Local Asset Poverty Index

 
  Click on map for LAPI data
The Asset Policy Initiative of California (APIC) developed the Local Asset Policy Index in 2005 to determine asset poverty rates at the city and county levels. Until now, analysis of asset poverty has occurred only at the national or state levels. The Local Asset Policy Index (LAPI) is the first tool of its kind to help local leaders understand asset poverty rates for their communities. It can be used to inform better policies, programs and strategies to address the chronic problem of generational poverty.

Assets are a critical component of a family’s financial wellbeing. Yet, the LAPI reveals that over two-thirds of all California counties are home to households with asset poverty rates of over 25%. These “asset poor” families do not have enough cash reserves or equity in their home or businesses to meet basic needs for three months during a period of joblessness, health emergency, divorce, or other unexpected financial hardship.

Some counties like Imperial, Los Angeles and San Francisco have asset poverty rates nearing 40%. And for some of California’s demographic groups, the LAPI is well over 50%. These figures have significant implications for the policy and program development among city and county policymakers and stakeholders across California.

How Do We Measure Asset Poverty?
Traditionally, poverty has been measured in term of income. Each year the US Census Bureau estimates the amount of income needed over the course of a year for households to meet their basic needs, i.e., the minimum caloric intake, acceptable housing, clothing, the ability to get to a job, etc. When a family cannot meet this basic financial threshold, they are living below the income poverty line. (Click here for a chart of the 2009 Poverty Guidelines).

Asset poverty, in contrast, measures the number of people who are getting by, but just barely. These households do not have enough cash reserves (banking accounts, stock, bonds equity in retirements savings, homes or businesses) to live at the poverty line for three months when their income has been disrupted. These “asset poor” families are just one layoff, medical emergency or divorce away from government dependence.

LAPI results are drawn from the Census and the Survey of Income and Program Participation (SIPP). Click here for a full explanation of the LAPI methodology.

Asset Poverty Needs to Be Localized
Much has been written about income poverty, but few studies have focused on the equally important measure of asset poverty. Public policies at all governmental levels rely on income poverty statistics to determine program development, budget allocations, and strategic planning for their working-poor populations. If we agree that income only tells part of the story, then these government policies are only addressing part of the problem. Incorporating the Local Asset Poverty Index into the pool of available local data allows elected officials, agency heads, funders, and non-profits to make more robust and effective policies, grants or programs to address the long-term economic security of their communities, which not only improves the lives of individual households, but also boosts local economies.

The LAPI Can Drive Policy
Current public policy intended to improve the lives of the working poor focuses on income supports. Grounded in existing income poverty data, these policies seek to raise income levels to match the cost of basic needs. They address the symptoms of poverty. But we also need to address the cure. Asset-building policies provide a remedy for the chronic condition of “being poor” in America. Saving for and investing in assets is a proven means of achieving economic self-sufficiency.

By analyzing asset poverty at the local level, the LAPI provides an impetus for changing the way we think about local anti-poverty and economic development strategies. The Local Asset Policy Index can be a very powerful tool for community leaders in the public and non-profit sectors by:

California has an opportunity to provide real solutions for the long-term financial success for our families. APIC’s Local Asset Policy Index, together with local asset-building champions, can help drive that discussion.