Inherited Prospects: The Importance of Financial Transfers for White and Black College‐Educated Households’ Wealth Trajectories

• Author: Tatjana Meschede,Joanna Taylor
• Published date: 01 May 2018
• DOI: http://doi.org/10.1111/ajes.12227
• Date: 01 May 2018

Inherited Prospects: The Importance of

Financial Transfers for White and Black

College-Educated Households’

Wealth Trajectories

By JOANNA TAYLOR* and TATJANA MESCHEDE†

ABSTRACT. The persistent racial wealth gap in the United States

continues to grow, reaching an all-time high in 2016.Throughout much

of the discussion and analysis on the racial wealth gap, however, the

assumption that higher education can at least narrow the gap has often

been left unquestioned. While education is a factor in increasing

incomes and wealth, recent research challenges the narrative that

education is the key to reducing the racial wealth gap. Our findings

provide further support for this growing literature. While black college

graduates do have higher wealth than those without college degrees,

the wealth gap with white college graduates remains vast, and the

inheritances received by white college-educated households provide a

huge boost to wealth that is not available to their black counterparts.

Further, we find that black college-educated households are much

more likely to provide financial support for theirparents as well as their

children, and that black households that do provide support across

generations do so with much less net wealth than white households

that do not.

Introduction

The persistent racial wealth gap in the United States continues to grow,

reaching an all-time high in 2016. White American families owned, on

average, over $900,000 in net wealth, over $700,000 more than their

black or Hispanic counterparts (McKernan, Ratcliffe, Steuerle,

*Doctoral candidate at the Heller School of Social Policy & Management at Brandeis

University. Email: jltaylor@brandeis.edu

†Associate Director at the Institute on Assets and Social Policy at the Heller School,

Brandeis University.

American Journal of Economics and Sociology, Vol. 77, No . 3-4 (May-September, 2018).

DOI: 10.1111/ajes.12227

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C2018 American Journal of Economics and Sociology, Inc.

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Quakenbush, and Kalish 2017).

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Even as our national conversation has

celebrated colorblind policies and post-racial politics, this gap has

grown, particularly for middle-income Americans. The Great Recession

of 2007–2013, for example, had a greater impact on the wealth of

middle-income blacks and Hispanics than on that of whites (Kochhar

and Cilluffo 2017). For middle-income families of color, wealth was cut

by nearly half, while the wealth of middle-income whites fell by a third.

Throughout much of the discussion and analysis on the racial wealth

gap, however, the assumption that higher education can at least narrow

the wealth gap has often been left unquestioned. It remains true that

additional education is a critical factor in predicting higher incomes and

higher wealth (Boshara, Emmons, and Noeth 2015). However, recent

research challenges the narrative that education is the key to reducing

the racial wealth gap (Addo, Houle, and Simon 2016; Emmons and

Noeth 2015). Our findings provide further support for this growing lit-

erature. While black college graduates do have higher wealth than

those without college degrees, the wealth gap with white college

graduates remains vast, and the inheritances received by white college-

educated households provide a huge boost to wealth that is not

available to their black counterparts.

Background

The American dream rests on the idea that hard work will result in

“getting ahead.” For many, this means having a good job with benefits,

earning enough to live comfortably, and accumulating wealth to pro-

vide for retirement and to pass on to children. The path to such a life-

style, we are told, is through education—specifically, a college degree.

A degree does confer benefits on its holders. Workers with a college

degree are more likely to have benefits such as health insurance, paid

leave, and retirement accounts, and are less likely to experience unem-

ployment (Chung, Davies, and Fitzgerald 2010). Among millennials

(ages 25–32 in 2013), those with a bachelor’s degree had median earn-

ings of $45,500, more than $17,000 more than their peers with only a

high school diploma (Pew Research Center 2014). Lifetime earnings for

those with a college degree are expected to be about $1 million more

than for those with a high school diploma (Carnevale, Rose, and Cheah

The American Journal of Economics and Sociology2

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