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Course looks at asset-building strategies for the working poor

Well-intentioned government programs aimed at alleviating poverty can actually have the opposite effect by discouraging recipients from building assets for a prosperous future.

That was one of the conclusions emerging from a May term 2011 economics course titled Asset Building for the Poor. The class was team-taught by economics professor Alan Bartley and President Emeritus Charles L. Shearer, whose Ph.D. from Michigan State University is in economics. It was supported by a grant from the Jessie Ball duPont Fund.

The course looked at the difference between income-based welfare programs and recent proposals based on asset building. In the former, the emphasis is on sustaining a person from day to day with welfare assistance based strictly on the income level of the family. The asset-building approach aims to help people accumulate financial, educational, or job-related assets that will help them over the long run.

“Our current system discourages people from bringing themselves up out of poverty,” said Ruth Kloha, a senior mathematics major from Ashland, Ky. “It gives people only enough money or food stamps to survive on a daily basis. Then there’s nothing you can put back on reserve to eventually build your own foundation of wealth.”

Lyman Stone, a junior economics major from Wilmore, Ky., said the class looked at successful micro-financing programs in developing countries such as Bangladesh, where loans to small farmers have put them on the road to economic independence.

“We associate micro-financing with the third world, but it’s being tried in the United States as well,” Stone said. “Even people stuck in poverty who we think can’t contribute in an economic way to society can be brought back into the marketplace if we structure incentives correctly. You have to have a government or a generous private donor, but in the long run it’s less expensive than giving them a check every week when a larger sum now will help them create sustainable economic growth for themselves. Then you don’t have to finance them, their children, and their grandchildren.”

The class surveyed a variety of ways to “front-load” the poverty-relief programs to focus on benefits that will lead to long-term prosperity for the recipients.

Shearer pointed to a United Way program that supports the working poor who want to save by matching their savings efforts on more than a dollar-for-dollar basis. “Building assets is what will pull you out of poverty, not just living on welfare checks. The idea is to move people away from pure consumption and toward the creation of their own assets.” 

“We went with the premise that a lot of working poor people sincerely want to generate assets,” Bartley said. “That’s seen as the way to a life of responsibility and respect. If that’s the case, then the question becomes how we as a society change our policies to encourage that.”

The course was taught as a seminar and required the 11 students in the class to fulfill daily reading, writing, and class presentation and discussion requirements. There were also a number of outside speakers from agencies such as the Mountain Association for Community Economic Development and the Federation of Appalachian Housing.

“This was my favorite class so far at Transylvania, and I really liked the way it was conducted,” said Kloha. “They gave us very pointed and interesting reading assignments, and the class sessions were discussion-based. It was a lot of reading and writing, but you wanted to do it so you could participate in the discussions.”

Both Stone and Kloha said the class had a positive impact on their career thoughts.

“I don’t know exactly what I’m going to do after Transylvania,” Stone said, “but this course was a good grounding in welfare policy in general, not just asset building, that I believe will be helpful for any type of work I might chose to do in the public sector. The outside speakers showed us how these ideas could have immediate applications.”

The course influenced Kloha to apply with Teach for America, a federal program that places teachers in very rural areas or inner-city neighborhoods where teacher shortages typically exist. It also drew her attention from world poverty issues to the situation in parts of America, especially her native Kentucky. 

“This course took away some of the naiveté I had about poverty in Appalachia,” she said. “We read some texts that talked about Appalachia and Kentucky as the eyesore of America and how some people from across the country see Kentucky as a third-world nation. That completely floored me. I couldn’t fathom that we have these issues right here in America.”

Whatever she winds up doing, Kloha feels the class was an asset-building experience for her personally.

“The course will make me a better citizen of Kentucky and the nation. It inspired me to be aware of the community I live in, how I vote, and the schools I will send my kids to.”

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