On any given day, there are 45M families in the United States living at or below the federal poverty line. The good news is that 75% of these families move above that line within four years fueling FII’s contention that low income families are not lazy and do not make bad decisions. The bad news is that 50% slip back under within five, thanks to the benefits cliff effect.
Source: Des Moines Register
Benefit programs that help low income families meet their basic needs – food, housing, childcare and health care – are typically administered based on a family’s savings and overall income level. The so-called cliff effect comes into play when a family either saves a bit of money for an emergency fund or begins to earn above the limits set by state and federal agencies and thereby becomes ineligible for food, housing, and child care subsidies.
A small well-deserved hourly wage increase or promotion pushes a family’s income above the eligibility threshold for one or more benefits, triggering a reduction in or a complete loss of benefits. Too often, the value of the lost or reduced benefits exceeds the increase in wages, leaving the family in a worse position financially and still well below economic self-sufficiency income levels, having an added adverse effect on initiative and self-worth.
FII counteracts the traditional cliff effect built into existing policies and practices by offering families an approach that engenders trust, recognizes creativity and resourcefulness, rewards initiative, and encourages community building. The three core components of the FII approach are choice and control, unrestricted direct investment, and social capital exchanges.
Choice & Control
Although over $400 billion is directed towards low-income families each year, nearly all of those funds are disbursed to families based on need, mandate how the dollars can be spent, and are tied to eligibility criteria that neither recognizes nor rewards creativity, ingenuity, and initiative. FII, on the other hand, takes a strengths-based approach that offers families choice in and control over their lives. When low income families are extended trust, direct unrestricted investment, and the opportunity to choose their own paths to mobility, they set challenging goals and work hard to meet them.
The importance of unrestricted direct investment cannot be overstated. While traditional social service agencies do indeed fund basic needs for families living in poverty, they do so only if a family can demonstrate need and only for prescribed use cases. As a result, families often feel the only way to maintain access to public benefits is to hide their strengths, their family and community supports, their savings, their businesses and, in some instances, the presence of a husband in their lives and and a father in the lives of their children.
At FII, we celebrate families and applaud their ingenuity, industriousness and initiative. After 6 months of journaling. FII families gain access up to $2,400 in unrestricted dollars through the FII UpTogether Fund over a two-year period. Because these funds are intentionally not prescribed, each family determines for themselves how best to invest their dollars. However, to advance our learning, we ask families for a general description of use case when they initiate a withdrawal. We categorize these open text field responses. Given that it is possible for a single fund withdrawal to be used for more than one purpose, the sum of category dollars may not match the overall disbursement.
As of 12/31/2018, the UpTogether Fund has been accessed 3,723 times, disbursing $2,254,975 to families.
There is a vast economy that occurs within natural networks that goes largely unnoticed. In low-income communities in particular, where money is often tight, millions of dollars in goods and services are exchanged on a daily basis as a result of mutual reliance and generosity. FII believes the concept of social capital exchange should be expanded across economic classes. Society as a whole must recognize the strengths and contributions of every individual and invest in them equitably.
Each month, we ask families to report, categorize, and monetize any social capital exchanges they have engaged in with others in their network. While no money changes hands, these exchanges have real economic value in the marketplace and we quantify them as such. Through the end of 2018, families reported exchanges of over $13 million. Interestingly, FII families give help more often than they receive it.**