Among the many troubling signs that the U.S. economy isn’t really recovering and that inequality is becoming more deeply ingrained is the lack of savings by most Americans and the tremendous disparities in assets between a wealthy few and much of the population. Although the stock market has rebounded spectacularly during the Obama years, the typical American household has seen its net worth fall by a third since 2003 to about $56,000. And about 60 percent of U.S. workers have less since $25,000 in savings, a far cry from what they will need to retire, while the 16,000 wealthiest American families have nearly $6 trillion squirreled away.
Although there are many reasons for Americans’ personal debt crisis, two loom large: Too many people are paid too little to make ends meet, much less save. For most Americans, wages haven’t increased since 2000. And, despite occasional calls to save, the calls to spend are much louder and more enticing.

These “liquid asset poor” Americans defy stereotypes: 89 percent hold a job and about half have some college education and are two-parent households. For them, if an unexpected medical problem arises, their car breaks down, or other emergencies occur, the only option is to take on more debt. But even that may be impossible. Despite the countless, annoying solicitations for new credit cards, more than half of Americans have subprime credit scores, meaning that banks won’t lend them money and they have to turn to family, friends or payday lenders charging exorbitant interest rates.

At the same time that wages and personal savings have stagnated or fallen, fewer and fewer American workers are offered employer-provided pension plans that would provide some economic security in retirement. That leaves Social Security, which 22 percent of married retirees and 47 percent of those who are single rely on for at least 90 percent of their income.

Raising wages and increasing tax credits like the Earned Income Tax Credit for those who work are essential. But increasing savings is not only about better wages. We also need to build incentives for people to save. Without dramatically boosting savings, not only do tens of millions of Americans face destitution or the prospect of working into old age, but taxpayers will ultimately have to pick up the tab and the lack of savings provides a drag on our overall economy.

Several ideas could make a difference. An automatic IRA, with the default option to save, could benefit 80 million workers who don’t have workplace-based pension plans. Individual development accounts could help build low-income adults’ savings, as participants would receive up to a three-to-one government match if they saved for an approved purpose such as a down payment on a house, paying college tuition, or starting a business. Children’s savings accounts, which have been piloted in Britain and San Francisco and proposed under the bipartisan the American Dream Accounts Act, would be seeded by a small initial investment by government for each baby born into low- and middle-income families, with additional amounts added during childhood as long as the family also contributed to these accounts. The cost would be less one-eightieth of what taxpayers spent on F-22 fighters, which had never flown a single combat mission until a September bombing strike in Syria.

Improving our people’s economic security will require many things, including higher wages and a stronger safety net. But it is also essential to make savings and asset-building much more possible for tens of millions of Americans.