[Closing The Gap, Part 5] Past is future: Intergenerational wealth

This is the fifth post in a running series based on our recent report, Closing the Opportunity Gap: Building Equity in Oklahoma, which assesses the racial wealth gap and proposes solutions for closing that gap through asset-building. Previous posts detailed disparities in foundational assets (health, education, transportation) generative assets (employment and income) and regenerative assets (savings and homeownership).

The opportunity gap has remarkable staying power.  From generation to generation, wealth disparities by race are persistent.  This post explores the intergenerational forces underlying this inertia and the role of past events in determining future outcomes.

We know that infants born into families that can’t meet their basic needs are more likely to end up on a lower rung of the economic ladder than infants born into families with the means to satisfy their every need.  That’s because our ability to build and accumulate wealth contracts or expands in proportion to our opportunities.  

This does not deny anyone’s capacity to work their way up (or down) the economic ladder regardless of their original circumstances.  Many people do.  But it’s similarly illogical to assume that anyone who is asset-rich must have worked harder and made better choices than anyone who is asset-poor (precisely the conclusion of a recent Oklahoman Editorial).

Individual choices, good or bad, do not take place in isolation.  And when it comes to accumulating wealth, individual choices are set against the backdrop of intergenerational forces largely beyond an individual’s control.  Past policies that enriched white Oklahomans by impoverishing people of color had real and long-lasting effects.  Denying people of color the opportunity to build wealth during their own lifetimes also robbed them of the capacity to pay wealth forward.  As explained in an NPR report:

Study after study shows that white families are more likely than blacks and Hispanics to enjoy certain economic advantages — even when their incomes are similar. Often it’s the subtle things: help from Mom and Dad with a down payment on a home or college tuition, or a tax break on money passed from one generation to the next.

Tom Shapiro of Brandeis University has tracked hundreds of families for almost 30 years and says the gap perpetuates itself.  “The larger the amount of financial wealth a family starts with, the more financial wealth it accumulated over that period of time,” he says.  In other words, it’s easier to get richer if you already are.

sharehhWhite households do in fact benefit disproportionately from intergenerational wealth transfers, as you can see from the chart to the left.  Data collected in a periodic national survey by the Federal Reserve reveals that nearly a quarter (24.6 percent) of White households received cash or assets as gifts and/or inheritances from family or friends over the last two decades – versus just 10.2 percent of African American households and 5.5 percent for Hispanic households receiving wealth transfers.

Among the households of color who did receive inheritances or gifts, the median value was markedly lower than among white recipient households.  The median Hispanic and African-American household received $24,600 and $17,400 less, respectively, than the median White household.


Now we see more clearly why households of color in Oklahoma have less wealth on average than White households: some had ancestors whose wealth was destroyed during the Tulsa Race Riot in the 1920s, grandparents who were denied a college education or homeownership in the 1940s and 50s, and parents who faced employment discrimination throughout the 1970s and 80s.  Wealth once accumulated begets more wealth, so gaps created long ago retain their momentum and become self perpetuating through intergenerational transfers.  

The remaining posts in this series will focuses on solutions and proposes narrowing the opportunity gap through effective and evidence-based public policy strategies.


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