Several years ago, pre-recession, some married friends of mine decided to start their own business. The husband (I’ll call him Jay), a plumber, worked for someone else, and while he liked his job, his wages weren’t enough for his family of four to break out of a low-income bracket. Jay and his wife (we’ll call her Beyoncé, just to mess with the image in your head) went out on their own.
Jay and Beyoncé prepared themselves well. They took classes and worked within a network of other small business owners to share ideas and fine tune the business plan for their plumbing company. Their growth was measured, but reasonable. But things popped up that got in the way of their progress. For instance, they had a son with juvenile diabetes. Once Jay left his job and became self-employed, they couldn’t get health insurance that would cover their son. His medication ran about $300 a month, and heaven help them if they encountered an emergency situation due to his disease. The system left them in a vulnerable position, and yet, they persevered, and grew, until the recession hit. Then they went back to traditional employment (for now, at least.)
There are plenty of people like Jay and Beyoncé in this country who are working arduously to achieve financial independence—not just to be free of government assistance, not just to be able to pay their monthly bills, but to have savings in the bank and enough left over to take a family vacation every year. They are bootstrappers, to a large degree, but they face barriers.
I didn’t realize how many barriers to financial independence existed until I did some work—both paid and volunteer—in the non-profit sector. I met clients and heard their stories, read legislation, and learned about social assistance program rules. Then I understood that while some people may be government assistance ‘lifers,’ content to collect every benefit they can for as long as possible, most want to get out of the social-assistance cycle, but find it tremendously hard to do so. They’d be better at bootstrapping if they didn’t have one hand tied behind their back and a blindfold on.
The examples are numerous, so here are just a few to illustrate how the social assistance system can create obstacles and/or prolong dependency (although laws and programs vary from state to state):
- In some states, recipients of EBT cards (electronic benefits transfer cards) pay a transaction fee each time they use their card. In Washington State, it’s 85 cents. Whether they buy 20 grocery items or a jug of milk, they’re charged. This is due to contracts negotiated between state social service agencies and banks, and it eats a chunk of their assistance.
- Welfare recipients who start their own business may have their benefits reduced as soon as they report business revenue. Since it takes three to five years for a business to really get going and become profitable, this policy is pretty counterproductive. Yet, the alternative in many cases is for the person to take a job that doesn’t provide a living wage, and soon enough they find themselves back on assistance.
- Other activities that are associated with ‘getting ahead,’ e.g. saving money, getting post-secondary education, can also mean a reduction or discontinuation of benefits. People are penalized for implementing strategies that will lead to their long-term financial sustainability.
It is possible for people to break out of poverty, but currently it’s kind of like running a marathon where the water stations disappear at the eight-mile mark. More of them would be successful if the barriers—to education, living-wage careers and financial security—were removed. Instead, we often cut people off at the knees just as they’re starting to gain some momentum. And then the cycle continues…
Are you a bootstrapper? Have you run head-on into an economic barrier (ouch)? Tell me your story!
Next week, I’ll be talking about why the idea of bootstrapping is nice metaphor, but largely a myth in real-world application.