Old Assumptions, New Realities: Ensuring Economic Security for Working Families in the 21st Century

5. Asset-Based Policies and Financial Services: Toward Fairness and Inclusion

CHAPTER ASSET-BASED POLICIES AND FINANCIAL SERVICES: TOWARD FAIRNESS AND INCLUSION MICHAEL SHERRADEN As the editors of this volume suggest in the opening chapter, we may be in an era of social policy transformation. Policies that were put into place during the twentieth century, in the United States and abroad, today are experiencing strain, questioning, and revision. Although typically discussed in the political terms of left and right, the sources of policy strain are primarily technological and economic.1 Social policies of the twentieth century were designed for an industrial society with low-skilled and relatively stable labor markets. When a household was without labor income due to death, disability, job loss, age, or some other factor, social policy was designed to provide income to support basic consumption. These policies were successful in many respects, notwithstanding the fact that America’s social policy was never as comprehensive or generous as most policies in Western Europe. In the twenty-first century, we live in a world where technological changes have produced very different labor markets. Greater skills are needed, jobs are less stable, more than one job is often required to support a middle class lifestyle, and income inequality is growing (Osterman, this volume , chapter 4; Stoll, this volume, chapter 3). Jacob S. Hacker (2004, 2006; 125 5 this volume, chapter 2) finds increased income volatility and downward mobility, with income instability in the mid-1990s to be several times higher than in the early 1970s. He also points out that employment-based social benefits and government programs have eroded, and risks have shifted from collective intermediaries (governments, employers, and insurance pools) to individuals and families. Although specifics might be debated, this key observation is accurate. What we are now witnessing may be a major revision in the social contract that was worked out for the industrial era. In this environment, the growth of income inequality and increased risks shouldered by individuals should certainly be understood as an issue of social injustice and human hardship—but also as an issue of a rapidly changing political economy in the information age. In this environment, the direct and indirect income supports suggested by Hacker, Sandfort, Heymann, and other authors in this volume are fundamental. But at the same time, it is no longer clear that collective forms of income support will be the singular policy response to household economic and social challenges going forward. In the first years of the twenty-first century, there is declining public and political support for means-tested programs in the United States and many other countries, and perhaps even declining support for some types of social insurance, a primary pillar of the twentieth-century welfare state. Although usually discussed in terms of values and politics, the underlying dynamics of change are operating on the larger stage of technology and history. Industrial-era policies are being questioned, and new policy directions are being considered and explored in many countries. No one can predict the outcome of this era of social policy transformation, nor can we even be optimistic that new policies will be constructive for families, communities, and nations. So far, we have reason to be disheartened and pessimistic about what is happening . We live in a time of increased inequality, hardship, and uncertainty. At the same time, there are opportunities for positive change. As with the creation of welfare state policies in the twentieth century, there is a sense that major new reforms may be required, although we do not know what they will be. Searching policy discussions, creative innovations, and applied research projects are under way. In this volume and elsewhere, many committed people and bright minds are engaged in this task. ASSET-BASED POLICY AND LOW-INCOME HOUSEHOLDS As one part of the larger tapestry of policy transformation, an active discussion of asset inequality and asset-based policy arose in the United States in the 1990s (Oliver and Shapiro 1995; Sherraden 1991). This has led to a 126 Old Assumptions, New Realities growing body of theory, policy innovation, and research. In simple terms, asset-based policy suggests that individual, household, and community well-being (or “welfare”) is derived not solely from a certain level of income and consumption, but also from building assets to invest in life goals and to enhance long-term economic stability and social protections. Asset building is viewed, in part, as a constructive response to information age economies and...