The federal government shutdown taught us some important lessons.
April 10, 2019
As 2019 began, the federal government needlessly imposed income volatility on federal workers and contractors, threatened the economic security of families, and laid bare wealth gaps that result from the legacy of racism in this country and continue with systemic inequity.
The government shutdown exposed two fault lines in the economy. Low- and middle-income households do not hold enough assets to weather economic disruptions, and inequity exacerbates these families’ lack of assets. Moreover, necessary tools and systems are not in place to provide access to solutions.
Most households lack the savings to survive the loss of just two paychecks. Pew reports that 1 in 3 American families have no savings, and 41 percent couldn’t easily access $2,000 if need be.
Like millions of Americans who live paycheck to paycheck, Allie and Chris rely on the safety net to get by. Their one-year-old daughter, Harper, was born prematurely at just 26 weeks and weighed only one pound at birth. Allie left her job as a social worker to take care of their daughter. A nearly year-long hospital stay forced Allie and Chris to deplete their savings. The family uses Medicaid to afford the medical equipment and therapy that Harper needs.
Chris puts food on the table by working at an IRS facility. Chris wasn’t paid during the shutdown. “We had a nest egg. We used that nest egg,” Allie told ABC News. “Now, you — the government — is creating another traumatic event for us.”
During the shutdown, federal workers and contractors showed us what most Americans would do if thrust into a similar situation: they exhausted savings and raided money saved for retirement, relied on credit cards, sold their belongings, and turned to high-interest payday loans. They sought food pantries, fell behind on rent, and made difficult choices to provide for their families.
Because of systemic and historic gender and racial discrimination supporting the creation of wealth gaps, families of color have significantly less liquid savings easily available to meet needs should an emergency arise. Black and Latino families respectively have on average five and eleven days of liquid savings, as opposed to white families that have 31 days. In large part because of the gender wage gap, female-headed households are more likely to have less or even nothing in savings.
Whether employees work in the public or private sector, they should have the opportunity to prosper economically. Unpredictability is no way to build opportunity, prosperity or, much less, a middle class. Increased productivity and return on investment are important values — but both business owners and employees should be the beneficiaries of these gains. Workers must be paid in a timely way. We must do better.
First, we must ensure a robust and strong safety net. We should invest in programs like the Supplemental Nutrition Assistance Program (SNAP), which effectively lifts low wage working families out of food insecurity. Key healthcare support programs like Medicaid, which helps millions of Americans stay healthy so that they can work and ensures the health of many children of working families, should be strengthened and expanded. And we can invest in communities by supporting and expanding refundable tax credits, like the Earned Income and Child Tax Credit. More importantly we need state innovation to provide vehicles for retirement savings such as Illinois Secure Choice and targeted tax incentives to new homeowners and to renters. By helping parents provide stability and security for their children, we are setting the next generation up for success.
We should also focus on strategies that help families become more economically stable such as savings for emergencies and retirement, sick days and paid leave for better health outcomes, post-secondary education and loan debt relief, entrepreneurship, and social networks. Asset building is strength building. It is how individuals, families, and communities gather the resources that will move them toward economic well-being, for now and for years to come. Families with assets are more likely to remain stable through financial emergencies, stay in their homes and neighborhoods, and even take risks that result in better jobs or new businesses.
Join the Shriver Center in the movement to end poverty and economic instability.
This blog is based on a piece Joseph A. Antolín wrote for the Asset Funders Network, www.assetfunders.org, of which he is the executive director. Antolín also serves on the Shriver Center’s governing board.
Our laws and policies must support people by ensuring fair work at a living wage and by providing the income supports families need to be successful.