Tuesday, March 9, 2010

Income Inequality vs. Wealth Inequality

When we discuss the achievement gap in education, income inequality often serves as one explanation.  But racial differences persist even when controlling for differences in income.  One reason?  Wealth may be a better indicator of household resources than income -- and wealth inequality is far larger than income inequality.

An advocacy group released this report on income inequality yesterday. The article I noticed on the topic focused on one statistic: the wealth of White vs. Black single women aged 36-49.  The average wealth for Whites is $42,600.  The average wealth for Blacks is $5.

While that statistic is striking, different people stay single for different reasons.  What I find more notable is this: the median wealth for both Black and Hispanic single mothers with children under 18 is $0.  Yes, that means that 50% of  Black and Hispanic single parents have less than zero in assets to tap in times of need.  And before you scoff at the small sub-category this represents, keep in mind that nationwide over 2/3 of African-American children are born to single mothers.  Single White mothers, on the other hand, have a median wealth of only $7,970 -- a fairly paltry sum, but infinitely more than Black or Hispanic single mothers.

If we look at all the stats for 18-64 year-olds, it's readily apparent that inequalities in wealth are far larger than inequalities in earnings.  Blacks and Hispanics make, on average, about 2/3 of what same-gendered Whites make.  But they usually possess less than 1/5 of the assets as same-status Whites (see two tables below (note: sorry for the lack of readibility, for some reason blogger still hasn't made it easy to insert tables)).

This isn't to say that wealth or income inequality explain all of the achievement gap, of course.  For one thing, in the stats below you'll notice that Hispanics often do worse than Blacks -- but we know that, nationwide, Hispanics outscore Blacks on standardized tests.

Wealth % of white
Married or Cohabiting White $162,500
Black $31,500 19.4%
Hispanic $18,000 11.1%
Single Male White $43,800
Black $7,900 18.0%
Hispanic $9,730 22.2%
Single Female White $17,500
Black $100 0.6%
Hispanic $120 0.7%

Earnings % of White
Male White $50,139
Black $35,652 71.1%
Hispanic $29,239 58.3%
Female White $36,398
Black $31,035 85.3%
Hispanic $25,454 69.9%


din819go said...

interesting data points -- thanks for sharing

Attorney DC said...

I've read that the best predictor of a student's academic achievement is his mother's education level. The focus should be less on income or wealth, and more on the educational background and attitudes of the family. For instance, Asian immigrants who work in low-income jobs but encourage their children to work hard in school end up w/ children who are academically successful. In the early part of the 20th century, Jewish immigrants from Europe came to America with almost no possessions....but with a strong respect for education. Their children and grandchildren became academically and professionally successful. A child's academic success is as much a matter of cultural and family respect for education as it is "income" or "wealth," in my opinion.