Thomas M Shapiro

A college education has been linked to higher life-time earnings and better economic achievements, so the expectation would be that it is also linked to higher net wealth for everybody. However, recent analyses challenge this hypothesis and find that the expectation holds true for White college-educated households but not for Black college-educated households. To examine this finding further and investigate the role of family financial transfers in household net wealth, the authors perform a mixed-method study using data from the Panel Study of Income Dynamics for a 24-year period, 1989-2013, and qualitative data from the Institute on Assets and Social Policy Levering Mobility study. Their results confirm that White college-educated households amass wealth, whereas the wealth of their Black counterparts declines. The authors also estimate the impact of just inheritance or large financial gifts and find that they decrease the existing racial wealth gap by nearly $ 40,000, or 20 percent.
Further analyses demonstrate that White college graduates are significantly and substantially more likely to provide and receive financial support for education and/ or a home purchase, while Black college graduates are significantly more likely to financially support their parents. Multivariate regression analysis identifies receipt of financial support for education and a home purchase as a positive contributor to net wealth and financial help for parents as a negative contributor to net wealth, disadvantaging Black college-educated households, who are less likely to receive and more likely to give financial support.
Longitudinal interview data collected in the Institute on Assets and Social Policy Leveraging Mobility study illustrate the mechanisms of family financial transfers and their relationship to wealth accumulation, contrasting the White and Black households' experiences. The discussion underscores the need to better understand intergenerational wealth and wealth sharing within families when studying wealth outcomes and highlights the role of family financial wealth transfers in creating opportunities for those who benefit the most-mostly White college-educated households.

Wealth inequality between the top and bottom deciles has grown over the last 20 years (Piketty and Zucman in Wealth and inheritance in the long run, Centre for Economic Policy Research, London, 2014), as has the racial wealth gap (Shapiro et al. in The roots of the widening racial wealth gap: explaining the black–white economic divide. Institute on Assets and Social Policy, Brandeis University, Waltham, 2013. http://iasp.brandeis.edu/pdfs/Author/shapiro-thomas-m/racialwealthgapbrief.pdf).

Within these broad trends of inequality, some families are able to get ahead and grow their wealth, while others are not. Yet we do not understand well the critical variables that increase the likelihood of wealth mobility across the life course—within the same generation. This paper addresses this gap and investigates the following questions: What accounts for intra-generational relative and absolute wealth mobility for families with children in the first decade of the twenty-first century? And how does it differ by race? The paper draws on two longitudinal data sets—the Panel Study of Income Dynamics household survey data matched with neighborhood-level US Census data (1999–2011), and the IASP Leveraging Mobility (LM) study (1998–2011). Applying an integrated mixed methods design, analyses are conducted in three stages: (1) A grounded theory analytic approach of the LM data determines key variables of wealth mobility: homeownership, income, employment characteristics, extended family wealth, negative life events, and neighborhood factors; (2) regression analyses test these indicators for absolute and relative wealth mobility; and (3) recontextualization through further analyses of LM data deepen the regression results by illustrating the pathways of significant wealth mobility predictors. Results reveal that increasing family income, larger family transfers, consistent long-term homeownership, and in some cases white-collar occupations increase the likelihood of upward relative wealth mobility. Negative life events, higher rates of neighborhood poverty, and black race are negatively correlated with the amount of wealth growth. These key drivers of wealth mobility highlight the need for targeted policies that reinforce and expand opportunities for all families to build wealth over the life course.

The dramatic and widening gap in household wealth along racial lines in the US reflects policies and institutional practices that create different opportunities for whites and African Americans. In 2013, Shapiro and his colleagues at the Institute on Assets and Social Policy at Brandéis University published research based on a sample of 1,700 working-age households that were followed over a 25-year period-from 1984 to 2009. This approach offers a unique opportunity to understand what happens to the wealth gap over the course of a generation and the effect of policy and institutional decision-making on how average families accumulate wealth.

New evidence reveals that the wealth gap between white and AfricanͲAmerican families has more than quadrupled over the course of a generation. Using economic data collected from the same set of families over 23 years (1984-2007), we find that the real wealth gains and losses of families over that time period demonstrate the stampede toward an escalating racial wealth gap.This report is the first
in a series that audits the growth of the racial wealth gap over the past generation.