• <div class="header-image" style="background-image: url(/live/image/gid/4/2611_Header_V6N2_web_4.rev.1518551584.jpg);">​</div><div class="header-background-color"/>

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. [1] 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. [2] 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. [3]

Image: Louisville Flood 1937. Source: Flickr.

Image: Louisville Flood 1937. Source: Flickr.

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. [4] 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. [5]

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. [6] 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. [7] 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. [8]

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. [9] 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. [10] 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. [11] Additionally, the highest infant mortality rates continued to be associated with low income African-American mothers. [12]

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. [13]

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. [14] 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.

Student Blog Disclaimer
  • 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.

 
References

 [1] Rooks, N. M. “The myth of bootstrapping.” Time Magazine Online (2012). http://ideas.time.com/2012/09/07/the-myth-of-bootstrapping/

 [2] Urahn, Susan K., Erin Currier, Dana Elliott, Lauren Wechsler, Denise Wilson, and Daniel Colbert. “Pursuing the American dream: Economic mobility across generations.” (2012).
 [3] Ibid.

 [4] Surowiecki, James. “The Widening Racial Wealth Divide” The New Yorker (2016). http://www.newyorker.com/magazine/2016/10/10/the-widening-racial-wealth-divide

 [5] Ibid.

 [6] Ibid.

 [7] Kochhar, Rakesh, and Richard Fry. “Wealth inequality has widened along racial, ethnic lines since end of Great Recession.” Pew Research Center 12 (2014): 1-15.

 [8] White, Gillian. “In D.C., White Families Are on Average 81 Times Richer Than Black Ones”. The Atlantic (2016). https://www.theatlantic.com/business/archive/2016/11/racial-wealth-gap-dc/508631/

 [9] Ibid.

 [10] Azzam, Amy M. “Neglecting high achievers.” Educational Leadership 66, no. 2 (2008).
http://www.ascd.org/publications/educational-leadership/oct08/vol66/num02/Neglecting-High-Achievers.aspx

 [11]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

 [12] 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

 [13] World Economic Forum. “Global Risks 2014.” (2014). http://www3.weforum.org/docs/WEF_GlobalRisks_Report_2014.pdf


 [14]McKernan, Signe-Mary. “Wealth in America: Policies to Support Mobility.” (2014). http://apps.urban.org/features/wealth-inequality-charts/

PENN WHARTON PPI
RESOURCE SPOTLIGHT:

  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>