Intergenerational Wealth Mobility and Racial Inequality

The U.S. wealth structure is extremely unequal and marked by very large racial gaps, with the average black household holding less than one tenth the net worth—defined as the total sum of assets minus debts—of the average white household (Oliver and Shapiro 2006). To what extent racial gaps in household net worth persist depends on how many children reproduce the wealth position of their parents, how many move up, and how many fall down. Here, we visualize and extend our recent finding of racial differences in intergenerational wealth mobility (Pfeffer and Killewald 2018) using a dynamic display of changes in relative wealth positions between parents and their children. Due to data limitations, we are able to compare mobility rates only for non-Hispanic blacks and non-Hispanic whites.

Building on long-standing evidence of greater rates of intergenerational downward mobility for blacks than for whites, Chetty et al. (2018) used full population tax and census data to confirm that black children are more likely than white children to fall below their parents’ relative income position. Their estimates were subsequently visualized by the New York Times (Badger et al. 2018). The same type of visualization is presented in Animation 1 (see https://viz.theinequalitylab.com/Animations/1-mobility-rates.html) for black-white differences in rates of intergenerational mobility in family wealth. It relies on data from the Panel Study of Income Dynamics assembled in Pfeffer and Killewald (2018).

We display the estimated probability of attaining each quintile of the net worth distribution (dividing the wealth distribution into five equally sized groups) of the net worth distribution for black and white children who grow up in the same wealth quintile of the parental wealth distribution. For instance, among those growing up in the middle 20 percent of the parental wealth distribution, black children are much more likely to be downwardly mobile, with 39 percent of them falling to the bottom 20 percent of the wealth distribution compared to 16 percent of white children. Transition probabilities for each parental wealth quintile can be selected interactively and reaffirm the disadvantage of black children in attaining wealth irrespective of the wealth position of their parents.

Animation 1 focuses on racial differences in mobility rates but obscures the fact that black and white children also are unequally distributed across parental wealth origins: White children are far more likely to have wealthy parents. Therefore, Animation 2 rescales the number of dots representing black and white children to match their distribution across parental wealth quintiles. The concentration of black families toward the bottom of the wealth distribution is immediately visible (see https://viz.theinequalitylab.com/Animations/2-wealth-structure.html). And although there is considerable intergenerational fluctuation in wealth positions, the wealth distribution in the offspring generation reveals similarly striking racial wealth gaps. While the representation of blacks in the middle 20 percent of the wealth distribution increases (from 8 to 15 percent) and their overrepresentation in the bottom 20 percent of the wealth distribution decreases (from 44 to 30 percent), the overall visual impression underlines the considerable stability of racial gaps in family wealth, despite the fact that 70 percent of white children and 62 percent of black children attain a wealth quintile different from their parents’. Animation 2 thus illustrates that ample intergenerational fluctuation in wealth positions coexists with the maintenance of substantial racial inequality in wealth.

Overall, we conclude that today’s black-white gaps in wealth arise from both the historical disadvantage reflected in the unequal starting position of black and white children (the focus of Animation 2) and contemporary processes (the focus of Animation 1), including continued institutionalized discrimination (see also Oliver and Shapiro 2006; Killewald and Bryan 2018).