Moving Families Out of Poverty – The Role that Mobility Plays in Increasing Income Mobility

By Susan N. Dreyfus and Jeffrey E. Faulkner | 9/27/2013, midnight

America’s status as the “land of opportunity” for all people is seriously in question, according to a recent study from The Equality of Opportunity Project.

 Researchers from Harvard University and the University of California Berkeley found that geography appears to play a major role in income mobility – a family’s ability to move up the economic ladder. The study, which compares upward income mobility across metropolitan areas, found that families growing up in urban areas in the Southeast and industrial Midwest had a lower chance of rising beyond the station of their birth than families from other regions.

This lack of upward mobility is making it harder for American families to move out of poverty. Four out of five U.S. adults will struggle with poverty at some point in their lives, according to the latest statistics. The gap between the rich and the poor is growing, with 46.2 million Americans (15 percent of the population) stuck in poverty.

There are many factors involved in the inability of some families to escape poverty, including access to jobs, healthcare and quality education. Increasingly, however, social scientists are identifying a more basic barrier to income mobility: mobility itself. 

A growing number of urban planners are examining the issue of transportation access to determine if a lack of mobility is impacting families’ income mobility and job options. In a study released by the Brookings Institution, only one-quarter of jobs in low- and middle-skill industries are accessible via public transit, as compared to one-third of jobs in high-skill industries.

Christina Hubbert of Atlanta, Georgia, commutes via bus and train daily to drop her daughter off at daycare and get to work, a trip that can often take in excess of two hours. When her bus is late, she can incur as much as $100 a day in day care late fees when she doesn’t pick her daughter up on time – a penalty of $10 per minute!

When she tried to buy a car she found that poor credit from some bad financial decisions she made in college meant a car loan would come with a 26% percent interest rate.

Then she learned about Ways to Work, a nonprofit financial empowerment loan program that helps working families through access to financial education and reliable transportation. A part of the Alliance family of organizations, Ways to Work is a leading Community Development Financial Institution and the nation’s largest nonprofit direct-to-consumer loan program. Operating at Alliance member agencies in 19 states, Ways to Work reduces poverty by helping credit-challenged, low-to-moderate income families finance auto loans so they can sustain employment and achieve financial self-sufficiency. In addition to benefitting more than 1200 families via $6.5 million in loans in 2012, Ways to Work provides targeted financial education, household budgeting and credit repair guidance to approximately 4,000 families each year, making it one of the nation’s largest financial education delivery programs.

In a 2012 evaluation of the program, more than 90 percent of program participants reported that their car loan helped them maintain or improve their employment situation, with 75 percent reporting an increase in earnings, 67 percent opening a bank account, and 80 percent moving their children to more appropriate childcare providers.

Programs like Ways to Work are finding success by empowering families with a hand up rather than a hand out. In doing so, they are achieving positive outcomes at a fraction of the cost of social welfare programs, good news to both federal and state governments who are seeing shrinking budgets for a myriad of programs.

All families, no matter their geographic location, should have access to the American dream. By helping families to experience success that lifts themselves out of poverty through the simple act of helping them access reliable transportation, effective financial literacy skills and a means to higher paying jobs, we are fulfilling the promise of America as the land of opportunity.

Susan N. Dreyfus is CEO of Ways to Work and president and CEO of the Alliance for Children and Families. Jeffrey E. Faulkner is president of Ways to Work.