Institutions and Inclusion in Saving Policy

The poor must save, not only to qualify for and pay off credit, but also for key purchases such as clothing for the start of a child's school year; life course events, such as births, weddings, and funerals; and emergencies, such as car repair, illness, or job loss. Recent applied research has contributed to our understanding of the potential importance of saving by low-income households. Yet saving by the poor is a largely overlooked topic in the United States, and public policy has largely ignored or marginalized saving policy for the poor. This is particularly striking given the recent rhetoric of the Bush administration about the ownership society. In this chapter we first develop an institutional theory of saving, which is provisional and in need of more empirical testing. We then explore in practice how existing institutions promote dis-saving among the poor. We also look at how policies to change these institutional structures could promote saving among these households. We also analyze current proposals that move in the opposite direction, largely benefiting the highest-income taxpayers whose net saving behavior is least likely to be influenced by the policies. Instead of focusing on additional saving proposals that benefit the upper end of the income scale, public policy should focus on building wealth among the least well-off. A sound policy would aim for inclusion of everyone in saving and asset accumulation