August 14, 2012
A new report reveals that a substantial population of New Orleans citizens live in severe "asset poverty" and are months away from catastrophic poverty if the the main source of family income is lost.
The report, by the Corporation for Enterprise Development (CFED) and local partner the Greater New Orleans Community Data Center (GNOCDC) reveals a significantally different picture than projected by business organizations and national media which have promoted the real growth of the entrepreneurship in the city in recent years, particularly, after Hurricane Katrina.
Below is a press release by a non-for-profit group the Greater New Orleans Foundation which has provided numerous financial grants to organizations in the city.
A new study on wealth, poverty, and opportunity in New Orleans reports that 37 percent of all New Orleans residents live in "asset poverty," a new measurement of poverty defined as not having the financial means to support a household for three months at the federal poverty level, (i.e., $4,632 for a family of three) should they lose their main source of income. According to the Corporation for Enterprise Development (CFED) and local partner the Greater New Orleans Community Data Center (GNOCDC), the national average of households in asset poverty is 27 percent, placing New Orleans above average in financial insecurity. The CFED study, commissioned by the Greater New Orleans Foundation and the Ford Foundation, shows the city's poverty rate at 27 percent, almost twice the national average of 15 percent.
"With this asset data we have, for the very first time, a complete picture of the financial health of our most vulnerable neighbors," said Albert Ruesga, President and CEO of the Greater New Orleans Foundation. "The results of this study confirm some hard truths. We want this to be a call to action. As a community we have to work together with a coordinated, multi-sector response because poverty affects everyone."
"Despite the fact that New Orleans has fared better than other cities in the country during the recent economic downturn because of the infusion of recovery dollars, we have a poverty crisis," said Allison Plyer, Chief Demographer of GNOCDC. "The data confirm that too few residents have the necessary resources--assets like savings accounts, home ownership, credit, and insurance for long-term stability." Income is necessary, but alone it's insufficient for achieving financial security.
The Assets and Opportunities Profile revealed that asset poverty extends beyond those living below the federal poverty line. Even middle class families face asset poverty. For example, over one in four New Orleans households earning between $45,655 and $70,014 could not weather a job loss for three months without falling into poverty. Seventeen percent of those who earn between $70,015 and $107,000 could face a financial catastrophe in the event of a sudden emergency.
Seventy-one percent of New Orleans consumers have a subprime credit score which is a disadvantage in the financial marketplace. Without good credit, consumers pay higher interest rates than other consumers on everything from credit cards to car loans to homes.
Twenty-one percent of New Orleans residents lack health insurance, a crucial necessity for maintaining financial security during a medical crisis. One in ten residents don't own a car, a necessity for evacuating in times of a hurricane.
The report also included data on education, race, and ethnicity for a multi-faceted snapshot. In New Orleans, almost half of those who hold only a high school degree are asset poor; 39 percent of those with an associate's degree or some level of college are asset poor; and 22 percent at the bachelor's level do not have enough savings to support themselves for three months at the federal poverty level without a job. By race and ethnicity, the data show that 22 percent of the white population faces asset poverty, while half of the African American and almost half of the Hispanic population in New Orleans live in financial instability.
Four in ten households are unbanked or under-banked defined as households that may have a savings and checking account but have used nonbank money orders, non-bank check cashing services, payday loans, or pawn shops.
"When banks promote affordable financial products and nonprofit organizations offer strong financial literacy programs, then we can help families focus on building assets which is a crucial step toward financial stability," said Nancy Montoya, the Senior Regional Community Development Manager for the Federal Reserve Bank of Atlanta. "It is clear that many families are suffering, but we have found ample evidence that local leaders, working in partnership with nonprofits, have the power to create highly effective programs that help families build wealth and save for the future," said Ida Rademacher, Chief Program Officer for CFED, a nationally renowned organization that identifies and cultivates economic opportunity across America.
"Data like these are essential as we attract new resources to our region from national foundations and government agencies," said Ruesga. "And we will use it to inform our own grantmaking." The Greater New Orleans Foundation plans to host several meetings over the next few months with leaders from various sectors across the community to discuss how a coordinated and integrated strategy can be achieved to address the poverty issue.
The Greater New Orleans Foundation administers an IMPACT Fund that supports nonprofit organizations in the Greater New Orleans area seeking to improve the quality of life for all.