Wealth Mobility of Families Raising Children in the Twenty-First Century

Abstract

Wealth inequality between the top and bottom deciles has grown over the last 20 years (Piketty and Zucman in Wealth and inheritance in the long run, Centre for Economic Policy Research, London, 2014), as has the racial wealth gap (Shapiro et al. in The roots of the widening racial wealth gap: explaining the black–white economic divide. Institute on Assets and Social Policy, Brandeis University, Waltham, 2013. http://iasp.brandeis.edu/pdfs/Author/shapiro-thomas-m/racialwealthgapbrief.pdf). Within these broad trends of inequality, some families are able to get ahead and grow their wealth, while others are not. Yet we do not understand well the critical variables that increase the likelihood of wealth mobility across the life course—within the same generation. This paper addresses this gap and investigates the following questions: What accounts for intra-generational relative and absolute wealth mobility for families with children in the first decade of the twenty-first century? And how does it differ by race? The paper draws on two longitudinal data sets—the Panel Study of Income Dynamics household survey data matched with neighborhood-level US Census data (1999–2011), and the IASP Leveraging Mobility (LM) study (1998–2011). Applying an integrated mixed methods design, analyses are conducted in three stages: (1) A grounded theory analytic approach of the LM data determines key variables of wealth mobility: homeownership, income, employment characteristics, extended family wealth, negative life events, and neighborhood factors; (2) regression analyses test these indicators for absolute and relative wealth mobility; and (3) recontextualization through further analyses of LM data deepen the regression results by illustrating the pathways of significant wealth mobility predictors. Results reveal that increasing family income, larger family transfers, consistent long-term homeownership, and in some cases white-collar occupations increase the likelihood of upward relative wealth mobility. Negative life events, higher rates of neighborhood poverty, and black race are negatively correlated with the amount of wealth growth. These key drivers of wealth mobility highlight the need for targeted policies that reinforce and expand opportunities for all families to build wealth over the life course.

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Fig. 1
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Notes

  1. 1.

    Relative economic mobility is typically measured in the movement between quintiles (20 % groups) over time.

  2. 2.

    Census tracts are designed to be relatively homogeneous units with respect to population characteristics, economic status, and living conditions at the time of establishment; they generally have between 1500 and 8000 people, with an optimum size of 4000 inhabitants. Census tract boundaries normally follow visible features, but may follow governmental unit boundaries and other nonvisible features; they always nest within counties.

  3. 3.

    All descriptive results are weighted.

  4. 4.

    We tested the need to use multilevel modeling, due to combining family and neighborhood characteristics. Estimates for the interclass correlation coefficient (Chi square on the group level variance) were lower than .05 and indicate no need for multilevel modeling. In addition, examination of the geographic distribution of families shows that there is little overlap among families residing in the same neighborhood.

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Correspondence to Tatjana Meschede.

Appendix: Measurement of Regression Variables

Appendix: Measurement of Regression Variables

See Tables 4, 5 and 6.

Table 4 Definitions of dependent variables
Table 5 Definitions of family-level independent variables
Table 6 Definitions of neighborhood-level independent variables

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Meschede, T., Thomas, H., Mann, A. et al. Wealth Mobility of Families Raising Children in the Twenty-First Century. Race Soc Probl 8, 77–92 (2016). https://doi.org/10.1007/s12552-016-9161-1

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Keywords

  • Economic mobility
  • Drivers of wealth mobility
  • Racial wealth disparities
  • Families with children