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FederalReserveBankofBoston
UnionofMinorityNeighborhoods
HowardRyeInstitute
AnthonyPoore
AnaPatriciaMuñoz
KailiMauricio
RobertClifford
November21,2015
“TheviewsexpressedheredonotnecessarilyrepresentthoseoftheFederalReserveBankofBostonortheFederalReserveSystem”
FederalReserveBankofBoston
REGIONAL&COMMUNITYOUTREACH
2
Mission
TheFederalReserveBankofBostonpromoteseconomic
growthinlower-incomecommunitiesbyconvening
stakeholders,conductingresearch,andidentifying
approachesthatwork.
FocalAreas
SmallerIndustrialCities–WorkingCitiesChallenge
HouseholdFinancialStability–Children’sSavings
Accounts
WorkforceDevelopment-FintechInternshipProgram
AnaPatriciaMuñoz
RegionalandCommunityOutreachDepartment,FederalReserveBankofBoston
TheviewsexpressedheredonotnecessarilyrepresentthoseoftheFederalReserveBankofBostonortheFederalReserveSystem.
3
THECOLOROFWEALTHINBOSTON
www.bostonfed.org/color-of-wealth
4
KennethGalbraith
“Societiesneverreallybecome
effectivelyconcernedwithsocial
problemsuntiltheylearntomeasure
them”
Importanceofwealth
Wealthallowsfamiliestomakeinvestmentsineducation,andbusiness
creation,andtocoverexpensesincaseofmedicalemergenciesorjobloss.
Assetpovertyisshowntobemorepersistentthanincomepoverty.
Networthistheeconomicindicatorinwhichwhitesandcommunitiesofcolor
aremostdisparate
Atruepoverty-reductionpolicyshouldprovideincentivesforthepoorto
accumulateassets.(WolfandCaner2004).
SeminalworkbySherraden(1991)andOliverandShapiro(1995)
underscoredtheimportanceofimplementingpoliciesthathelpreducethe
wealthgap
5
Importanceofwealth
Inflow:income
Stock:wealth
Outflow:expenditure
Measuringwealth(networth)
ASSETSLIABILITIES(DEBTS)
Savingsaccounts
Checkingaccounts
Retirementaccounts
Bonds
Stocks
Home
Vehicle
Businessequity
Mortgages
Autoloans
Creditcarddebt
Medicaldebt
Studentloans
Wealth(networth)=assets-liabilities
Measuringwealth:wideningracial
wealthgapatthenationallevel8
79,650
110,500
7,5466,314
9,9257,683
0
20,000
40,000
60,000
80,000
100,000
20002011
MedianNetWorthofU.S.Households,2000and2011
White,notHispanicBlackHispanic
X11X8
X18X14
Source:U.S.CensusBureau,SurveyofIncomeandProgramParticipation.Note:BlacksincludeHispanics.
U.S. dollars
Measuringwealth
Twoshortcomingsofthesesurveys:
Theydon’tprovideenoughinformationbyraceandethnicity.
Mostsurveysprovidedataonlyatthenationallevel.
Toaddresstheselimitations,wepartneredwiththeFord
FoundationandDukeUniversity'sConsortiumonSocial
EquitytobringtheNationalAssetScorecardfor
CommunitiesofColor(NASCC)totheBostonMetropolitan
Area
9
TheNASCCprojectisfundedbytheFordFoundationandtheFederalReserveBankofBoston(fortheBostondata).
WilliamDarity,Jr.(DukeUniversity)andDarrickHamilton(TheNewSchool)serveasprimaryinvestigators.NASCC-Boston
projectmanagerisAnaPatriciaMuñoz.
NASCC:WhyisitimportanttocollectthesedataintheBostonMSA?
PopulationgrowthinBostonMSAisdrivenbynonwhitepopulation
10
12%
6%
1%
-3%
13%
33%
52%
58%
50%
58%
117%
121%
46%
37%
42%
45%
21%
41%
US
Boston
US
Boston
US
Boston
US
Boston
US
Boston
US
Boston
US
Boston
US
Boston
US
Boston
TotalWhiteBlackAsianHispanicDominican
Puerto
RicanCaribbean
Cape
Verdea
n
PopulationChangeinU.S.andBostonMSA,2000-2012
Source:U.S.CensusBureau,2012AmericanCommunitySurvey.
11
TheColorofWealthinBoston:Summaryoffindings
Source:Muñoz,AnaPatricia,MarleneKim,MarikoChang,RegineJackson,DarrickHamilton,andWilliamDarity.(2015).ThecolorofwealthinBoston.
CommunityDevelopmentDiscussionPaper,FederalReserveBankofBoston,DukeUniversity,TheNewSchool.www.bostonfed.org/color-of-wealth
ThetypicalwhitehouseholdintheBostonMSAismorelikely
thannonwhitehouseholdstoowneverytypeoffinancialasset
12
92
74
40
56
74
55
10
21
82
75
8
21
53
39
9
16
62
37
68
54
48
19
28
CheckingaccountSavingsaccountStocksIRAorprivateannuity
Percentage of households
Typeoffinancialassetsowned
WhiteU.S.blackCaribbeanblackPuertoRicanDominicanOtherHispanic
Note:Thedifferenceinthepercentageofnonwhitesascomparedwiththepercentageofwhitehouseholdsisstatisticallysignificantat
the99%levelinallcasesexceptforsavingsaccountsforCaribbeanblackandCapeVerdean,andcheckingandIRAaccountsfor
CapeVerdean.
Source:NASCCsurvey,authors’calculations.
Ingeneral,nonwhitesweremorelikelytohavedebtsthan
whites,althoughinmostcasesthedifferenceswerenot
statisticallysignificant
13
47
19
11
52
28
17
53
34
17
41
19
11
55
2120
40
34
24
CreditcardStudentloanMedicaldebt
WhiteU.S.blackCaribbeanblackPuertoRicanDominicanOtherHispanic
Percentage of households
Source:NASCCsurvey,authors’calculations.
ThewhitehouseholdsintheBostonMSAaremorelikelythan
nonwhitehouseholdstoowneverytypeoftangibleasset
14
79
84
34
5149
84
21
61
17
69
34
77
HouseVehicle
Percentage of households
Typeoftangibleasset
WhiteU.S.blackCaribbeanblackPuertoRicanDominicanOtherHispanic
Note:Thedifferenceinthepercentageofnonwhitesascomparedwiththepercentageofwhitehouseholdsisstatisticallysignificantat
the99%levelinallthecasesforhomeownership.AsforvehicleownershipthedifferenceisstatisticallysignificantforU.S.blacks,
PuertoRicans,andDominicans.
Source:NASCCsurvey,authors’calculations.
Thedifferencespersistevenifwelookatthesameeducational
attainmentandsameagegroup
15
Percentage of households
Note:Thedifferenceinthepercentageofnonwhitesascomparedwiththepercentageofwhitehouseholdsisstatisticallysignificantat
the99%levelinallcases.Source:NASCCsurvey,authors’calculations.
98
82
96
82
89
48
69
45
75
4952
33
PercentbankedHomeownershipratePercentbankedHomeownershiprate
Bachelor'sdegreeorhigherAge:51to65years
WhiteBlackHispanic
Percentageofbankedhouseholds,homeownershipandvehicleownership
rates,andnetworthvaluesforwhiteandnonwhitehouseholdsbycollege
education
16
WhitewithLESSthan
bachelordegree
Blackwith
bachelordegreeor
higher
Hispanicwith
bachelordegreeor
higher
Percentageofhouseholdswhoare
banked(%)878975
Percentageofhouseholdswhoowna
vehicle(%)837991
Homeownershiprate(%)754849
Medianliquidassets($)9,0003,5003,000
Medianhouseholdwealth(networth)
($)28,50012,000NA
Source:NASCCsurvey,authors’calculations
Medianvalueofliquidassets(indollars)
17
25,000
670
3,500
150
20
150
700
White
U.S.black
Caribbeanblack
CapeVerdean
PuertoRican
Dominican
OtherHispanic
Note:Liquidassets,whichcanquicklybeconvertedintocash,includemoneyinsavingsandcheckingaccounts,stocks,money
marketfunds,andgovernmentbonds.Thecategoryexcludescashonhand.
Source:NASCCsurvey,authors’calculations
Medianvalueofnetworth(assets–debt)
(indollars)
18
Note:Forthosegroupsforwhichthedataarereported,theestimationexcluded“missingvalues,”thatis,caseswheretherespondents
indicatedthattheyhadanassetsordebtbuthadnotassignedavalue.Estimationsmaychangeifmissingvaluesareimputed.These
valuesdon'tincludecashonhand.
Source:NASCCsurvey,authors’calculations
247,500
8
12,000
3,020
0
2,700
White
U.S.black
Caribbeanblack
PuertoRican
Dominican
OtherHispanic
Othervariablesofinterest
Useofpayday
lending
Respondentorfamily
hasbeeninjail
Sendsremittances
regularly
White1.28.72.6
U.S.black4.021.2**8
Caribbeanblack1.43.126.6***
CapeVerdean1.07.816.6**
PuertoRican2.512.96
Dominican8.7**7.432.3***
OtherLatino6.4*8.717**
NEC5.516.617.3
Source:NASCC-Boston.Notes:Black,whiteandAsianarenon-Hispanic.
FinancialResourcesinKinshipandSocial
Networks
20
Source:TatjanaMeschedeet.al.(2015),“FinancialResourcesinKinshipandSocialNetworks:FlowandRelationshiptoHouseholdWealthby
RaceandEthnicityamongBostonResidents”,BostonFedCommunitydevelopmentdiscussionpaper
PercentageofRespondentsReceivingLargeFinancialGift/InheritanceandSending
MoneyinSupportofFamilyMembersbyRace/Ethnicity
Sometakeaways
21
Racialwealthgapmuchwiderthatincomewealthgap
Importanceoflookingatbothsidesofthebalancesheet:assetsanddebts
Wealthistransmittedintergenerationally
Nonwhitegroupsinthestudyhaveverylittletorelyonincaseofanemergency
Thestaggeringdisparitiesshouldurgeustofindpoliciesthatcanhelpnarrowthe
wealthgap
Policysolutionsarecomplexandneedtouseamultifacetedapproach.
Suchpoliciesshouldconsiderthewidediversityamongnonwhitepopulationsandbe
targetedoradaptedaccordingly
Somesolutionswillhavetobedrivenatthenationallevel.Whatcanbedone
locally?
Educationalonewon’tclosetheracialwealthgap
Importanceofcollectingdataonassetsanddebtsatthelocallevel,including
disaggregatedinformationfornonwhitegroups.
Theviewsexpressedheredonotnecessarilyrepresentthoseofthe
FederalReserveBankofBostonortheFederalReserveSystem
TheCostofPost-SecondaryEducationand
StudentDebtinNewEngland
KailiMauricio-RegionalandCommunityOutreachDepartment,FederalReserveBankofBoston
RobertClifford-ResearchDepartment,FederalReserveBankofBoston
23
Less
than
9th
Grade
Incomplete
High
School
High
Schoolor
Equivalent
Some
College
Associate'sCollegeGraduate
UnitedStates4.0%8.1%24.1%23.3%8.5%22.5%9.5%
NewEngland2.4%5.6%22.8%19.5%7.3%28.0%14.5%
Massachusetts2.5%5.1%19.9%17.7%6.5%30.9%17.4%
Connecticut2.8%6.2%24.0%20.3%6.9%25.3%14.6%
Vermont1.0%5.6%28.6%19.2%8.4%27.4%9.8%
New
Hampshire
1.4%5.6%25.7%21.4%9.4%26.8%9.7%
RhodeIsland3.6%7.1%22.9%22.2%8.5%24.9%10.8%
Maine1.0%5.0%30.1%24.4%9.5%22.8%7.1%
Educationalattainmentbystate
andregion,ages25-34
Source:U.S.CensusBureau.(2009-2013).2013AmericanCommunitySurvey5-Year
Estimates.Retrievedfromhttp://factfinder2.census.gov
24
25
26
StoryTime!
27
Twosiblings
Storyofaveragesandmedians
Onedoeswellgoestoamoreselectiveschool
Theothertakesadifferentpathbutstillgoesto
schoolaftergraduatinghighschool.
TopSchoolsinNewEngland
28
Source:U.S.DepartmentofEducationScorecard.
FirstSiblingExpectations
29
Source:AuthorscalculationfromU.S.DepartmentofEducationScorecard.*2013Cost
Sarah
(SelectiveSchool)
Cost
$43,062*
GraduatingDebt
$19,038
WithdrawDebt
$18,507
2-year/3-yeardefault
rates1.5%/1.7%
Notworking2yearsout
7.4%
Earnings2yearsout
$58,001
Earnings6yearsout
$71,249
Two-yearForProfitSchoolsinNew
England30
Source:U.S.DepartmentofEducationScorecard.
Expectations?
31
Source:AuthorscalculationfromU.S.DepartmentofEducationScorecard.*2013costs
Sarah
(SelectiveSchool)
Juliet
(2-YearFor-profit)
Cost
$43,062*$27,920*
GraduatingDebt
$19,038$13,162
WithdrawDebt
$18,507$7,249
2-year/3-yeardefault
rates1.5%/1.7%11.4%/17.1%
Notworking2years
out7.4%19.1%
Earnings2yearsout
$58,001$33,015
Earnings6yearsout
$71,249$36,048
Studentloansareaninvestmentinhumancapital
32
Loansenablealargeportionofthepopulation
enrolledincollegetoattendhighereducation
institutions.
Studentloansareaninvestmentintheacquisitionof
skillsandcredentialsinexchangeforfutureearnings.
Whilethereturntoobtainingapost-secondary
educationispersistent,borrowersneedtomake
complicatedassumptionsaboutcostsandbenefits
whendecidingwhether,when,andwheretoattend.
Thewagepremiumforpost-secondary
educationispersistentandincreasesover-time
33
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
25-2930-3435-3940-4445-4950-5455-5960-6465+
Master'sDegreeorabove
Bachelor'sDegree
Associate'sDegree
SomeCollege,nodegree
HighSchool
LessthanHighSchool
Source:AuthorscalculationusingtheU.S.CensusBureau,2013AmericanCommunitySurvey.
Note:Sampleisrestrictedtothose25+andemployed.
AverageWageandSalaryIncomeinNewEnglandbyAgeandEducation,2013
Theaveragestudentdebtperborrowerhas
risenconsistentlyinpastyears
34
$12,000
$14,000
$16,000
$18,000
$20,000
$22,000
$24,000
$26,000
2005200620072008200920102011201220132014
US
NE
MA
Source:Authors’calculationusingFederalReserveBankofNewYork/EquifaxConsumerCreditPanel.
Note:Borrowersindefermentandforbearanceareexcludedfromthepoolofborrowers.
AverageStudentDebtperBorrower,2005-2014
AverageDebt
perBorrower
Delinquencyrateshavealsorisenovertimebut
moderatedrecently
35
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2005200620072008200920102011201220132014
US
NE
MA
Source:Authors’calculationusingFederalReserveBankofNewYork/EquifaxConsumerCreditPanel.
Note:Borrowersindefermentandforbearanceareexcludedfromthepoolofborrowers.Delinquencyisdefinedasbeingover31days
lateonanystudentloanpayment.
PercentofStudentLoansBorrowersDelinquent,2005-2014
AverageDebt
perBorrower
Moststudentloanborrowersinrepaymenthave
under$25,000indebt
36
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
USNEMA
Source:Authors’calculationusingFederalReserveBankofNewYork/EquifaxConsumerCreditPanel.
Note:Borrowersindefermentandforbearanceareexcludedfromthepoolofborrowers.
ShareofBorrowersbySizeofStudentDebt,Q42014
ShareofBorrowersby
DebtLevels
DelinquencyratesarehigherintheUSandare
higheramonglowerdebtborrowers
37
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
USNEMA
Source:Authors’calculationusingFederalReserveBankofNewYork/EquifaxConsumerCreditPanel.
Note:Borrowersindefermentandforbearanceareexcludedfromthepoolofborrowers.
PercentofBorrowersDelinquentbySizeofStudentDebt,Q42014
DelinquencyRate
FederalReserveBankofBoston
ComplementarySolutions
toStudentDebt&Their
Implicationsfor
Massachusetts
WhatareChildren’sSavingsAccounts(CSAs)
Long-termasset-buildingaccountsestablishedforchildren,asearlyasbirth,and
allowedtogrowovertheirlifetime.
TwoProductModels
Adeposit-onlysavingsaccountofferedbytraditionallender.(K2CModel,SanFrancisco)
A529savingsplan(namedfortherelevantsectionofthefederaltaxcode)isastate-
sponsored,tax-preferredsavingsplanforqualifiedpost-secondaryeducationexpenses.
(HaroldAlfond,Maine)
Eithermodelcanprovidesavingsmatchesorotherincentivestoencouragepositive
savingsbehaviors–particularlythoseoflowerincome–tosave.
39
MajorDevelopmentsintheCSAField
40
Source:CenterforEnterpriseDevelopment(CFED)
WhyDoWeCare?
CSAshavethepotentialtoexpandeconomicandeducational
opportunitiesforlow-andmoderateincomefamilies&children.
CSAssupporttheinterestofStatesinincreasingthepercentageof
itspopulationwithcollegedegrees,certificatesandcredentials
(LuminaFoundationGoal2025).
MassachusettsGoal:60%by2020
CollegeAttainmentamongAdultsAges25-64:51.5%
CSAsrepresentalongterminvestmentinourcitizenrywhilehelping
addressandalleviateNewEngland’s/Massachusettsmiddleskills
gapbyaddressingsecondaryeducationaffordability.
CSA’sencourageandleverage,family,publicandprivatecapital
resources.
41
PrinciplesofEffectiveCSADesign
42
Allowuniversal,automaticchildenrollment.
Carryanationalfootprintandequitableamongdifferent
jurisdictions.
Allowidentificationandengagementwithaccounts,including
parentandchilddeposits,in-personandviaelectronicinterface.
Restrictaccountstoasset-buildingpurposes,butnotstrictlyto
highereducation.
Beadministrativelyefficientinallessentialoperations,including
disbursement,andsustainableatscale,withtolerablylow
administrativecostsandintegrationintoexistingpolicysystems.
Adequatelyprotectconsumers,withpubliclyprovidedaccountsor
privateaccountswithsubstantialregulatoryoversight
MovingTowardaPolicyAgendaforImprovingChildren'sSavingsAccountDeliverySystems
WilliamElliottIII,MelindaK.Lewis,AnthonyPoore,andBrianClarke,CommunityDevelopmentIssueBrief,No.1,2015
NewEnglandLeadstheNation
43
Source:CenterforEnterpriseDevelopment(CFED)
NewEnglandLeadstheNation
NewEnglandLeadstheNation
45
NewEnglandLeadstheNation
ThreeNewEnglandState
Legislatorshave
sponsored/passedCSA
Legislationin2015
Vermont:Rep.Jill
Krowinski
NewHampshire:Rep.
MaryGile
Massachusetts:Sen.
JamesEldridge&theCity
ofBoston,Treasurer
Goldberg46
CSAsContinuetoGainMomentum
47
Regional
NewEnglandBoardofHigherEducation
FederalReserveBankofBoston
National
NationalLeagueofCities
InstituteforYouth,EducationandFamilies’Learning
Collaborative
NationalConferenceofStateLegislatures
CampaignforEveryKid’sFuture
CorporationforEnterpriseDevelopment(CFED)
SoWhat’sHappeninginMassachusetts?
48
CommunityBasedEfforts
Inversant(formallyknownasFuelEducation)
MunicipalEfforts
CityofBoston-Fall2016
Commonwealth(Sen.Eldridge&Rep.Sannicandro)
S664/H.1067:AnActtocreateacollegesavingsprogram
foreverychildborninMassachusettsthatwouldcreatea
collegesavingsaccountforeverychildborninthestate.
MAStateTreasurerDeborahGoldberg
PilotProgram:Fall2015
WhatDoesEarlyResearchSuggest:
Assets,Empowerment&Opportunity
CollegeReadiness
Higherstudentandparentalcollegeexpectations.
Weakbutpositiveeffectsonreading&math.
HigherhighschoolGPA
CollegeBoundIdentity
CollegeAccess
Evencollegesavingsoflessthan$500increasecollegeentry
forlowandmoderateincomestudents.
3Xsmorelikelytoenrollincollegethanwithnosavingsaccount.
CollegeSaversIdentity
49
Elliot,W.andLewis(2013).ArestudentloanswideningthewealthgapinAmerica?It’saquestionofequity.Lawrence,
KS:Assets&EducationInitiative(AEDI).
WhatDoesEarlyResearchSuggest:
Assets,Empowerment&Opportunity
CollegeCompletion
Evencollegesavingsoflessthan$500increasecollege
completionforlowandmoderateincomestudents.
4Xsmorelikelytograduatecollegethanwithnosavings
account.
Youngadultgraduateswhohadsavingsasadolescents:
2Xsmorelikelytoownsavingsaccounts(banked/unbanked)
2xsmorelikelytoowncreditcards
4xsmorelikelytoownstocks
50
Elliot,W.andLewis(2013).ArestudentloanswideningthewealthgapinAmerica?It’saquestionofequity.Lawrence,
KS:Assets&EducationInitiative(AEDI).
WhatAreSomeOtherComplementarySolutions
toStudentDebt?
51
Scholarship&MentoringApproaches
TennesseePromise
OregonPromise
LoanRepaymentAssistance
AdrianCollege:AdrianPlusProgram
YaleLawSchool:CareerOptionsAssistanceProgram
AssetBasedApproaches
MatchedSavingsPrograms/IDAs
Children’sSavingsAccounts
52
AnthonyPoore
DeputyDirector,R&CO
anthony.poore@bos.frb.org
www.bostonfed.org/commdev/childrens-savings-accounts

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