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The Podium

A blueprint for economic mobility

Despite the trend of inflexible partisanship, there is growing pressure from across the political spectrum to raise a national conversation about poverty policy. From The Nation’s #TalkPoverty efforts to spark the candidates to articulate their solutions, to David MacDougal’s New York Times piece calling for a “third way” that is neither blind social budget axing or knee jerk program creation — there is consensus: our current approach is not working.

The trickle down approach has left most of us behind. And while the safety-net system ameliorates the harsh effects of poverty it is not a springboard to move people forward. If we hope to see a middle class resurgence we need a new approach — one that leverages families’ hard work as they pursue their American Dream.

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Since 2001, through my organization, the Family Independence Initiative, I have partnered with hundreds of low-income families in Boston and the Bay Area to test an approach to social and economic mobility that looks nothing like our current methods. If anything it’s an inverse. Instead of paid professionals, low-income people are the agents of change and decision-making in their lives. Instead of penalizing progress, people can access resources as they move up. Instead of perceiving and treating low-income families as needy, families are respected for their capacity and resourcefulness. Instead of building a sense of dependence on programs, families forge strong relationships with friends creating social capital, interdependence, and mutual aid.

In the sample communities we tracked, average household incomes jumped 20 percent, debt decreased, savings increased, kids’ grades improves, and many families dropped public assistance. Almost all of the families had members who transitioned to higher paying jobs, got additional education, started their own businesses creating jobs for themselves and their teens, or made other significant progress. Some started lending circles with their friends so that they didn’t have to rely on predatory lenders when they needed capital.

Our investment of under $2,000 on average per household helped bring about these changes. Independent evaluators identified a few key motivators behind this success — and, surprisingly, it wasn’t the capital. Rather people responded to and appreciated the responsibility involved in leading their own change — the power of self-determination. And they were also motivated by the group context — having the support of peers, a place to share ideas, formulate plans, and give and receive support. They overwhelmingly concurred that moving up in America was a group effort.

Jorge and Marie Elena worked hard to realize their dream of home ownership. Their story shows the power of social capital and self-determination at work. After purchasing their home they discovered their broker was a predatory lender. Their mortgage was 65% of their income. When their community learned the family might lose their home, friends and neighbors descended upon the house to paint, tile, landscape, and re-roof it. The increased value of the house allowed them to re-finance their mortgage, getting the payments down to a manageable amount. Not only have they been able to stay in their home through the foreclosure crisis, but many friends, who previously thought such an accomplishment was impossible, were inspired to buy homes too.

I’m often asked for a blue-print for others to reproduce our project. But the answer to the country’s stalled mobility is not to create hundreds of projects like mine. Rather, philanthropies, policy makers, nonprofits, and private sector stakeholders can reward and encourage initiative, invest in residents’ solutions, and support social networks. Collectively we can create a platform for opportunity and mobility.

Fortunately we already have an incentive system like this in place. It exists for people who make upwards of $80,000 a year. This system incentivizes asset building and savings by offering a variety of benefits such as tax based home mortgage deductions, matched savings for retirement, education savings, and other tools that put a premium on asset building. We can expand this opportunity rich environment to create a system that it is relevant for people at all income levels.

It’s time to apply our collective ingenuity towards leveraging social capital and creating opportunity. We did it before with the GI Bill, which helped grow the middle class through economic and educational opportunities for millions of returning WWII vets. Today innovation and investment needs to come from all sectors. We have many great examples: Kiva Zip uses technologies to crowd-source loans for start up businesses that don’t qualify for bank or microfinance loans; Mission Asset Fund makes traditional lending circles a credit building opportunity; EARN’s Triple Boost education savings account is a model for matched savings for low-income workers; and funders like Boston Rising and the Jacobs Family Foundation invest philanthropic dollars in resident ownership of community change.

The American Dream is as much a challenge as it is a promise. Our history is rich with examples of people rising to the challenge — poor immigrants and former slaves who built townships, small businesses, and community. Today low-income people work harder than ever. Many are holding down two jobs but still struggling. Now is the time to invest in this capacity and initiative. It’s a winning investment we can’t afford to miss.

Maurice Lim Miller is founder and CEO of the Family Independence Initiative and winner of the 2012 MacArthur Award.
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