More than 37 percent of California households have so little cash saved that they couldn’t live at the poverty level for even three months if they lost a job or suffered another significant loss of income.
That’s the grim assessment of the 2017 Prosperity Now Scorecard. The report was compiled by Prosperity Now, a Washington, D.C.-based organization seeking to help people — particularly people of color and those with limited income — achieve financial security and prosperity.
No emergency fund
The scorecard also shows that 46 percent of households in the Golden State didn’t set aside any savings for emergencies over the past year, a higher percentage than the national rate of 43.7 percent.
It doesn’t help that 21.1 percent of California jobs are in low-wage occupations. The scorecard found that 21.4 percent of Californians experienced income volatility over the past year, a situation that most often results from irregular job schedules.
Households of color
It gets worse for households of color. They are nearly twice as likely to live below the poverty line as white households — 18.2 percent compared to 9.7 percent — and they are much less likely to own a home or other assets that could help boost their long-term financial stability.
Less than half of California’s households of color (43.9 percent) own homes, compared to 62.5 percent of white, non-Hispanic households. Moreover, 60.7 percent of Latino households and 56.7 percent of black households have virtually no savings and are considered “liquid asset poor,” compared to 28.2 percent of white households fitting that category.
“Beyond providing a cushion to get families through emergencies, increased savings and wealth allow families to invest in their futures and gain ground for future generations,” Prosperity Now President Andrea Levere said in a statement. “It’s clear that far too many people are stuck in economic limbo.”
High housing costs
Lars Perner, an assistant professor of clinical marketing at the USC Marshall School of Business, said California’s high housing costs have put many households on shaky financial ground.
“The cost of housing in California is exorbitant,” he said. “That’s a big part of the problem. People pay a disproportionate amount of their income toward housing.”
The report finds that nearly 20 million U.S. households (16.9 percent of the total) have zero or negative net worth. That means they owe more than they own.
Getting on track
The scorecard suggests several policies that could help get struggling households on track, including adopting policies that encourage saving, increasing the minimum wage, providing better access to home ownership and boosting retirement security.