Racial Wealth Gap Is Partially Explained by Blacks Willingness to Help Their Poorer Relatives

Rourke O’Brien, a PhD candidate in Sociology and Social Policy at Princeton University, has completed research into why black Americans do not accumulate wealth as fast as white Americans. In a research paper titled “Depleting Capital? Race, Wealth and Informal Financial Assistance,” O’ Brien argues that blacks don’t accumulate wealth as fast as they could because they are more likely than whites to financially assist poorer relatives.

Middle-income blacks are more than twice as likely as middle-income whites to have a poor sibling and more than four times as likely to have parents below the poverty line. And because of these relationships, they’re called upon more often to provide financial assistance.

O’Brien’s idea makes perfect sense; and, in fact, the idea itself has been floating around in various forms for some time. However, “Depleting Capital? Race, Wealth and Informal Financial Assistance” is one of the first published research efforts to empirically test for the effect that black Americans rate of giving to friends and family has on the wealth gap.

A study cited by O’ Brien “suggests that as much as 27 percent of the black-white wealth gap can be explained by the greater financial claims made on middle-income blacks.” Considering that as of 2009, the median wealth of white households was $113,149 and for black households it was $5,677, it can be assumed that middle class blacks are giving thousands of dollars in assistance every year to their close friends and family.

Of course, the generosity of middle-class blacks is not the only explanation for the wealth gap–approximately 70 percent of the gap is left unexplained. Racism is one explanation. Many blacks who are making middle-income salaries are first generation middle-class, and thus they do not have the social capital–i.e. a network of friends and family who can provide financial advice, etc.–that many whites have, social capital that could help them save and invest their money in the most prudent fashion. And, in part due to housing discrimination, professional blacks tend to live in lower-income, predominately black neighborhoods, where the value of their homes do not appreciate as fast their fellow white co-workers, who may live in up-and-coming urban communities.

What can newly-minted middle-class blacks start doing to help friends and family who may need assistance (assuming that helping family–though not necessarily helping extended family and/or friends–is a good thing), while at the same time accumulating wealth for themselves?

A new explanation for the racial wealth gap” [The Boston Globe]
Jamila Akil is a Senior Editor at Beyond Black and White. Follow her on Twitter @jamilaakil.