security on March 25, 2014 Noon-1pm CT for our next webinar onTax Code Knowledge & Behavioral Responses among EITC Recipientswww.cfs.wisc.edu/Please contact Hallie Lienhardthebennett@wisc.edu or 608-890-0229 with questions.
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