To Be Defined by History No Longer
Imagine this… Arthur, a 17-year old caucasian, and Zachary, a 16 year-old African American, both live in the Woodlands, Texas: an upscale suburb of Houston, well-known by the Houston populous for its tantalizing selection of shopping outlets, its painstakingly maintained golf courses, and its majestic residences. Unfortunately, reputation isn’t everything. Arthur and Zachary are both high school baseball players living with their respective parents, and after a competitive, yet relaxing, practice scrimmage, Zachary rides home in Arthur’s BMW 4 series coupe (Zachary’s parents can’t afford another car for him). On Monday, Arthur will attend class at one of the highly selective private schools in the area, while Zachary continues studying at the local public school: his parents simply can’t afford the $30,000 annual enrollment fee for him to attend a prestigious private school. Saturdays are the relaxing pinnacle of the week: baseball practice followed by scrumptious burritos at the local Chipotle, and yet Zachary finds himself subconsciously worrying about the bill, rather than decompressing with his friend. Although some may attribute any number of circumstantial evidence to justify Arthur’s and Zachary’s respective economic situations, I argue that the mere existence of this wealth inequality deserves an intensive analysis.
In addition, this wealth disparity is not localized to one town in the middle of southeastern Texas; on the contrary, various forms of wealth inequalities exist all across the globe. A common economic measure of a countries’ wealth inequality is the Gini Index, and a popular measure of educational equality is the national literacy rate. The Gini Coefficient quantitatively describes a country’s inequality on a scale of 0 (perfect equality) to 1 (perfect inequality). Income inequality continues to plague San Juan, Puerto Rico which has a Gini Coefficient of 0.558 (Toro). Education inequality hinders Burkina Faso, which had a literacy rate of only 41.22 % in 2018 (Burkina Faso Literacy Rate). Finally, racial wealth inequalities heavily limit the opportunities of those in the minority in Washington D.C. and Wisconsin, USA. Though each region may battle a unique type of wealth disparity, the umbrella issue remains so prevalent in today’s global society that it brings to light two key questions: firstly, what can be done to prevent the furthering of these unequal gaps? And, are our societies doomed to maintain some trace of economic inequalities despite our best efforts to ameliorate them? I argue that there is hope, through meticulous empowering efforts and state intervention, both for those who are negatively affected by the crushing weight of wealth inequality and for the numerous societies who have continued to fail in helping those most vulnerable over the last century.
As we approach the daunting idea of reducing global wealth disparities, we must begin by first understanding one of the root causes of the crisis and subsequently the focus of this paper: generational wealth. The idea of generational wealth describes the passing down of family-owned assets to one’s descendents (Adams). Due to the vast interconnectedness of racial inequalities and generational wealth within the U.S., one simply cannot be studied without considering the other. Generational wealth can have enormous impacts on the success of the following generation, as an individual who receives a family inheritance has an undeniable head start in controlling their economic situation as compared to someone who receives nothing.
Alexandra Killewald further reviews the impact race has on one’s aggregate wealth; for instance, Killewald determines that a variety of factors including, income, savings, return on investments, blacks’ limited entrepreneurial activity, and intergenerational transfers, all have a partial effect on the evident wealth gap between whites and blacks (1179). Additionally, Omar Khan and Runnymede Trust discuss the obvious racial discrimination in the job search that exists within the UK: “The fact that people with Asian or African sounding surnames have to send in twice as many CVs to get an interview is not an arbitrary or random inequality, but is based on views about deep-seated, sometimes not even conscious, views about their competencies and skills” (1). Killewald explains how intergenerational transfers lead to a “sedimentation of inequality” (1179). Khan and Trust blatantly state that modern society still holds deeply-rooted discriminatory views that hinder black individuals and immigrants from obtaining well-paying jobs. Even if these discriminatory actions are unconscious results of a greater sense of privilege, the effects on the workers who lose an opportunity for a promotion or never receive a job interview are quite tangible. Both of these sources paint a disheartening image of modern society. Killewald implies that the uneven distribution of intergenerational transfers between blacks and whites will only increase the wealth divide between the two races, and Khan and Trust indicate that a discriminatory society looms as a shadow over every minority group hindering them from climbing the socio-economic ladder. While I agree with Killewald that intergenerational transfers have a compounding effect on the future of the race, I believe that Khan and Trust emphasize a fragment of the true solution to mitigating the wealth gap between minorities and white individuals; a collaborative, anti-discriminatory effort between society and the individuals themselves is needed in order to restore a more equal interaction between all peoples.
In the book, The Color of Wealth: The Story Behind the U.S. Racial Wealth Divide, the authors emphasize, “an estimated 80 percent of assets come from transfers from prior generations” (Lui, M. et al. 8). The authors then describe how “white people are much more likely to inherit money from deceased relatives than people of color” (Lui, M. et al. 8). These statistics provide fundamental evidence for the existence of a racial wealth gap within the United States, as well as, in more local regions, such as The Woodlands. More than 22.5% of Houstonians identify as African American compared to the mere 4.31% of the population of The Woodlands (World Population Review). Combining Lui’s assertions and the census data from The Woodlands, it can be inferred that a significantly larger percentage of The Woodlands’ population would be expected to have previously inherited wealth from deceased ancestors. Thus, the brutal cycle of generational wealth continues, as those with ample disposable income are more able to assist their descendants than those living paycheck to paycheck.
Similarly, a study done by the Organization for Economic Cooperation and Development (OECD) on economic inequality in the European Union (EU) concluded that migrants faced discrimination when job-searching, as compared to their European peers (22). Furthermore, a BBC report by Maddy Savage on the growing wealth in Norway, suggested non-Norweigian workers struggled to find and secure jobs, despite the country’s booming economy. Though Lui, M et al., OECD, and Savage emphasize the discrimination of minorities within society as compared to physical generational wealth discrimination, these three statistics describe the overlapping issue that looms behind all wealth disparities. Systemic racism aimed at black Americans and foreign immigrants often forces these minorities into positions of lower economic opportunity. Therefore, in order to alleviate the strain of generational wealth disadvantages, these minorities must first be allowed to accumulate wealth. This is fundamentally easier in the absence of economic suppression by a discriminatory society.
I believe that the first step in lessening the generational wealth cycle hinges on minorities receiving equal treatment by all their peers. For instance, migrant discrimination in European countries often forces individuals into a vicious cycle of reduced opportunity, frustration, and suffering. Across the Pacific, many European countries rely on laws passed by the European Union to protect their migrant workers from blatant discrimination, and yet, some forms of discrimination in the workplace are difficult to prove (Human Rights Watch). Moreover, trade unions, organizations made up of workers, aim to “protect and advance the interests of its members in the workplace” (nidirect). Norway, a country known to top the charts for workplace equality, has upwards of 51% of its working population in trade unions (European Trade Union Institute). This is compared to the substantially lower 10% of the U.S. working population who are active members of trade unions (U.S. Bureau of Labor Statistics). An increase in union activity, especially by working-class minority populations, could prove beneficial for hindering the obvious instances of discrimination within the workplace. Unfortunately, many unions require its members to pay monthly or annual dues, which could prevent low-income minorities from attempting to gain support.
A more novel solution includes encouraging the integration of more inclusive minority environments for private and government companies. One powerful way to rid society of its current latent discimination is to encourage people to empathize with the minority and racial groups against whom they are subconsciously discriminating. This unknowingly endows an individual’s peers with a sense of empathy for how an individual of a minority experiences the world. National governments can reward companies with government subsidies and tax-benefits when a more inclusive and minority-integrated environment is created at the office. This incentivizes companies to participate in the solution, while forcing the employees to work alongside the very people who are subject to discrimination. While some may say a company should not be rewarded for doing the moral thing, punishing the company for discrimination typically results in administrative pushback with no actual results. However it is necessary to eliminate this discrimination in order to begin reducing the crippling effects of generational wealth inequalities.
Perhaps, the greatest source of common wealth for people in today’s society is their home. Home ownership has significantly more impact on one’s financial life than is often known. Mike Grundon, in his article “Why Owning a Home is Important,” states, “Owning a home…[is] the gateway to long-term and short-term financial success.” He continues by comparing the benefits of paying for an asset rather than renting an apartment by saying, “If you can afford to buy a home, turning the cash that you would be spending on rent into payments on a mortgage can make a major difference in your long-term financial stability” (Grundon). Put simply, paying off the mortgage on a home often comes with an increase in wealth as homes tend to appreciate in value. On the other hand, Choi et al. discuss the proven connections between parent homeownership and the financial success of their children. They conclude that, “living with a homeowner parent could help a young adult gain access to homeownership in many ways” (Choi et al. 5). One specific way for wealthy homeowners to positively influence their children’s likelihood of homeownership is by assisting with the [new house’s] down payment (Choi et al. 6). Thus, wealthier parents are more able to aid their children in establishing their own sense of wealth, without having to provide a physical inheritance. Both Grundon’s and Choi et al.’s analysis are reflected within the discriminatory context of today’s society. Immigrant workers across Europe will likely struggle to become first-generation homeowners without the financial support of their parents; furthermore, due to the intense wealth inequality as a result of workplace discrimination and historic systemic racism, minority families often can’t afford to financially assist their children. This results in a lack of wealth accumulation for one generation and a subsequent hindering of the next.
In some instances, poor public policy has led to a perpetual generational inequality stemming from brutal, historic racism. In the United States, The Homestead Act, originally signed by Abraham Lincoln in 1868, provided an easy method for Americans to obtain nearly free land during and after the Civil War. Even though the Act concluded in 1934, Thomas Shapiro illustrates the lasting effects of the Act by stating, “25 % of homeowners today…can trace their ownership to the Homestead Act.” While Shapiro focuses on the lasting effects of the Act, it is important to note who benefited from this policy in the first place. Historian Keri Leigh Merritt emphasizes that “by the end of the Act, more than 270 million acres of western land had been transferred to individuals, almost all of whom were white.” Thus, this legislation from the 19th century has a disproportionate effect on one race of Americans over another. Shapiro and Merritt concur that historic events from more than a century ago helped set in motion a cycle that furthers the generational wealth gap between black and white Americans.
Furthermore, national home ownership percentages shed some light on the projected generational wealth of a country. A higher percentage indicates more adults are owning homes as opposed to renting properties. Thus, the higher the percentage, the more likely the next generation will end up with an inheritance of some type, as rented properties are not considered assets for an individual. While the United States’ home ownership percentage has stagnated in recent years at about 63%, many European countries have seen a spike in their percentages (Goodman et al.). Bulgaria and the Czech Republic sit comfortably amongst the highest rated developed countries with percentages of 82% and 78%, respectively (Goodman et al.). While these statistics provide some evidence for the existence of a wider generational wealth gap within the US as compared to European countries, it is important to note that cultural practices can affect the data. For instance, in Goodman et al.’s article titled “The U.S. homeownership rate has lost ground compared to other developed countries,” the authors indicate that Germany protects renters’ rights to ensure rent prices do not soar. This results in Germany having a homeownership percentage less than that of the United States (Goodman et al.). The takeaway: home ownership in itself is only one indicator of the generational wealth divide within a country. Thus, another factor must be at play in causing the generational wealth inequality that is present within the United States and so many other places around the world.
In the context of the surrounding Houston area, much of the unaffordability of The Woodlands can be attributed to high-end businesses entering the area, as they know the population of The Woodlands has sufficient disposable income to buy their product. Thus, these businesses in The Woodlands appeal largely to higher income individuals, thereby discouraging lower income residents, often disproportionately minorities, from shopping and living within the city. Meanwhile, the Houston area suffers much more drastically at the hands of unequal generational wealth, as seen by the significant portion of Houstonians who identify as black. However, these two sources of regional inequality are not mutually exclusive, as higher end businesses often result in higher barriers to entry for start-up companies and family-owned businesses. The entrepreneurial sphere within The Woodlands, and in many higher-end areas, is limited to start-up companies that already have sufficient capital to compete with the existing businesses. One of the top challenges for minority-owned businesses in America is described as: “many minority business owners assume rejection and fail to even pursue small business funding when starting a small business” (BenetrendsFinancial). This often excludes minority-owned companies from reaching more affluent areas as these companies often do not have the necessary initial funding to be competitive. Furthermore, this form of economic suppression highlights the cyclical nature of poverty. Black or migrant business owners often lack the funding necessary to make their companies competitive, which in turn discourages their entrepreneurial spirit. If their businesses fail, then their attempt to build wealth also fails and the generational wealth gap continues to increase.
One potential solution to this business-owning generational wealth issue is to encourage and facilitate the creation of non-inheriting individuals’ businesses. Perhaps one of the most necessary tasks to ensure these businesses have a fighting chance is to reduce the barriers to entry within more affluent areas, like The Woodlands. Benetrends Financial Blog states one of the most important factors for increasing the growth of minority-owned businesses is, “[providing] better access to small business funding.” The blog continues by saying this solution could gain significant traction as, “financial institutions [will] continue to recognize the power of startup companies to fuel the nation’s economy.” Municipal powers and policy makers need to help provide start-up funds for primarily black-owned businesses in order to boost these companies to the level of their well-established competitors. However, this solution is not limited to affluent areas; any non-inherited business in any area of the world would benefit from initial assistance in growing their assets. Not only would the business-owning generation benefit from an increase in their personal wealth, but the descendents of that generation would likely see the passing of assets that might not occur without external municipal support. Furthermore, these new companies would need assistance withstanding the predatory effects of large, monopolistic corporations in the area that would threaten to push them out of business. Of course this potential solution requires the collaboration of both parties, but if implemented effectively, strengthening minority-owned businesses could decrease the generational wealth gap, while also bolstering the region’s economy.
Reid Cramer states, “this misalignment between public policy and lived experience threatens to undermine the potential of an entire generation, and handicap the next” (1). I find significant value in Cramer’s discussion of the future generation. Suppressing the current generation of people effectively sets back their children. Instead of legislation that specifically discriminates against minorities, today’s latent injustice often exists in a much more subtle form: economic suppression. Modern society has developed an underlying sense of minority discrimination in almost all aspects of life. Eliminating this deep-rooted injustice is a necessity if minorities across the world ever hope to have equal opportunities. Over the last four centuries, black Americans in all walks of life have been struggling to even out the generational wealth disparity. However, Cramer’s statement implies that it only takes one generation to begin a recovery process; implementing empowering techniques in the communities and businesses of non-generational inheritors is the first step to begin decreasing the gap between white and black Americans’ generational wealth.
Without sufficient financial freedom, any individual’s life becomes a constant battle for survival. Handicapping an entire cohort of people forces them to constantly fight for opportunities that are simply handed to others. As seen throughout the last 50 years, the consequence of doing nothing to solve this ever-increasing generational wealth gap is a sustained division within society, in which an entire group of people are forced to live under the burden of an inherently racist system. However, intentionally implementing these solutions and encouraging companies to emphasize minority integration into their working atmosphere both provide hope for the lessening of this generational economic inequality.
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