It's a surreal experience waking up to a story related to what I work on on the radio. It's happened several times, and I'm never quite sure if I'm actually awake or just processing the day's events. Such was my experience this morning listening to NPR as Marketplace launched the first in a series on wealth and poverty.
In the first installment, reporter Mitchell Hartman looks at the importance of wealth, especially for the non-wealthy. For those families, he says, "wealth is most important for the material boost it can provide to the younger generation." This language is a very subtle way of saying that the economic status of one generation lays a foundation for the opportunities available the next.
As Thomas Shapiro, someone quite familiar with the (dis)advantages that wealth holdings transmit across generations, explains, one way that a parent's wealth can translate into a financial advantage for a child is in assistance purchasing his first home. With the equity generated from that home, the child has a buffering against a financial shock or a way of financing college for their child. Homeownership, in fact, has been the primary asset for most lower income and minority families and has provided the resources for many to send their children to college.
The burst of the housing bubble hit these families particularly hard, however, since they tended to lose more more home equity that their higher-income and white counterparts and had fewer assets to offset those loses. Consequently, the cost of this loss will have long reaching ripple effects on the educational prospect of their children. Recent research suggests that college enrollment of students from families earning less that $70,000 could drop by 30 percent due to the loss of home equity that would have been used to finance their education. The US Census Bureau announced last week that, for the first time, the number of adults over 25 who had received a bachelor's degree topped 30 percent. The data, however, also revealed continued gaps in degree attainment between white students and minority students. Without an intervening policy that decouples the financial disadvantages of one generation from the opportunities of the next, it's reasonable to think that these trends will continue unabated.
Looking forward, I'm eager to see what solutions to the growing wealth gap the series identifies. If they haven't done so already, I'd recommend taking a look at the Asset Building Program's Assets Agenda for ideas on how to expand the options available for all families build financial security and move up the economic ladder.