Family Wealth Critical to Child Opportunity

by Fred Kammer, SJ

A new study by the Insight Center for Community Economic Development in Oakland reminds us once again that family income is not the only indicator of the well-being of people in the household, especially children. Family assets—wealth—are critical to child development, good health, good education, security, and dreams of a better future.

In Diverging Pathways: How Wealth Shapes Opportunity for Children, the authors underscore how children of color live in the most economically fragile households, concentrated in pockets of racialized poverty where schools are often deficient, streets are violent, housing stock is deficient, and transportation, jobs, and stores with healthy foods are not readily available. These all affect what Americans say we prize: equal opportunity.

The authors detail a number of critical disparities between children who are white and their families and those of color. Some of the more telling are set out here [page numbers in brackets]:

WEALTH GAP

• Between 1994 and 2007, the wealth gap between white and black households with children increased by $22,000 -almost doubling from $25,000 to $47,000. [1]
• In 2007, black households with children held only 4% of the wealth of white households.
• From 2005 to 2007, black households living with zero or negative net worth (debt) grew from 35% to 39% while it stayed constant at 15% for white households. [1]

MOTHER’S EDUCATION

• For every dollar of wealth owned by a white mother with a bachelor’s degree or higher in 1994 a black mother owned 64 cents. By 2007, it had fallen to 13 cents. [1]
• The wealth gap for households of white and black mothers with a bachelor’s degree or higher, increased fivefold between 1994 and 2007. The wealth of these black households drops by nearly 61% while the wealth of white households steadily rises. [9]
• [B]y kindergarten the percentage of households with no assets falls as maternal education improves, but racially distinct patterns still exist. Even when the mother has a bachelor’s degree, black and Latino children are more than twice as likely to be asset poor than white and Asian children. [8]

ECONOMIC FRAGILITY

• Children of color are four times more likely than white children to be born into the most economically fragile households. A poor start affects long-term well-being, making it difficult for children of color to catch up to their white counterparts and do as well in adulthood. [2]
• Latino, black and American Indian children under the age of five are three times as likely as whites and some Asian ethnicities to live in households with little income and few or no assets, such as cash savings, stocks and bonds or retirement savings. [2]
• Half of white households with young children have incomes over 185% of the federal poverty level and multiple assets, compared to only 14% of black and Latino households. [3]
• In sharp contrast, 40% of black and Latino households are economically vulnerable, both low income and without assets, compared to about 12% of white households. [3]

NO SAVINGS OR INVESTMENTS

• Sixty-nine percent of Latino and 71% of black children live in low-income households and more than 40% live in households with neither savings nor investments. [4]
• In the years leading up to the recession, the financial stability of black households was declining. Between 2005 and 2007, black households with zero or negative net worth (debt) grew from 35% to 39%, while the percentage of similar white households stayed the same at 15%. [5]

NET WORTH

• In 2007, black households with children held only 4% of the wealth of white households (this is all households, not just those with positive net worth…). Put another way, the black median net worth of $1,495 is barely enough to cushion the average family who experiences a job loss or financial crisis at the poverty level for one month, while the white median net worth of $33,232 can support that same family at the poverty level for two years. [5]

IMPACT ON CHILD DEVELOPMENT

• At nine months of age, all children start out with fairly similar scores on a standard child development test, but by two years of age, racial disparities emerge—with children of color lagging behind their white and Asian peers. [6]
• These early differences in outcomes become more pronounced as children enter school. By kindergarten entry, white and Asian children are scoring much higher on average than black, Latino, Native Hawaiian/ PI, and American Indian/AN children on math skills tests. [6]

HEALTH OUTCOMES

• Child health outcomes also reveal racial disparities. White children are most likely to be rated in excellent or very good health at every time point (between nine months and kindergarten entry) and it is the only group that maintains consistently high health ratings. [7]
• On the other hand, black and Native Hawaiian/PI children tend to have much higher rates of asthma starting as early as age two. … A recent study documents how living in segregated communities with concentrated poverty is a key factor leading to an increasing prevalence of asthma among Black and Latino children. [7]

[These disparity indicators above were all measured before the Great Recession and recent studies indicate that families of color have suffered more acutely than white families in the years since.]

When a family is without wealth, an economic catastrophe as personal as a job loss or as global as the Great Recession of 2008 can easily become an economic catastrophe that spells hopelessness for the children of the family. Families with accumulated assets (bank accounts, stocks, savings, home ownership, and wealthy extended families) often have the time and resources to weather these same shocks.

As far back as 1986, the U.S. bishops decried the degree of economic inequality in this nation. The disparity in net wealth was even worse than that of income. And, since then, U.S. economic and political policies have only worsened the situation. Catholic social teaching, they noted, “does not require absolute equality in the distribution of income and wealth.” However, they did conclude that inequality should be evaluated in terms of two basic principles: (1) the priority of meeting the basic needs of the poor; and (2) the importance of increasing the level of participation by all members of society in the nation’s economic life. These norms “establish a strong presumption against extreme inequality of income and wealth as long as there are poor, hungry, and homeless people in our midst.”

The situation of inequality in the United States has become worse in the past twenty-five years, especially, as the center’s study indicates, for families and children of color. Such inequality, the bishops stated in 1986, is detrimental to the development of social solidarity and community. Even more than ever before, their conclusion now rings so very true: “In view of these norms we find the disparities of income and wealth in the United States to be unacceptable. Justice requires that all members of our society work for economic, political, and social reforms that will decrease these inequities.”