Economic security throughout the life course is linked to income and asset ownership. Households that are poor or low-income have a hard time building assets and, as a result, face a significant barrier to long-term financial stability. According to a recent report by the Corporation for Enterprise Development (CFED), asset poverty is on the rise in North Carolina.
More than 1 in 4 households in the state are “asset poor,” meaning they do not have adequate resources to keep them out of poverty for three months in case of a layoff, a reduction in hourly wages, or an emergency. Nearly 1 in 2 households are “liquid asset poor,” meaning they do not have immediate access to savings. Even more unsettling, the share of asset-poor households is much higher for households of color.
Asset poverty is distinct from the traditional federal poverty threshold—which was $22,314 for a family of four in 2010—as it measures a household’s financial vulnerability as well as the ability to access opportunities requiring significant upfront investments
What qualifies as an asset or a liquid asset? If you listened to Fergus Hodgson, the Director of Fiscal Studies at the John Locke Foundation, on Carolina Journal Radio (audio is included below), you may believe that household appliances are assets.
Contrary to the information shared in this recording, household appliances—such as televisions and microwaves—are not assets. As succinctly pointed out by the Center for American Progress, these household appliances have limited re-sale value and cannot be sold to lift a struggling family out of poverty. Assets, on the other can, can help families fend off poverty.
Assets are stocks of resources that people accumulate over time and are a means to build wealth. Because they are investments, assets generate returns and are a source of security against unexpected economic events. Examples include home ownership, savings accounts, retirement savings accounts, and advanced college education.
Income and asset poverty exist in North Carolina and they are a barrier to economic opportunity and greater stability and prosperity in the broader economy.