Research by Author & Topic

Publications by Signe-Mary McKernan on Poverty and Safety Net

Income inequality understates the size of the economic gap between whites and minorities in the United States. In 2010, whites on average had two times the income of blacks and Hispanics, but six times the wealth. Analyses of wealth accumulation over the life cycle show that the racial wealth gap grows sharply with age. Wealth isn't just money in the bank, it's insurance against tough times, tuition to get a better education and a better job, savings to retire on, and a springboard into the middle class.

Despite the Great Recession and slow recovery, the American dream of working hard, saving more, and becoming wealthier than one's parents holds true for many. Unless you're under 40. Stagnant wages, diminishing job opportunities, and lost home values may be painting a vastly different future for Gen X and Gen Y. Today's political discussions often focus on preserving the wealth and benefits of older Americans and the baby boomers. Often lost in this debate is attention to younger generations whose wealth losses, or lack of long-term gains, have been even greater.

Nearly half of children born to poor parents remained poor half their childhoods. Black children are especially disadvantaged: two-thirds of poor black newborns are persistently poor. Children who are poor early in life (age 0-2) are 30 percent less likely to complete high school than those first poor later in childhood, even after controlling for poverty duration and other factors. Reaching vulnerable children at birth is vital, as a child’s early environment can affect brain development. This factsheet summarizes the report “Child Poverty and Its Lasting Consequence".

One in six newborns were born poor over the past 40 years, and nearly half remained poor half their childhoods. These persistently poor children are nearly 90 percent more likely than never-poor children to enter their 20s without completing high school and are four times more likely to give birth outside of marriage during their teenage years. Children whose parents did not complete high school are less likely to complete high school themselves. This paper examines the magnitude of child poverty, family characteristics related to childhood poverty persistence, and childhood poverty’s lasting consequences.

Large differences in wealth holdings exist between white households and their African American and Hispanic counterparts. This factsheet summarizes key findings from a study that explored the impact of private transfers on racial and ethnic wealth gaps. It found that small cash transfers had little or no effect on wealth holdings, but in the case of African American households large inheritances or gifts explained about 12 percent of the difference in wealth between them and white households.

Millions of U.S. adults are unbanked and lack access to safe financial accounts. The MyAccountCard pilot program offered low-income adults a prepaid card account that could be used for electronic delivery of their tax refunds and everyday financial transactions. Key findings from the evaluation, designed to test different account features, include (1) the card account appealed most to its target population: likely unbanked individuals were three times more likely to take-up the card; (2) individuals are price sensitive: charging a monthly fee decreased card take-up by roughly 40 percent; and (3) the savings account as designed in this pilot was not perceived as valuable.

This report looks closely at what happened to assets, debts and home equity for families living in low-income neighborhoods during the Great Recession, using data from the longitudinal Making Connections Survey. We find that both average savings and debt amounts increased between 2005/06 and 2008/09, but asset and debt levels remained lower for vulnerable families, and low-income families disproportionally lost equity during the crisis. Yet even in 2008/09, home equity was substantial and an important component of wealth ($66,000, more than four times as much as families had in savings) for the nearly half of families who were homeowners.

Using longitudinal Making Connections Survey data on 2,500 families in low-income neighborhoods, this fact sheet finds that access to credit and residents’ perceptions of their neighborhood are all related to wealth holdings, even after controlling for household characteristics. Residents who believed their neighborhood had shared values increased their total debt and equity from 2005/06 to 2008/09. High rates of subprime lending were associated with less saving and borrowing, perhaps signaling less access to credit. Our findings suggest that both household and place characteristics matter to wealth families accrue and illustrate the importance of paying attention to place and local conditions.

Can the poor accumulate assets? Longitudinal data from the Panel Study of Income Dynamics and programs targeted at helping families accumulate assets provide empirical evidence that they can. Following families over a 13-year period reveals that, even among those poor more than half the time, over 40 percent increased their net worth. And following low-income, asset-poor families over time revealed that 12 years later 44 percent saved enough to escape asset poverty. This shows that across the life course a substantial proportion of poor and low-income families do manage to accumulate assets.

Based on our review and synthesis of the individual development account (IDA) literature, findings in this report include that IDA accounts (in the short-term, five years after program entry) help low-income families become homeowners, start or expand a business, or pursue secondary education. Studies to date have found no relationship between IDA program participation and net worth. The report reviews empirical evidence on the effect of IDA program participation and project design features on outcomes and highlights remaining gaps in the literature.