Poverty Reduction Programs

1. Poverty Reduction Programs Vocational Rehabilitation & Asset Building Abby Cooper abbylindmancooper@gmail.com Kennedy Douglas Consulting

2. Agenda Overview of Poverty Concepts What is Asset Development Disability and Poverty Attitudes about Money Tension Systems Credit Score and Rehabilitation Behavioral Economics Integrating Asset Development into the Rehabilitation Process Helpful Tools Asset Building approaches ABLE & ACA Next steps Kennedy Douglas Consulting

3. And what does it have to do with Vocational Rehabilitation? What is Poverty? Kennedy Douglas Consulting

4. How the Federal Government Defines it: Federal Poverty Guidelines:Typically, in January or February of each year the federal government releases an official income level for poverty called the Federal Poverty Income Guidelines, often informally referred to as the "Federal Poverty Level." The benefit levels of many low-income assistance programs are based on these poverty guidelines. Poverty Threshold : poverty thresholds is based on the "thrifty food plan," which was the cheapest of four food plans developed by the Department of Agriculture. It assumes that 1/3rd of your after taxes income is based on food. This calculation has not changed since 1965. Kennedy Douglas Consulting

5. Kentucky’s minimum wage is $7.25OVR’s average wage in 2011$11.53 @32 hours a weekPlaces an individual at 20% of poverty levelStill working poor.National Center for Children in Poverty at Columbia University calculates that “families of four typically need an income of $42,400 to meet basic needs.” Federal Poverty Rate 2012 Kennedy Douglas Consulting

6. Problems in how poverty is viewed. Types of income - By failing to include income that many low-income people receive in the form of public assistance, some critics maintain that the extent of poverty is over-stated. Calculation is Flawed - assuming that families spend one-third of their income on food. Food now accounts for something closer to one-sixth of the family budget. Housing, transportation and utilities are much larger components of family spending. Crucial Expenses -are simply excluded from consideration in the poverty calculation. Most attempts to establish a new measure of poverty would result in higher numbers of people being counted as poor. Kennedy Douglas Consulting

7. Living Wage In recent years there have been more fundamental challenges to the poverty measure. Concerned that the poverty rate is far too low, community-based organizations around the country have advocated for "living wages." Policy and research institutes around the country have developed living wage budgets that take into account the full range of costs required for families of different sizes to maintain a decent standard of living. http://www.thecalculator.org/ http://www.dcmassc.org/ http://www.dol.gov/whd/minwage/america.htm#Kentucky Kennedy Douglas Consulting

8. Europe looks at social exclusion Irish :What is poverty? People are living in poverty if their income and resources (material, cultural and social) are so inadequate as to preclude them from having a standard of living which is regarded as acceptable by Irish society generally. As a result of inadequate income and resources people may be excluded and marginalized from participating in activities which are considered the norm for other people in society. Kennedy Douglas Consulting

9. Causes of Poverty Behaviors of the Individual- Research on the choices, behaviors, characteristic and habits of individuals. Welfare,Single parenthood, Intergenerational, addiction, mental healthHuman and Social Capital in the community – Research on the resources available to individuals, communities and business. Social Capital, Intellectual Capital, well paying jobs, middle class flightExploration–Research on the economic, political and social policies-Resource limits, globalization, taxation patterns, salary ratios, interest rate All vantage points have validity. But each will frame how we deal with poverty and clients differently. Kennedy Douglas Consulting

10. ASSETS • A resource of economic value that an individual,  owns or controls with the expectation that it will provide future benefit. Such asstock of capital, including savings, financial securities, owning a business or property. Other less tangible forms of assets include educational achievement, job skills, training and access to credit. But what is Asset Building? Kennedy Douglas Consulting

11. The wealthiest Americans (those earning over $1 million annually) receive more than $95,000 in tax benefits. • Middle income families receive a few hundred dollars • Poor families relying on public benefits actually face penalties for saving. • Eight out of 10 of the wealthiest families saved approximately one-third of their household income in 2009. • A full one-third of low-income households earned too little to make ends meet, much less save for the future. • About 80% of the value for mortgage and property tax deductions accrued to the top 20% of taxpayers. • In fact, many homeowners don’t take the mortgage deduction because they do not earn enough income or incur enough of a tax liability to warrant itemizing their deductions 400 Billion Federal Asset BuildingBudgethttp://cfed.org/assets/pdfs/Upside%20Down.pdf Kennedy Douglas Consulting

12. Tax codes created the middle class • GI bill • Land Grant System, • Creation of the Federal Housing Administration, • The Home Mortgage Deductions, • College aid. Since many people who are poor don’t earn enough to benefit from the tax code.Different approaches were created. Kennedy Douglas Consulting

13. Persons with disabilities were not part of the Asset Building Community • Many people with disability are unemployed and don’t pay taxes. Those who do work frequently do not take advantage of options like the Earned Income Tax credit . • Welfare policy for the poor and disabled has tended to focus nearly exclusively on income support. • Sometimes even discouraging assets -Supplemental Society Income (SSI)-prevents an individual having more than $2000 in resources. • Asset Development programs are trying to help individuals leave poverty. So how is Vocational Rehabilitation part of Asset Development? Kennedy Douglas Consulting

14. For individuals without disabilities, 12.8% had income below the poverty level over the past 12 months • For individuals with disabilities, more than 2x that rate - 27.3% had income below the poverty level. • 69% of people with disabilities do not have a checking account, and 50% did not have a savings account. • 75% of persons with disabilities do not have any loans with financial institutions • 10% of persons with disabilities own their own home • 39% of persons with disabilities indicate that lack of financial resources is the most serious problem they face Should be part of the asset building community Kennedy Douglas Consulting

15. Federal poverty level for an individual is $930 a month. • The average monthly payment for someone on SSI in July was $532.00, SSDI was $1,111.44. • People with significant disabilities are frequently the poorest of the poor Many individuals believe they will always be poor. And many are right unless we believe there is another way. Kennedy Douglas Consulting

16. CFED Score CardFinancial Assets &Income- F rank 47th Tax Burden by Income— The poorest 20% of families pay 1.5 times more of their income in taxes than the top 1% of familiesBusinesses &Jobs– D rank 40thHousing &Homeownership- C rank 28th Health Care– B rank 20thEducation– C rank 35th Kentucky One of the 11 states that have over 30% of its population living in poverty areas. Five of the 11 are in SE TACE region Http://scorecard.assetsandopportunity.org/2012/state/ky https://www.census.gov/hhes/www/poverty/data/index.html Kennedy Douglas Consulting

17. Protect Consumers in the Financial Marketplace: To address high unbanked and underbanked rates, increase credit scores and lower bankruptcy rates, Kentucky should help ensure residents have access to fair and appropriate financial products by  capping payday loans at 36% APR. • Increase Incomes and Encourage Savings: • Kentucky should enact a state Earned Income Tax Credit to maximize income for low-wage workers, • remove the disincentive to save for very low-income families by lifting asset limits in two public benefit programs: TANF and family Medicaid, • create a state Individual Development Account program. WHAT KENTUCKY CAN DO Kennedy Douglas Consulting

18. Everyone should be a part of the financial mainstream This needs to be an underlying assumption of our services Kennedy Douglas Consulting

19. The Assumption was Work will be the AnswerWe rarely view disability services as setting someone up to live in poverty or being part of the working poor with no way out. Employment First efforts are not considering living wages.Frequently there is the assumption that the job is what matters, not the wage because: * The person doesn’t understand money * And/or they have public benefits. * Everyone starts somewhere Most people only understand what they need to know to function. Kennedy Douglas Consulting

20. Where someone is in his or her life will directly impact what information they need or want. • Need to assess what the person is able to hear and understand and what information should wait until a later time. • Helping someone think about what they need to establish the desired lifestyle is not just about obtaining employment and budgeting. • It is also about understanding the emotional connection to money, i.e. self-image. The emotional connections to money are far difficult to think and talk about honestly Money is Emotional Kennedy Douglas Consulting

21. Past financial behavior can inhibit certain vocational dreams • Myths and misunderstandings may inhibit a participant’s vocational aspirations • Attitudes = subconscious thoughts and feelings • Habits = unconscious patterns of behavior that are acquired through frequent repetition over time • Attitudes and habits determine your behavior and actions How Does money play a role in successful closures? Kennedy Douglas Consulting

22. Attitudes about Money Survival-basic needs, food, clothing and shelterSecurity- adequate retirement fundsFreedom – greater varietyPleasure- vacation, travel, hobbiesLove – express affection by giving generously to othersPower – means of controllingPrestige – approval and influenceCompensation- fairnessSelf-development – money to learn new skillsIndependence – self-supportingMoney doesn’t matter Kennedy Douglas Consulting

23. A penny saved is a penny earned … Waste not, want not … You deserve the best … If I could just win the lottery everything would be okay … Easy come, easy go … Do you think money grows on trees …? She is living beyond her means Money messages Kennedy Douglas Consulting

24. Customers should work at SGA if _____________? • Working under the table is _______ ? • Receiving full benefits when you can work full time is ______? • Expecting the system to pay when you can is ____________? • Debt is ________________? Underlying messages Kennedy Douglas Consulting

25. Pick a partner & Tell them • Your earliest memory about money • Who earned the money in your household • Who handled the money in your household • Did you have money • What did you hear about people who didn’t have money Exercise Kennedy Douglas Consulting

26. Tension Systems Kennedy Douglas Consulting

27. Kurt Lewin’s theory on tension system • Environments are complex and layered • There are behaviors that pull us away and towards certain behaviors. • These are “tension systems” • Small changes can make a desired behavior easier to obtain • Dieting: • Smaller plates • Remove the temptation • Push back from the table Kennedy Douglas Consulting

28. Ladders are the small changes that make the desired behavior easier to act on. Chutes are forces propelling us away from those behaviors.Can be very subtleCommentsMissing a busSelf-doubt Mapping Tension Systems Kennedy Douglas Consulting

29. What are the chutes your customers face? What are the ladders we need to create? • As a system • In counseling and guidance Kennedy Douglas Consulting

30. Some ladders to think about Keep it SimpleWhat forms can you combineMake it easy to be successful – shorter goalsUse technology Label it with a pictureHave the person write the implementation plan in his or her own hand writingHave the person mail the implementation plan to him/herselfPut information on the web Kennedy Douglas Consulting

31. RISK. A risk is something one can gauge or has a sense of the possible outcomes based on past experience and knowledge. When a risk is taken the risk taker has a reasonable idea of the expected outcome. Uncertainty however, means one is unclear what will happen and has no way to project possible outcomes. Kennedy Douglas Consulting

32. Credit Scores Impact How they are calculated Plan Kennedy Douglas Consulting

33. Bad credit score can impact: • Getting a job • What a person pays in insurance • Getting a loan or credit card • If approved pay higher interest rates • Renting an apartment • Utility companies may request a higher deposit • Self-image Why it matters Kennedy Douglas Consulting

34. Thinking about how to combine credit scores with benefits planning and vocational counseling? • How do you currently use or talk about credit scores? • Do you help customers get their credit scores? • Is improving credit scores part of any planning? Should conversations about credit scores be part of counseling and guidance? Kennedy Douglas Consulting

35. Credit repayment history • Balances on credit • Rate at which they are using credit versus the amount of credit they have available • Depth of credit history • Length of credit history FICO Credit Scores35% -Payment history30%- Amount you owe on revolving accounts15%- How long you have been using credit10% - Your applications for new creditIn order to have a scoreAt least one account open for six monthsAt least one undisputed account reported to the credit bureaus in the past six months Kennedy Douglas Consulting

36. There is a million ways to wreck your credit and only one way to improve you credit. • Bring active past due accounts current and keep them current • Keep credit card debt below 30% of credit limit • Request correction in writing for any errors • Do not close existing accounts • Limit applications for new revolving debt – credit cards At what point do we talk about this? And how?Assist participant in obtaining credit report ?(www.annualcreditreport.com) Kennedy Douglas Consulting

37. A payday advance company must disclose its fee in writing before entering into a transaction with a borrower. It must refer to the fee set forth in the agreement as a service fee rather than interest. In Kentucky, a consumer can have two outstanding loans at a time, provided that both do not exceed $500. A payday loan business is prohibited from bringing a civil or criminal action against a borrower to collect on a defaulted loan.Maximum loan amount:A borrower can obtain up to $500 in payday loan funds.Loan terms:The loan term ranges from 14 to 60 days.Extensions:Borrowers cannot rollover or extend a check cash advance loan.Fees and charges:A payday loan store can charge a maximum finance fee of $15 per $100 borrowed.  The finance charge for a two-week loan in the amount of $100 is $17.65.Fee schedules and APR:The APR for a two-week loan valued at $100 is 459%. Trying to cap it at 36% Kennedy Douglas Consulting

38. New Research on Pay Day Loanhttp://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pew_Payday_Lending_Report.pdf • •57% higher for renters than for homeowners • •62% higher for people earning less than $40,000 than for those earning more • • • 82% higher for people without a college degree than for those with a four-year degree or higher • Loan Usage • 12% Disabled Individuals have used pay day storefronts • 12% African American • 13% separated or divorced Kennedy Douglas Consulting

39. How Do We Talk about Money in Counseling and Guidance? Kennedy Douglas Consulting

40. We are under the illusion that we make rational decision. We take short cuts in our thinking without even knowing it. • Yellow Red Green Purple • OrangeBlackPinkWhite • Gray Rose Brown Kennedy Douglas Consulting

41. Behavioral Economics • Probability Judgment- is central to everyone’s economic life. • Frequent questions: Will I get a raise? Can I afford to buy that car? Will I loss my job? • The likelihood of an event occurring- is usually not based on careful cognitive thought, or logic. Kennedy Douglas Consulting

42. Availability– How our memories sequence information distorts probability judgment people tend overestimate the likelihood of easy to recall events and underestimate the likelihood and impact of less familiar by more likely events. Anchoring-People estimate of the size or value of something based on what they start out comparing it to or what has been paid in the past. “Sticker Shock” or thinking you are getting a deal. Some Concepts to Think about Kennedy Douglas Consulting

43. Status quo bias- People tend to do what they have always done. Change is hard, need to think about how we create options that have the desired behavior as the default • Loss aversion- Adam Smith- people are far more concern about what they will loss then what they will gain. Some Concepts to Think about Kennedy Douglas Consulting

44. People will respond differently to the same information in either a positive or negative way depending on how it is framed. • We have financial literacy classes every Monday night. • Every Monday night we have classes that present proven strategies to increase your income. Framing Kennedy Douglas Consulting

45. People impose patterns where they do not exist based on a stereotypes drawn form experience with a few member of a group, or a hypothesis. It is a shortcut in thinking. • Example: When software engineers refused to believe people were having problems with their software. Microsoft installed a test room with one-way mirror so the engineers could see people struggling. (Hearth, Larrick & Klayman 1998) Representativeness Kennedy Douglas Consulting

46. Unrealistic OptimismProblems will happen to someone elseYou will do better than you actually will Kennedy Douglas Consulting

47. People may change subsequent behavior when asked what they intend to do. • Too many or too much information of any product or services impedes a person’s ability to sort through choices rationally. • Fairness- people want their actions to appear fair. • Dan Ariely- Behavioral Economics • http://www.youtube.com/watch?v=9X68dm92HVI • http://www.youtube.com/watch?v=JH1GBX4ohMw Priming & Complexity Kennedy Douglas Consulting

48. All this is interesting but what does it have to do with my job? Kennedy Douglas Consulting

49. Current System Kennedy Douglas Consulting

50. What we want Living wages Kennedy Douglas Consulting