Safety Net

When Bad Financial Advice Pushes Seniors into Poverty

When you meet with a financial adviser, the advice you get may not be what’s best for you—it may be what’s best for them and their bottom line.

Fortunately, earlier this month at the Center for American Progress, the U.S. Department of Labor announced its final fiduciary rule that would require financial professionals who advise on how to invest retirement savings to act in their clients’ best interest. The fiduciary rule is much more than an obscure legal concept—it’s a commonsense action that closes 40-year-old loopholes in retirement security laws that were left open by Congress. It also returns at least $17 billion a year to American families.

Granted, struggling families are not likely to have access to retirement funds and financial advisers, so some may wonder how this helps low-income Americans. The fact is that faulty advice can leave individuals in poverty when they retire, even if they were able to save for retirement during their working years.

For example, Ruby H. of Philadelphia scrimped for 17 years to put aside $5,000 for retirement, and an adviser helped her grow that amount to $17,000. But when her adviser switched firms, he changed her investments into the ones most advantageous to him, and she lost everything. And Phil Ashburn lost the bulk of his savings after he spent 30 years working for utility companies: first Western Electric in 1972, and finally Pacific Bell. Offered a buyout in 2002, he was recommended to a financial adviser who put the value of his savings—about $355,000—in an expensive variable annuity. However, he ended up with only about 20 percent of those savings following the Great Recession. Meanwhile, the adviser received a commission of roughly 7 percent and ended up making $900,000 that year.

More than half of all working-age households are considered inadequately prepared for retirement.

These stories are a painful reminder of why workers face such bleak prospects for retirement. Forty years ago, when the rules on retirement advice were first written, most workers didn’t have to worry about whether they were getting good advice because they weren’t expected to plan for their own retirement. The vast majority of workers with a retirement plan had traditional pensions, which rewarded a lifetime of work with monthly payments for life. There was no need to wade through different investment options and savings strategies. But today, with the erosion of pensions and advent of options that are far less secure, more than half of all working-age households are considered inadequately prepared for retirement, up from 31 percent in 1983.

The rule also reminds us why Social Security is so crucial, particularly in this era of financial uncertainty. Social Security brings the incomes of more than nearly 15 million elderly above the poverty line, cutting senior poverty by three-quarters. And for roughly two-thirds of the elderly, Social Security provides the majority of their retirement income. Future retirees need the assurance that Social Security will be there even if their savings, or their financial adviser, aren’t up to par. Thankfully, as Senator Brian Schatz (D-HI) noted during the Department of Labor’s announcement, cutting Social Security is no longer mainstream: “How much should we cut Social Security is such a preposterous proposition except on K Street, except among pundits.”

But while Social Security is safe for now, this fiduciary rule is under attack by some financial firms and their conservative allies. This disagreement isn’t unexpected. As Senator Elizabeth Warren (D-MA) has pointed out, there are “17 billion reasons” why special interests oppose the rule—that is, the $17 billion returned to the American people. In fact, from the beginning of discussions around the rule, some industry players have called it unworkable, argued that their voices were not heard, or threatened to sue. House Speaker Paul Ryan has also derided the rule, calling it “Obamacare for financial planning” and seeking to undo it. Given that his stated concern for the poor has often been accompanied by policy proposals to make drastic cuts to the safety net, perhaps this is not surprising. But, as the Department of Labor has stepped in to close loopholes of Congress’ own making after decades of improper financial advice, rolling back the fiduciary rule now will only increase retirees’ vulnerability in the coming years.

Some opponents have even gone so far as to claim that the reform will diminish working families’ access to financial advice because some advisers may stop working with less profitable savers if they cannot charge as much. But the fact is that most working families with small amounts of savings are not served by advisers today to begin with, and may have less trust in the advice that’s given in the first place. This same argument about access is a common defense for other predatory products—whether payday loans or for-profit colleges—in which the real question about access is whether companies can keep their access to the vulnerable consumers whom they grift. Meanwhile, new firms are offering independent, nonconflicted advice at a fraction of the cost, proving that it can indeed be done without ripping off current or future retirees.

This rule is a stark reminder for members of Congress to decide which side they are on: that of savers or of special interests. If they stand with Secretary Tom Perez and those who came out in favor of the rule, they have the opportunity to prevent bad financial advice from cheating more families out of their retirement dollars.

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Labor

When Corporate Promises Fall Short, Retail Workers Pay the Price

During my first months working for a major retailer, my manager called to inform me that my next three scheduled shifts would be cancelled due to low sales. At the time, I was 16 years old, dependent on my parents’ income and splitting my paychecks between my savings account and concert tickets. By contrast, erratic work schedules put my coworkers with car payments to make and diapers to buy in an economically precarious situation.

Phone calls like the one I received from my manager were far from atypical in my job. In addition to last-minute cancellations, my coworkers and I would wait until Friday evenings to receive our weekly schedules—which would begin less than two days later, on Sunday mornings. Even when we received notice of our schedules later than Friday evenings, we still had to be on time if we were scheduled for the 6 a.m. markdown shift on Sunday. We might also discover that we would be working just 12 hours in a week, even though the previous week we had worked for 20.  Last August, a few months before I left, the company publicly announced that it would provide all employees their schedules 14 days in advance by early 2016. But my former coworkers tell me that they still receive their schedules just 48 hours before the workweek starts. The ugly reality is that corporate promises—even widely publicized ones—do not ensure change.

The ugly reality is that corporate promises—even widely publicized ones—do not ensure change.

The scheduling practices that continue to threaten my coworkers’ ability to make ends meet are hardly unique to my former employer. In fact, schedule volatility affects a staggering 90 percent of the retail workforce. And for the 35 percent of these workers who are parents, fluctuating hours seriously impede their best efforts to secure high-quality child care.

The practice of on-call scheduling is particularly disruptive to work-family balance. Someone who is on-call has to sit in schedule purgatory until her manager either clears her to stay home or asks her to come in—which can happen with as little as two hours’ notice. If she can’t scramble to find child care in that time (a difficult task given the scarcity of accessible, affordable care in this country), she may have to take a disciplinary strike for failing to report to work. If she accumulates too many strikes, she can be fired. Informal consequences like reduced hours or inconvenient shifts are not uncommon either. Although some major retailers have announced plans to end on-call scheduling, many still expect their employees to report to work with little notice and at any time of day (or night).

To make matters worse, only a few states and localities protect parents’ ability to request time off to care for their children. As a result, in most places, employees can be fired when family responsibilities make them unavailable to work a shift. In November 2014, some year-round Kmart employees reported that they had to be available to work on Thanksgiving and Black Friday, or else risked termination. Even though child care on a federal holiday is nearly impossible to find, the ultimatum stood: work on Thanksgiving, or lose your job.

The result is that parents with unpredictable work schedules are much more likely to rely on home-based child care providers, relatives, or both. A patchwork of informal care arrangements can deprive children of the educational and developmental benefits associated with high-quality child care. Early childhood education is a springboard for educational attainment, economic mobility, and social well-being for children in low-income families. Yet, schedule instability in low-wage industries constrains parents’ ability to position their children for future success.

Schedule instability in low-wage industries constrains parents’ ability to position their children for future success.

To help low-income parents afford child care, the federal Child Care and Development Fund provides billions of dollars in subsidies—but the program is far from perfect. It’s funded through block grants, meaning that states have the power to impose work requirements for parents who have no control over their hours; states can also make the application process cumbersome through requiring employers to corroborate parents’ schedules and income with additional documents. (It should be noted that none of these requirements exist at the federal level.) Conservative policymakers tout block grants as an ideal way to tailor policies to fit the unique needs of different states, but in reality, they keep high quality child care out of reach for many working parents.

But even when child care is affordable for retail workers, it often is unobtainable in practice. Just 3 percent of center-based child care providers are open on weekends, and even fewer are open after 7 p.m. Meanwhile, only 44 percent of retail workers work regular daytime hours, which leaves the majority of the retail workforce with very limited options for child care. To complicate things further, providers often require advance payment for full-time enrollment, which is often impossible for parents whose hours can fluctuate by 50 percent from week to week.

None of this is inevitable. Policies that recognize and empower working parents are crucial to reining in unchecked schedule volatility in the retail industry and beyond. The Schedules That Work Act, introduced in the Senate last summer, offers much-needed, common sense protections. The bill requires employers to modify schedules based on employees’ child care needs, and prevents employees who use their right to request schedule modifications from adverse outcomes like pay cuts and termination. It guarantees four hours of pay if workers are sent home early, and eliminates unpaid “on-call” shifts. Finally, the bill mandates employers to provide clear and advance notice of work schedules.

Overall, this legislation would make it easier for my former coworkers who are parents to provide their children with the long-term benefits of consistent, high-quality care. Retail workers are expected to take initiative and be proactive problem solvers—not only as workers, but also as parents. It’s only fair that the law require our employers to do the same.

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Culture

Why Art Matters, Even in Poverty

In the toy aisle, which is inconveniently next to the bread aisle, I tell my 5-year-old son we are not getting a truck today. I tell him we buy what we need, and not more. I tell him I have enough money for food, but nothing else. I tell him I don’t buy treats for myself.

“You buy art supplies,” my son says. And I’m stumped.

Because of course he’s right.

I live in Appalachia, in the poorest county in my state. I often make less in a month than some people spend on cable, though my son and I don’t have cable. We don’t always have trash collection. I drive a 15-year-old car with dents in the back and a scrape on the side that will never get fixed, and I’m behind on medical bills.

But I do buy art supplies.

One of my first memories is of drawing. I’m sitting below the table while my parents have dinner; I’m drawing their portraits. Outside, rural Indiana is flat and abandoned. Our road is gravel. Our neighbors have trailers. But in the warmth of the kitchen, I draw and dream.

I don’t remember being specifically encouraged in art as a child, but I was encouraged to be creative. I was encouraged to occupy myself. I was told, when I complained to my mother that I was bored, “Is your imagination broken?”

When I became a mother—and then, a solo mother—I found myself saying the same words to my son. I filled an old suitcase with art supplies, and put the suitcase in the living room. Mostly, I did it to distract him, to gain a few minutes so I could fold laundry, or start dinner.

But something happened: my child came to love art.

A few years ago, I took him to a “First Friday” event, a street fair when the stores—those that are still in business—stay open late, and there are hot dogs and a high school band. Kids were playing in a fountain, but my kid started sobbing. Because he wanted to see paintings. He had heard me mention an art gallery—and he had to see the paintings there.

My son became enamored with paintings after seeing the art I make at night after he’s asleep. Most nights I fall asleep working as a freelance reporter, drifting off over my laptop, but some mornings, it’s paper and paint pens that litter the quilt when he wanders into my room. He holds the images up. He has questions. He has favorites, and constructive criticism.

What is living in poverty if not constantly being creative?

Not long ago, in the midst of making what I thought was a couch fort, he made his own art gallery. He turned the biggest cushion on its side and taped up his creations to the fabric. He’s also done an “installation” in which he taped greeting cards, string, an odd piece of paper from a grocery bag he cut out himself, and small toys to the wall. He did this after seeing me arrange my own postcards on the wall of our rented place, to cover a water stain.

Why is it important to have art even in poverty? Why is it important to make it? Why spend time trying to make things look nice?

My child is observant—he knows we struggle—and is prone to worry. It’s just clothes, I tell him when he has a play date that will end in mud and wet grass. It’s okay if they get dirty. That means you’re having fun.

Fun is okay, I tell myself. It’s okay to be happy. It’s okay not to spend every second working. It’s okay not to spend every second worrying. It’s okay to forget sometimes—briefly—the creditors on the answering machine, the possibility that we might have to move again, my cough that I can’t afford to get checked out.

Why do I bother making things?

One of my jobs as a poor mother is to make things, to stretch the laundry detergent with water, to fit the screws back in the car door with wire. What is living in poverty if not constantly being creative? Continually making it work? Making the unbearable, bearable. Making the money last. Making the unlivable not just livable, but survivable.

So I cover up scuffs in shoes with marker. I use baking soda to wash my face. Every leftover portion from dinner, I carefully wrap and freeze.

Self-sufficiency is a hallmark of Appalachian life, as is DIY ingenuity. Everything is jerry-rigged, slapped or duct-taped together. One Christmas, my friend helped me chop a tiny evergreen, but when I got it home, I realized I had nothing to put it in. So I filled a pot with water, propped the tree in it, and secured it to the pot handles with rubber bands. Appalachian tree stand.

That’s the descriptor for what we do—and it’s a brand of honor. Appalachian tanning bed: a blanket in the sun. Appalachian recycling bin: throw your empties out the window.

There is more to this life than struggle; there is also great love. I learned that when my son was a newborn, and the knocks on the door began: strangers with mason jars of soup and trays of rice and beans. I learned it when my son was a toddler, and a friend’s father gave him a bicycle and spent hours helping me teach him to ride.

Living in Appalachia, being surrounded by people who are the kindest, most generous I have ever met, even though they have the least, has allowed me to find a way when it seemed there was no way. It has made me feel strong and capable at the hardest points of my life. It has also allowed me to give. When I feel like I have nothing, I can give my son the gift of creativity, the gift of imagination, the gift of spending a happy hour painting cardboard on the porch.

Yes, the porch is splintered, and it doesn’t belong to us, and we don’t own the land—we don’t own any land, not yet—but the paint is bright, the colors are true, and my son smiles.

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Safety Net

What a Budget That Invests in the American People Looks Like

Nearly two years ago, Center for American Progress President and CEO Neera Tanden wrote, “We have a historic opportunity to address poverty today, because the interests of low-income people and the middle class are converging.”

As the first vice-chair of the Congressional Progressive Caucus (CPC), I couldn’t agree more.  In fact, it’s one of the reasons I was proud to unveil the CPC’s budget for Fiscal Year 2017—The People’s Budget: Prosperity Not Austerity; Invest in America.  It offers evidence-based fiscal policy that boosts both short- and long-term economic growth, while also reducing the deficit by more than $5.1 trillion dollars over ten years. More importantly, it demonstrates that We the People can rise in this economy together, and that current levels of poverty and economic inequality aren’t inevitable—they are the result of policies that don’t put hard-working Americans first.

While conservatives are battling over how much to cut vital programs that help the 46 million people in poverty, our budget recognizes that serious economic hardship is something that will affect most of us. More than half of all Americans will experience at least a year of poverty or near-poverty during their working years.  If you include people who will endure at least one year of unemployment or who will need to turn to the safety net, that represents nearly 80 percent of us. That’s why The People’s Budget reinvests in our country after years of austerity policies, which have cut the social safety net and resulted in crumbling infrastructure across the country.

Americans are working longer hours and taking home pay checks that haven’t kept up with the rising cost of health care, housing, and education. We must find a pathway out of poverty for low-income Americans and restore economic security to the working class. That begins by investing in infrastructure, investing in education, and investing in wage growth to increase opportunity for all.

The People’s Budget invests $1 trillion to rebuild our crumbling infrastructure, which would ensure that our roads, bridges, railways, and facilities will be strong, and that no town will experience the kind of devastation that we are witnessing in Flint, Michigan.  In all, we create 3.6 million well-paying jobs to push our economy back to full-employment, and the increased demand for workers will help spur across-the-board wage growth. We also protect collective bargaining, seek to close the pay equity gap, and increase funding for worker protection agencies in order to crack down on wage theft, combat overtime abuses, and safeguard workers’ retirement savings. In short, we recognize that the struggles of people in poverty and the middle class aren’t due to a lack of hard work—they are due to the lack of a fair deal.

Current levels of poverty and economic inequality aren’t inevitable.

When it comes to ensuring that children in working families are prepared for success, The People’s Budget tackles the current inequities in education head on. From pre-school through college, every student deserves a high-quality affordable education and a fair shot at the American Dream. That’s why The People’s Budget provides pre-K for all students and fully funds Early Head Start to help families during the critical prenatal through toddler years. We fully fund Title I of the Elementary and Secondary Education Act—the most powerful tool that we have to drive improvements in educational outcomes for low-income children. Finally, our budget creates a federal matching program that supports state efforts to promote debt-free college, and invests in federal student aid programs to ensure that students with the greatest need aren’t priced out of a higher education.

In addition to creating good jobs for workers and educational opportunities for their children, The People’s Budget ensures that those workers can afford housing for their families.  This isn’t just the right thing to do—it’s the smart thing to do.  For example, new research demonstrates that housing assistance during childhood is associated with higher adult earnings for girls; and among black households, increased earnings for both boys and girls when they reach adulthood.  Yet only 25 percent of families that qualify for federal housing assistance actually receive it; and nearly 8 million low-income families pay more than 50 percent of their income on housing.

The People’s Budget fully funds programs to make housing affordable and accessible for all Americans.  Moreover, at a moment when there are a record 1.3 million homeless students in our public schools, we invest $11 billion to end family homelessness through vouchers, new affordable housing units, and rapid rehousing assistance in cooperation with the efforts of cities, counties, and tribes.

By now—after the worst economic crisis since the Great Depression and historic levels of inequality—we should realize that there is really no separation between the interests of people with low incomes and those of the middle class. The People’s Budget is an aspirational document indicative of our shared progressive values that puts a down payment on a brighter future for all Americans, ensuring every family struggling to make ends meet has a fair shot at the American Dream. It’s past time that we embrace policies that will dramatically reduce poverty, restore economic mobility, and grow and strengthen the middle class.

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Safety Net

The Need for a Budget Proposal That Works for All Families

Today, the House Democratic Steering and Policy Committee is considering the question of how trickle-down economics failed in the War on Poverty. This hearing sharply contrasts with the House Republican budget proposal, which would cut programs for low- and moderate-income people by about $3.7 trillion over the next decade without asking for a single additional dollar in tax revenue.

These proposed cuts to the safety net will devastate the lives of millions of Americans like me. As a single mother of three, I have spent much of my life pulling myself up by my proverbial bootstraps. I have weathered spells of unemployment, food insecurity, homelessness, and domestic violence.

But in spite of my struggles, I obtained a four-year college degree. Were it not for federal and California state programs, I would not have been able to balance the many challenges of higher education with my familial obligations. CalWorks, the income assistance program in my state, helped me to identify a cognitive disability that otherwise would have gone undiagnosed, and then helped me to secure the accommodations I needed to finish my education. Medicaid gave my children health insurance––which helped me sleep better at night. The Supplemental Nutrition Assistance Program (SNAP) and WIC helped me afford groceries and feed my family. With the help of this vital assistance, I graduated with a degree in public policy in 2007. I am living proof that the safety net can work—but only when it’s adequately funded.

Since my graduation, I have continued to pursue my passion for social justice and political advocacy by working with a legal services agency. I connect low-income individuals with state and federal resources that help them keep their heads above water. The clients I work with are not “takers.” They are people who are trying to find affordable housing and nutrition assistance for their families so that they can escape abusive relationships, find a better-paying job, heal from an illness or injury, or overcome  addiction. And perhaps they, too, will one day be able to connect others with these vital programs.

I am living proof that the safety net can work—but only when it’s adequately funded.

But in recent years, I have noticed that these programs have become harder to access. When I first started at this job, the majority of my caseloads were approved with almost no issues. Now, as block grants and “work first” reforms have hacked away at many of the programs that were so crucial to my success, more and more people are seeing their applications denied. For example, today just 23 of every 100 families with children living in poverty benefit from cash assistance through the Temporary Assistance for Needy Families program, compared to 68 in 1996. In my experience, a lot of the clients who come to our agency for help have trouble keeping up with the intrusive and needlessly complicated applications, reauthorizations, and verification forms required to receive benefits. Just one missed deadline, and you can be cut off with no warning. The wait to get back into the system can be over a month long.

These realities are deeply misunderstood by many legislators. Indeed, conservatives—who seek cuts to the very programs that have served as a lifeline for me and my three daughters—peddle an oversimplified and inaccurate notion of poverty. Instead of raising wages or increasing access to affordable housing, these legislators work to further stigmatize low-income people through instituting drug testing requirements, even though very few recipients test positive for drug use, or by banning the use of SNAP benefits to purchase lobster. These frivolous “solutions” in search of a problem underscore how, unlike me, they have never had to strategize about which food pantry to get bread from, or which public restroom to wash up in, or which shelter to spend the night in with three children.

Lawmakers have an obligation to pass a budget that invests in all Americans. They have an obligation to recognize the struggles that people in poverty endure every day—not shame them for those struggles.  They have an obligation to strengthen the safety net, not unravel it. It’s not just people living in poverty who need these key federal investments. Every American who believes government can make a fundamental difference in people’s lives has an inherent interest in protecting public assistance programs.

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