According to a new study led by a sociologist at the University of Michigan, Black children are far more likely than White children to wind up with less wealth of their own in comparison to their parents. This is true even when comparing Black and White children whose parents have similar wealth.
The racial wealth gap can play a significant role in access to quality higher education. Components of family wealth, such as stocks, bonds, money in the bank, and real estate, produce interest, dividends, or rental income which are commonly used to offset or pay college costs. Wealth also includes the value of a family’s home. This important asset can be sold or borrowed against to provide funds for college expenses.
For this new study, the research team analyzed data from the Panel Study of Income Dynamics, a nationwide longitudinal study, to show how the racial wealth gap between Black and White Americans persists across generations. Their analysis shows that the disadvantage of Black families is a consequence of both wealth inequality in the parental generation and race difference in the transmission of wealth positions across generations.
“We show that, although many children attain wealth levels that differ from those of their parents, the racial divide in the wealth structure is effectively maintained across generations,” said Fabian Pfeffer, an assistant professor of sociology at the University of Michigan’s Institute for Social Research.
To illustrate racial differences in these intergenerational movements, the researchers displayed the probability of attaining each quintile of the distribution of net worth (dividing the wealth distribution into five equally sized groups) among Black and White children who grew up in the same wealth quintile of the parental wealth distribution. For example, among the middle 20 percent of the parental wealth distribution, Black children are much more likely to be downwardly mobile, with 39 percent dropping to the lowest 20 percent of the wealth distribution compared to only 16 percent of similar White children.
Across generations, the representation of Blacks in the middle 20 percent of the wealth distribution increased from 8 to 15 percent and their overrepresentation in the bottom 20 percent of the wealth distribution decreased from 44 to 30 percent. But the overall visual impression, the researchers say, underlines the considerable stability of racial gaps in family wealth, despite the fact that 70 percent of White children and 62 percent of Black children attain a wealth quintile different from their parents.
The researchers believe their results highlight that this racial gap can be attributed to both a legacy of disadvantage and discrimination as well as ongoing racial inequality in opportunities for wealth attainment.
“Those seeking to decrease today’s intense level of racial wealth inequality need to look at both the past and the present; structural racism has hampered the wealth attainment of minority households for a very long time and it continues to do so,” said Dr. Pfeffer.
The full study, “Generations of Advantage. Multigenerational Correlations in Family Wealth,” was published in the journal Social Forces. It may be accessed here.