Our Wealth Disparity & What it Means For Future Generations

by Lynn B. Johnson on May 2, 2013

Money and JusticeLast week, the Pew Research Center announced that between 2009 and 2011, the mean net worth of the wealthiest 7% of U.S. households increased by an estimated 28%. Meanwhile, the rest of us saw our net worth fall 4%.

This makes sense, right? After all, the richest people typically invest the bulk of their wealth in the stock and bond markets (and can afford to ride out economic valleys), while the less affluent are more likely to call their homes  their primary investments.

Sub-prime loans and the myriad ways that foreclosures hurt the housing market —too many foreclosed homes equal a glut on the market, plus abandoned properties devalue neighboring homes— have taken an unrecoverable bite from the assets of households that make under $140,000 yearly. But the upper 7% of households have seen their mean wealth increase “almost 24 times that of those in the less affluent group in 2011,” according to Pew.

Part of this might have to do with the subprime derivatives that saw investors gain wealth each time a homeowner stopped paying a mortgage. And, while market investors took a hit in the mid-2000s, the S&P 500 has risen 60% since 2009, while housing prices remain 26% below the 2006 market peak.

So, the disparity between rich and poor is increasing. Why should we care? Because it’s affecting the next generation of Americans: our children.

According to The Great Divide series on NYTimes.com, the rich-poor gap in students’ test scores is nearly 40 percent greater than it was 30 years ago. In fact, the rich/poor gap between students’ SAT-type test scores is 125 points: nearly double the white/black gap of 70 points. NYTimes.com reporter Sean Reardon writes, “The academic gap is widening because rich students are increasingly entering kindergarten much better prepared to succeed in school than middle-class students. This difference in preparation persists through elementary and high school.”

If the difference persists through high school, then more rich than poor children will attend college. “Educational success is much more important than it used to be, even for the rich,” Reardon adds. And if the children of the rich are achieving higher scores than middle-class kids, then it will be the rich children who get the best educations —particularly as it becomes more apparent that the “rising costs of higher education are pricing the middle class out of college”— while the middle class slips to the lower class and the lower class is entirely out-priced and out-achieved.

What can be done to end this vicious cycle of wealth and test-score disparity? Free or lower-cost access to early childhood education would be a good start. My child’s half-day, five-day-a-week pre-K program costs $466 a month; it’s our largest bill besides our mortgage. Quick action to rectify the lack of educational resources for the 93% would help to even out test scores 15 years from now. And it will pay off: multiple journals have reported that for every $1 invested in Head Start programs, our nation reaps a return-on-investment of $7 to $9.

Discussion

Chidimma Agunwamba
see http://www.unn.edu.ngnthanks
May 6 at 11:06 am

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