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Authors: Samantha Bustamante, Alexa Gutierrez
Advisor: Mikahl Banwarth-Kuhn
Background
Background
Wealth vs. Income.
Wealth refers to the sum of a family’s assets, including savings, stocks and homeownership. It is different from income, which refers to the stream of money a family makes.
What is Generational Wealth?
Generational wealth refers to any kind of asset that a family passes down to their children or grandchildren. For example, cash, investment funds, stocks and bonds, and/or property. While we might often think of wealth transmission as children from wealthy families receiving huge inheritances, the transmission of wealth to the next generation primarily occurs through “early” life events such as supporting a child’s education or helping a child to purchase a home [1].
Why should we care?
Inequality in family wealth in the U.S. is high. Right now, the net wealth of an average Black family in America is one-tenth that of an average White family 2. Current research has documented the severe disadvantage of African American households in not only their wealth attainment, but also in their intergenerational wealth mobility compared to White households 1. A 2018 analysis of U.S. incomes and wealth revealed that “no progress has been made in reducing income and wealth inequalities between Black and White households over the past 70 years” [3].
Research Questions an Results
Research Questions an Results
Our research questions.
We aimed to better understand how race and wealth gaps interact and manifest in the San Francisco Bay Area. Our research focused on two main areas.
Area 1: How does income inequality drive wealth attainment?
We hypothesized that racial income gaps contribute to unequal ability to support a child’s education or purchase a family home--two main avenues of wealth transmission. To test this hypothesis we used a family budget calculator together with census data to determine how much money an average White, Latinx, and Black family would have left over each year to put toward their childrens’ education or a downpayment on a house.
Results. An annual budget was calculated using the Family Budget Calculator from the Economic Policy Institute (https://www.epi.org/resources/budget/).
This tool calculates the annual budget from the following expense categories: housing, food, child care, transportation, health care, other necessities, and taxes. This budget represents the necessary amount of annual income required to afford a sustainable living in the San Francisco Bay Area.
Figure 1: The annual budget for a two parent family with two children living in the Bay Area was estimated to be $112,922. This sustainable living budget is indicated by the red dashed line. The Hispanic/Latinx and Black racial group had an average annual total personal income around $83,205 and $85,662 respectively, while the White racial group had an average annual total personal income of $158,798. The White racial group was the only group with funds left over ($36,876) on average after paying for basic necessities, while the Hispanic/Latinx and Black racial groups were left with negative funds on average ($-38,717 and $-36,876 respectively).
Future work: Could a universal basic income help close this income gap? How long would it take each family to save up a downpayment for a house?
Area 2: How do homeownership trends drive wealth attainment?
In the US, a primary way to build wealth is homeownership. Thus, we first sought to understand some of the stark differences in homeownership rates by race in the San Francisco Bay Area.
Results.
Important note as we consider results from our data analysis:
As we began looking into the data, we noticed an enormous lack of information about BIPOC, Latinx, Chinese, and OAPI communities. This became especially true as we looked back at data from previous decades (e.g. before the year 2000). This matters because wealth inequality in this country did not begin in the year 2000. The impact of these actions continues to prevent those communities from fully participating in our economy.
Rates of homeownership by race:
We observed that rates of homeownership in the San Francisco Bay Area were not equal across different racial groups.
Home values by race:
We observed the following trends in home values. We separated our analysis by race and the number of generations living in the household.
Future work.
During our research one of our group members came across a news story about a Black family in the Bay Area that was undercut by $500K in their home appraisal [4]. For us, this story was a sad example of how the legacy of discrimination and racism in this country impacts current homeownership in the San Francisco Bay Area. After a group discussion, we came up with the following hypotheses:
White people inherit homes at a higher rate and homes remain in White families for longer compared to other racial groups.
We tend to believe that the longer a home remains in a family, the more valuable it will become. We hypothesize that this increase in home values is not equal across different racial groups.
We would like to know more about the burden of debt BIPOC and Latinx people face in order to own a home and how this debt impact their wealth.
References
References
[1] Pfeffer, F. T. & Killewald, A. Generations of Advantage. Multigenerational Correlations in Family Wealth. Soc. Forces 96, 1411–1442 (2018).
[2] Oliver, M. L. & Shapiro, T. M. Black Wealth, White Wealth: A New Perspective on Racial Inequality. (Taylor & Francis, 2006).
[3] Kuhn, M., Schularick, M. & Steins, U. I. Income and Wealth Inequality in America, 1949-2016. doi:10.21034/iwp.9.
[4] Glover, J. Black California couple lowballed by $500K in home appraisal, believe race was a factor; ABC news 7, Retrieved: Aug 1, 2020. https://abc7news.com/black-homeowner-problems-sf-bay-area-housing-discrimination-minority-homeownership-anti-black-policy/10331076/
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