Staggering US wealth inequality heaps long-term harm on to minority children | Hacker News Reader

Staggering US wealth inequality heaps long-term harm on to minority children

theguardian.com

38 pointspaulpauper31 comments

> “A relatively small group of parents – mostly white – control the lion’s share of the wealth available to children,” the authors conclude.

> "Wealth is calculated by aggregating a family’s assets and subtracting from it their debts. The median for white families largely consists of the value of the homes they own minus mortgages, with additional wealth coming from savings and inheritance."

There's enormous racial inequality, but if your study attributes most of the difference in "wealth available to children" to "home value" you're not making reasonable measurements-- that wealth isn't available to any children. On the other hand, living in a nice (or even not crime-ridden) neighborhood gives a lot of advantages, but we already know that from zip code data. Maybe the actual point being made is that the nicer neighborhoods are much less available to minorities?

Home ownership is a good measure in the US. It's how most families create generational wealth and the effects of decades of redlining mean that minorities don't have much value in their homes. It's not that nicer neighborhoods are much less available to minorities, it's that minority neighborhoods have historically been not nice.

>...Maybe the actual point being made is that the nicer neighborhoods are much less available to minorities?

This just serves to decenter the discussion from the racial aspect of it. No one legitimately thinks the financial and social standings of the parents don't cascade to the children. In addition, entrance into nicer neighborhoods depends on capital, which by law was denied to minority groups. And should those groups acquire the necessary capital to move into a nicer neighborhood, covenants and redlining ensured that would never happen.

I really think inflation increases the Gini coefficient. Wealthy people who hold most of their wealth in assets see a greater increase in their wealth than those that see most of their wealth come from wages. I think we are currently on a path to see even greater wealth inequality with the current quantitative easing policies that increase asset prices faster than wages. Here's my crazy idea. If people really cared about inequality, wouldn't they want deflation? Deflation would see wage earners purchasing power increase while the wealthy people's assets would depreciate. This would definitely lower the Gini coefficient. But the wealthy people who control monetary policy would never want to see their assets deflate so we will never see a deflationary monetary policy, which could help wealth inequality.

I was thinking this today but I didn’t have the fancy jargon. I don’t even know how a deflationary system would work. I wonder if the upper class will change their mind after class warfare starts? The Sackler story yesterday was the first time I saw people say out loud that pitchforks were in order.

The upper class actively pushes for laws and policies that protect them from class warfare. It's a part of the strategy.

You would need negative interest rates for it to work and then you would need a tax on land to curb speculation on the strongest monopoly in the economy.

While you're right that deflation would decrease the value of assets, it will also have other impacts that will negatively effect the poor (as well as the wealthy). Liquid assets, such as cash, become more valuable, so investment in creating new assets will decrease, such as starting a business, investing in stocks, business loans, etc. will decrease. This will likely stifle growth, which would likely disproportionately impact those already at the bottom in lower wages and fewer jobs. If companies are playing someone $10 an hour today, and the value of a dollar drops by 50%, business will start lowering salaries to $5. The very wealthy, on the other hand, have access to international markets/investments and would be able to flee the deflationary effect. Such as Eric Schmidt becoming a citizen of Cyprus to avoid taxes.

https://www.vox.com/recode/2020/11/9/21547055/eric-schmidt-g...

-edit grammatical error

I have heard that income inequality has decreased in recent times of high inflation, but I do not have a source for that. Who is worse off depends on the inflation. If wage inflation is bigger than price inflation, then that is good for working class, and bad for margins of business and associated stock prices. Hard assets generally climb in price though they may just maintain their value.

In the past 10+ years we have had low wage inflation but high asset inflation. I think this has been helping the rich.

wage inflation has almost never outpaced overall inflation. when that happens companies have extremely strong incentives to do things like outsource or automate or hire illegal labor

Maybe that is why wealth inequality keeps getting worse? I'm hopeful that it will be different right now because of the various current circumstances, but we will see.

You're making a foolish assumption that many economists made and I will completely destroy it through an unrelated problem.

That is, monetarists assume a constant circulation velocity of money. i.e. hoarding of money doesn't exist.

This is extremely foolish because it would mean the existence of a debt crisis would be impossible. Every dollar the government spends will circulate and as it circulates it will get taxed. It's impossible for the government to be insolvent or go bankrupt. The truth is that the government cannot repay at any arbitrary interest rate. It takes time for the money to circulate until it is 99.99% taxed out of the economy. That delay effectively determines the interest rate the government can afford to pay. Companies and the rich are strongly incentivized to minimize their tax burden. If they find a way to never pay the money back then the interest rate would have to be 0% or even negative.

This doesn't work for the average household that is paying income tax. It cannot hide from taxation forever. In other words, the money that isn't returning to the government also isn't being used to hire people. The mythical constant circulation velocity simply isn't happening. In fact, it's dropping. You constantly have to add more money into the system just to maintain the same velocity. That constant velocity is needed to maintain full employment.

What inflation does is take money that is stuck in the untaxed section of the economy and tax it immediately.

>If people really cared about inequality, wouldn't they want deflation?

Deflation benefits the rich because they can acquire bigger piles of Bitcoin than you can. How difficult is that to understand?

>Deflation would see wage earners purchasing power increase while the wealthy people's assets would depreciate.

Wealthy people would just have money be their primary asset. Considering that money is needed to pay incomes it doesn't sound like a very good idea. Your boss pays you according to the value you produce, if the money supply contracts/price levels fall off then the products you produce are worth less meaning you have to take a pay cut or get laid off.

>This would definitely lower the Gini coefficient.

You just shifted wealth from one asset to another. How does that change anything?

>But the wealthy people who control monetary policy would never want to see their assets deflate so we will never see a deflationary monetary policy, which could help wealth inequality.

What the hell is wrong with people nowadays? 20 years of low 2% inflation has rotten their brain and made them think inflation is out there to get them. If deflation is really all that great why hasn't it reduced inequality by now?

Deflation doesn't necessary favor the rich, there are a lot of other factors here. Deflation means that the price of goods is falling. That also applies to wages, but since those don't rise with inflation, deflation would be better.

According to the article, this research was published by the Russell Sage Foundation, with the specific goal of coercing Congress to extend an existing child tax credit for poor families. You can decide for yourself how trustworthy, or how biased, the underlying report may be.

I grew up in social housing in Western Europe, my family had zero net worth but did live in cheap subsidised rentals, with an extra rental subsidy. My classmates lived in million-dollar homes a 10 minutes away. Obviously there were differences in our lives and the opportunities we had. Yet they were nowhere nearly as different as a net wealth gap of 1 to 100 [0].

At the end of the day we went to the same schools, lived in similar neighbourhoods, went to the same football club, same parks. I didn't holiday in New York like classmates did, but instead went camping in a tent in my home country or a neighbouring one. Our toys looked very different. But I got a free computer from the municipality, I read all the books I wanted through the library, as a low-income fam we got free tickets from the municipality for fun things like the swimming pool or museum, and I mostly had similar experiences and opportunities.

Healthcare was free till 18, since then it's the same 110 euros a month for universal health insurance that everyone else has, if you make less than the median annual income you get a 90 euro subsidy per month. University was 80% paid by the government for everyone, and because we were poor I got a subsidy to cover the remaining 20% + a little extra.

If you look at all the benefits we enjoyed, the after-tax and after-benefits income difference between rich and poor wasn't all that great, and the impact it had on me as a kid wasn't that great. The effective income and its impact between me and my rich classmates was substantially different, don't get me wrong, but we're not talking orders of magnitude here. And the wealth locked up in my classmates' homes didn't make that big of a difference. I feel I had a very rich life as a kid from a poor family.

At age 25-35, is when the bigger differences started. Much of that home equity of the parents gave my classmates a leg up on the housing market. That made a massive generational difference (although it turned out fine for me, other poor classmates definitely didn't). Nowadays we also see a lot of private tutoring come into play at younger ages, that wasn't a big thing when I was a kid, and it's increasing the gap between rich and poor, too.

Anyway, that's just my personal experience in western europe. This plays out quite differently in the US where there seems to be much more segregation (poor and rich go to vastly different schools), no universal healthcare or college etc. If I had to choose a place to be born and had no clue where the family I'd be born into would be on the socioeconomic ladder, rich or poor, I'd not choose the US, I'd probably choose a country in Europe. (although on a city-level, some American places are doing great things, too).

I'm very grateful for this time. I now earn a multiple of the average annual income and own my own home, and quite happily pay a substantial tax.

[0] Black families with kids having access to barely 1 cent for every dollar enjoyed by their white counterparts."

Out of curiosity, where exactly was this? The term Western Europe is way too broad geographically and can mean anything between Portugal or Germany for example and the difference between those two countries is huge.

I'm guessing Netherlands.

yes

Except for the bit about healthcare being provided by the .gov instead of your employer you just described what it's like to grow up in a heck of a lot of US suburbia and small cities.

Even including that - if you're poor there's Medicaid.

A better title might be:

> Staggering US wealth inequality heaps long-term harm on to low-income children, minorities most affected

It would say everything there is to say without throwing non-minority low-income children under the bus. IMO, children are a bit too young and malleable for racial-identity profiling. They have insane amounts of potential for change, and putting them in racial boxes seems in poor taste.

I'll admit now, that I'd probably not have clicked on this link but for the mention of 'minorities' in the headline. Clicks got to come from somewhere.

Yes, minorities are disproportionately represented in this group -- but frankly, there is getting to be so many inter-racial marriages, that it really makes less and less sense to frame all of this around 'minority status'.

The "minority status" stuff seems fine in the grand scheme of adult world... people are fairly predictable passed a certain age (based off generation/origin). The generalizations obviously punch down on people who never really fit in with their "political identity", but misfits have never had it great.

With kids though!? It's so misguided. You don't know who they're gonna be.

>... IMO, children are a bit too young and malleable for racial-identity profiling.

What? Children are aware of the racial aspect of society by the time they exit elementary schools. Being a child does not mean society is blind to your race and that it doesn't act on it.

title should have read as “ … disadvantaged minorities …”.

There are some minorities that are doing above GINI index.

Seems to me that disadvantaged majorities would be impacted just the same by this analysis, too.

so downvoters would be saying that minorities are inherently … disadvantaged, no?

Even in a nation of law completely voided of minority-specific preferences or rules?

amazing to me with wealth inequality people don’t do the most basic calculations to do a fair comparison between racial groups or any other group.

A 22 year old with 10k saved but making 200k a year at google is a lot better off than a 80 year old who has 200k saved thats living off social security, despite have 1/20th of the wealth.

the median age of whites is 50 percent higher than that of black people so they should have 15 more years of savings accrued in their net worth

https://www.pewresearch.org/fact-tank/2019/07/30/most-common...

So your argument is that we need to compare 80 year old whites to 80 year old blacks, both of which reached adulthood in the Jim Crow era?

how about 20 year old blacks versus 20 year old whites instead of 20 year old blacks versus 50 year old whites

In addition to the difference in median ages, I'd like to see someone control for household make up (one vs. two parent households) as there are significant differences between racial groups. Both of these seem like a no-brainer if we want to better understand the sources of wealth inequality, rather than painting with a broad brush.

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