New Report Proposes Robust Program to Address New Jersey’s Staggering Racial Wealth Inequality
Newark, New Jersey — The New Jersey Institute for Social Justice today released Reclaiming the American Dream: Expanding Financial Security and Reducing the Racial Wealth Gap Through Matched Savings Accounts, a new report proposing a robust state Individual Development Account program to empower residents to build wealth through matched savings and financial education and coaching.
Read the PDF version of the report here.
Individual Development Accounts (IDAs) enable individuals, through matched savings, to save for a particular asset or goal such as buying a home, starting a small business, or financing postsecondary education. The Report argues for the creation of a statewide IDA program with a progressive match rate, allowing low-income residents to build wealth while helping New Jersey to address its shameful degree of racial wealth inequality.
“Economic mobility is the great unfinished business of the civil rights movement, and that’s particularly true here in New Jersey,” said Ryan P. Haygood, President & CEO of the New Jersey Institute for Social Justice. “Incredible wealth exists alongside punishing poverty in our state due to structural barriers that perpetuate staggering rates of racial wealth inequality. Creating a robust IDA program in New Jersey is an exciting and strategic way of addressing those disparities and advances the Institute’s mission to bridge the ‘two Americas’ that Dr. Martin Luther King, Jr. spoke so powerfully about over 50 years ago.”
“New Jersey has one of the worst racial wealth gaps in the nation, with the current median net worth for white families at $309,396 and, according to the data from last year, a current median net worth for Black and Latino families at just $5,900 and $7,020, respectively,” said Demelza Baer, Sr. Counsel & Director of the Economic Mobility Initiative at the New Jersey Institute for Social Justice and co-author of the Report. “These are staggering racial wealth disparities that reflect systemic, not individual, failures. A robust IDA program is a systemic solution that has great potential to build wealth in communities that have been deprived of it for decades.”
“The more I researched IDAs, the more I saw the potential for them to address the shameful racial wealth disparities in New Jersey,” said Brooke Lewis, Trustee Social Justice Legal Advocacy Fellow at the New Jersey Institute for Social Justice and co-author of the Report. “Matched savings accounts allow people to save for foundational parts of the American Dream—buying a home, getting an education and starting a business. I look forward to the development of a state program and seeing it have on-the-ground, real-life impact on people’s lives.”
A state IDA program already has the support of several New Jersey legislators.
Sen. Nilsa Cruz-Perez, representing the 5th legislative district in New Jersey and Chair of the Senate Economic Growth Committee, co-sponsored the original legislation creating New Jersey’s current, federally-funded IDA program.
“Many people in New Jersey are working full-time or multiple jobs to support their family, but they are unable to save money for emergencies or to realize their life goals. I‘ve always believed that matched savings accounts are a practical and effective way to help people save for meaningful goals like homeownership, education and businesses – milestones that will help them achieve their version of the American Dream,” said Cruz-Perez. “I commend the Institute for its initiative to create a new state IDA program, and will proudly introduce legislation that will create a robust state IDA program in New Jersey.”
“There are clear indicators that show that New Jersey still struggles with achieving economic equality for all its residents. The New Jersey Institute of Social Justice’s report on matched savings accounts is a valuable resource for policymakers seeking to address New Jersey’s widening wealth gap,” said Sen. M. Teresa Ruiz, New Jersey Senator for the 29th legislative district and Chair of the Senate Education Committee. “It is critical that we have creative conversations about how we can bridge or close the gap and create sustainable opportunities for our families. I am honored to be a part of this conversation as we move forward in making New Jersey equitable for all of our families.”
“As I argue in my book, wealth-building incentives like IDAs are a critical part of closing the extreme racial wealth disparity in our society,” said Robert E. Friedman, Founder and Chair Emeritus of the Board for Prosperity Now, and author of A Few Thousand Dollars: Sparking Prosperity for Everyone. “I commend the Institute for its advocacy of this innovative, practical and feasible proposal to expand IDAs in New Jersey to provide expanded access to economic opportunity for residents of the State.”
With today’s national conversation laser-focused on income inequality and proposed solutions, this Report expands the discussion beyond income to include methods of building sustainable wealth for economically-deprived communities.
“Having seen IDAs in action, I know they can be life-changing for people who want to save for foundational assets like a home, education or business,” said Gavin Taylor, Manager of the Financial Empowerment Center at United Way of Essex & West Hudson, which administered Federal (TANF) and Home Individual Development Account programs from 2014-2017. “Combining matched savings with financial education and coaching is an effective recipe for building wealth. The Newark Asset Building Coalition looks forward to working with the Institute to advocate for a new and robust state IDA program.”
In the Institute’s home of Newark, many working families consistently live one emergency away from falling into poverty. Nearly two-in-three Newark households lack sufficient liquid assets to live above the poverty line for three months.
“Without an IDA, I never would have been able to finally fulfill my dream of homeownership,” said Tamika Thomas, a Newark resident who participated in the United Way of Essex & West Hudson’s Individual Development Account Program. “I was a single mother of four and using most of my income to pay the rent. Having a matched savings plan available to help me save was a blessing. I strongly support expanding New Jersey’s IDA program so that other people can benefit from similar opportunities.”