The Unequal American Dream
August 22, 2017
Early in childhood many children begin to repeatedly hear the same advice from their families, teachers and mentors; be exceptional in high school and get into a top college, choose a “useful” major, graduate on time, get a well-paying job, and work your way up. Beyond simply being a list of ways to get young adults out of their parent’s home, generationally these instructions have been passed down as keys to socioeconomic mobility. Within the United States, this concept of economic mobility is a norm. It is the epitome of the American Dream, but in practice there are gaps in execution and the hoarding of a dream for particular groups of people.
This process of climbing up, also known as “bootstrapping”, has always been linked to the American Dream. Today, approximately 84% of Americans have actually obtained greater wealth than their parent’s generation, but it is generally those that are born at the top who have a greater chance of remaining there and moving up generations down the line.  Conversely, for those born at the bottom, where they once would have been typical contenders of bootstrapping, they are now instead stuck and even more likely to fall backwards.  Racial wealth gaps have been measured for decades and one fact seems to remain the same; white families are able to accumulate more wealth at a quicker pace than black and brown families. 
The trend of racial wealth gaps first dates back to days of slavery where people of color were initially excluded from participation in economic institutions and government programs that helped white families to build generational wealth.  Transitioning to the Civil Rights era wealth gaps later manifested themselves in the form of redlining where it was impossible for Black and Latino families to secure mortgages from banks, forcing them all to move into one concentrated area. The gaps were even reinforced by the passage of the GI bill; while extremely successful in building the American middle class, again excluded people of color. 
Income is money coming into the family, while wealth is the total of a family’s assets. Both are important for financial stability but wealth is what gives means to climbing up the ladder. Income inequality buffers wealth inequality because the income people have available to save and invest matters.  The United States is now in a space where these once minor wealth gaps have become grave in difference. In 2013, the median white family held 13 times as much net wealth than the median black family and 10 times as much as the median Latino family; in comparison to just a decade prior, where the ratio was then only 7 to 1 for blacks and 9 to 1 for Latinos.  Wealth discrepancies between whites and minorities are particularly glaring in major U.S cities and vary widely. The difference can range from high as white families having 89 and 81 times as much wealth, as is in Los Angeles and D.C respectively; to as low as 30 times as is in Miami and 18 times in Tulsa. 
These statistics while telling unfortunately do not completely capture what these gaps mean for minority families. In practice it translates into limited access to education and extracurricular activities that could help boost low-income families into the middle class. It results in decreased opportunities to create a savings, own a home, and create economic security. And it means that parents and grandparents have little to nothing to pass on.  And the consequences extend beyond a lack of economic security; pervasive generational poverty impacts many aspects of minority life. Minority students living in poverty are not only more likely to attend high poverty schools with fewer resources, but also have teachers who expect less of them academically.  Minority children in poverty are also more likely to be exposed to drug and alcohol advertisements and more likely to use and exhibit antisocial behaviors.  Additionally, the highest infant mortality rates continued to be associated with low income African-American mothers. 
Closing the racial wealth gap is not just about equalizing financials, it is an opportunity to offer minorities a fair chance at having optimal physical, mental, and emotional health outcomes, attain better education, and live a life that is worth living. Moreover, racial wealth gaps are not just an issue of economic disadvantage; it actually worsens economic outcomes for the country as a whole. Economic inequality is a source of economic volatility. Meaning that if the economy was to hit a volatile wall, and there were not enough people who had the resources to withstand it, the entirety of the economy would be more vulnerable. 
For decades, racial wealth gaps have been driven by policies that have generally failed to promote asset building for lower income families. For example, expanding access to higher education for minorities is great, but it is not helpful when they are forced to finance their education with loans because their families have less wealth and fewer private resources they can use. Implementation of safety net programs to offset low incomes is helpful to keep families financially afloat, but they do nothing to encourage wealth building and economic mobility in the long run.  Public policy can positively intervene through many avenues such as establishing automatic savings in retirement plans, creating and implementing a children’s universal savings account as a step towards asset building, or even limit the mortgage interest tax reduction and using revenue to provide credit for first time home owners, among other interventions. The gaps will never close until the United States supports policies that efficiently and equitably promote savings and asset building, and provides minorities the tools to invest in themselves and their communities.
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The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.
Additional Blog Posts
Dubow, Eric F., Stanley Edwards, and Maria F. Ippolito. “Life stressors, neighborhood disadvantage, and resources: A focus on inner-city children’s adjustment.” Journal of clinical child psychology 26, no. 2 (1997): 130-144. http://www.tandfonline.com/doi/abs/10.1207/s15374424jccp2602_2
 Fiscella, Kevin, Peter Franks, Marthe R. Gold, and Carolyn M. Clancy. “Inequality in quality: addressing socioeconomic, racial, and ethnic disparities in health care.” Jama 283, no. 19 (2000): 2579-2584. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.616.6257&rep=rep1&type=pdf