The Wealthy Kids Are All Right
Two 21-year-old college students sit down in a coffee shop to study for an upcoming test. Behind the counter, a barista whips up their double-shot lattes. In the back kitchen, another young adult washes the dishes and empties the trash.
These four young adults have a lot in common. They are the same age and race, each has two parents, and all grew up in the same metropolitan area. They were all strong students in their respective high schools. But as they enter their third decade, their work futures and life trajectories are radically different—and largely determined at this point.
The culprit is the growing role of inherited advantage, as affluent families make investments that give their children a leg up. Combined with the 2008 economic meltdown and budget cuts in public investments that foster opportunity, we are witnessing accelerating advantages for the wealthy and compounding disadvantages for everyone else.
One of the college students, Miranda, will graduate without any student-loan debt and will have completed three summers of unpaid internships at businesses that will advance her career path. Her parents stand ready to subsidize her lodging with a security deposit and co-signed apartment lease and will give her a no-interest loan to buy a car. They also have a network of family and professional contacts that can help her. While she waits for a job with benefits, she will remain on her parents’ health insurance.
Ten years later, Miranda will have a high-paying job, be engaged to another professional, and will buy a home in a neighborhood with other college-educated professionals, a property that will steadily appreciate over time because of its location. The “parental down-payment assistance program” will subsidize the purchase.
The other collegiate, Marcus, will graduate with more than $55,000 in college debt, a maxed-out credit card, and an extensive résumé of part-time food-service jobs that he has taken to pay for school, both during summers and while in college, reducing the hours he can study. Though he will obtain a degree, he will graduate with almost no work experience in his field of study, lose his health insurance, and begin working two part-time jobs to pay back his student loans and to afford rent in a shared apartment.
Ten years later, Marcus will still be working in low-paying jobs and renting an apartment. He will feel occupationally stuck and frustrated in his attempts to network in the area of his degree. He will take on additional debt—to deal with various health and financial problems—and watch his hope of buying a home slip away, in large part because of a credit history damaged during his early twenties.
Tony, the barista, has the benefit of not taking on mega-debt from college. He will eventually enroll in some classes at a local public university. But his income and employment opportunities will be constrained by not having a college degree. He will make several attempts to learn a building trade and start his own business, eventually landing a job with a steady but low income.
The good news for Tony is that his parents, while not college educated or wealthy, are stable middle-class with modest retirement pensions and a debt-free house, acquired by Tony’s grandfather with a low-interest Veterans Administration mortgage. They are able to provide a bedroom to their son. That home will prove to be a significant factor in Tony’s future economic stability, as he will eventually inherit it.
Cordelia, working in the kitchen, has even less opportunity than Tony for mobility and advancement. Neither of her parents went to college nor have significant assets, as they rent their housing. Though she was academically in the top of her urban high-school class, she did not consider applying to a selective college. The costs seemed daunting, and she didn’t know anyone who went away to college. There were no adults or guidance professionals to help her explore other options, including financial aid available at private colleges, some of which would have paid her full tuition and expenses to attend. Instead, she takes courses at the local community college where she sees many familiar faces. Cordelia will struggle with health issues, as lack of adequate health care and insurance means she will delay treatment of several problems. Over time, she will have a steady and low-wage job, but she will also begin to take more responsibility for supporting members of her family who are less fortunate.
The Born-on-Third-Base Factor
These four coming-of-age adults in no way represent the entire spectrum of young adult experience, which also includes ex-offenders, mediocre students, and people with disabilities. Young adults in rural communities and small towns, for example, face their own education and economic challenges, such as limited employment options. They will disproportionately populate our volunteer military, fill the growing ranks of disability-pension recipients, or migrate to communities where they have few social supports.
A key determinant in these diverging prospects is the role of family wealth, a factor that plays an oversize role in sorting today’s coming-of-age generation onto different opportunity trajectories. The initial sort begins much earlier. A growing mountain of research chronicles what sociologists call the “intergenerational transmission of advantage,” including the myriad mechanisms by which affluent families boost their children’s prospects starting at birth. The mechanisms include financial investments in their children’s enrichment, school readiness, formal schooling, college access, and aiding the transition to work. Meanwhile, the children in families unable to make these investments fall further behind.
Imagine a ten-mile race in which contestants have different starting lines based on parental education, income, and wealth. The economically privileged athletes start several hundred yards ahead of the disadvantaged runners. Each contestant begins with ten one-pound leg weights. The race begins, and the advantaged competitors pull ahead quickly. At each half-mile mark, according to the rules, the first twenty runners shed two pounds of weights while those in the last half of the field take on two additional pounds. After several miles, lead racers have no weights, while the slower runners carry twenty additional pounds. By midrace, an alarming gap has opened up in the field, and by the finish line, the last half of the field finishes more than two miles behind the winners.
This race of accelerating advantages and compounding disadvantages is a disturbingly accurate metaphor for inherited privilege. As in life, there are well-publicized stories of exceptional runners starting far back in the pack and breaking to the front of the field, therefore able to shed weights and remain competitive. There are also front-runners who perform poorly, squandering their initial advantages and falling back. But the overall picture is one of steadily growing class-based inequality. Consistent with emerging sociological research about children and opportunity, once inequalities open up, they rarely decrease over time.
A healthy democratic society could rise to this challenge, resolving to make robust public investments in time-tested interventions that equalize the conditions of the race. But in our increasingly plutocratic political system, the very wealthy have less stake in the opportunity-building mechanisms in our communities, as their own children and grandchildren advance through privatized systems. These same wealthy families maintain disproportionate influence in shaping our national priorities, such as whether to cut taxes on the wealthy or maintain investments in public education. We are snagged in a cycle of declining opportunity driven by the new politics of inherited advantage.
A Growing Family Welfare State and a Shrinking Public One
The United States prides itself on being a socially mobile society where what one does is more important than the racial and class circumstances of one’s birth. Indeed, in the three decades after World War II, between 1947 and 1977, social mobility increased, particularly for the white working class. This imprinted a national self-identity as a meritocratic society, especially juxtaposed with the old “caste societies” of Europe, with their static class systems and calcified social mobility.
That story of European versus U.S. social mobility has now been turned on its head. European nations and Canada, with their social safety nets and investments in early childhood education, are experiencing greater social mobility. Canada now has three times the social mobility of the U.S. Budget cuts at all levels of government have dismantled post–World War II public investments that had begun to create greater opportunities for economically and racially disadvantaged families. Higher education has taken one of the biggest hits. Meanwhile, the relative advantage of wealthy families, in terms of social capital and civic engagement, has accelerated over the past 30 years.
The idea that people’s futures might be economically determined deeply offends U.S. sensibilities. We want to believe that individual moxie matters, that a person’s creativity, effort, and intelligence will lead to economic success. Stories of exceptional strivers, heroically overcoming a stacked deck of obstacles, divert our attention from the data. But the large mega-trends are now indisputable. If you fail to pick wealthy parents and want to experience the American dream today, move to Canada.
Parental Investments from Birth
Long before our four 21-year-olds considered college, they were on different glide paths. Debt-free Miranda was the beneficiary of parental investments that prepared her for school and high achievement. She grew up in a book-filled and conversation-rich home environment with college-educated parents that had more leisure and vacation time to spend with her. She spent more time in ecologically pristine environments and had access to recreation, health care, and nutritious food. Her parents, knowledgeable about brain development, talked to her, using vastly more vocabulary words than children of other classes hear. When she was away from her parents, they paid for comparably stimulating child-care settings.
Researcher Meredith Phillips found that by age six, wealthier children spent as many as 1,300 more hours a year than poor children on enrichment activities such as travel, music lessons, visits to museums, and summer camp. All this results in much higher math and reading skills and other attainments later in life.
Success-bound Miranda had more opportunities than her non-wealthy peers to develop the important social capital that results from more time with parents and time spent in social institutions such as religious congregations, civic organizations, and extracurricular activities. Working-class youth, often with parents holding down multiple jobs to make up for several decades of stagnant wages, are more socially disconnected or connected in dysfunctional ways. As a result, they develop fewer “soft skills” useful in job networking and workplaces.
As our foursome enter K-12 school, once considered the great avenue to equal opportunity, disparities widen. The early literacy and reading support conferred by the more advantaged families leads their children to pull away from others, not just those with low incomes. Class-based disparities in the cognitive skills of reading and math test scores have grown since the 1970s, corresponding with the national income and wealth gap. According to researcher Sean Reardon, the income-achievement gap between children from high- and low-income families is roughly 30 percent to 40 percent larger among children born in 2001 than among those born in 1976.
Among “high achievers,” the top 4 percent of students nationwide, 34 percent come from the top quartile, households with incomes of more than $120,776. Only 17 percent come from the bottom quartile, with incomes of less than $41,472. The income-achievement gap is now bigger than the race gap, a reverse from 50 years earlier. The main explanation is that high-income parents of all races are investing more in children’s cognitive development.
Family Advantage and College Success
All four of our young adults graduated from their high schools in the top fifth of their classes. But their high-school experience was quite divergent, based on their community and neighborhood. The key decision point—as to whether to attend college and where—was largely driven by disparities in income and wealth in the form of parental investment, K-12 education systems, and college-preparatory supports.
In the 70 years since World War II, college attendance has played a significant role in employment opportunity and lifetime earnings. Over these 70 years, college entry has increased by more than 50 percent, and the rate of college completion by age 25 has more than quadrupled. But since 1980, an income-based gap has grown up in terms of college completion.
Low-income students born around 1980 only increased their college-graduation rates by 4 percent—whereas higher-income cohorts saw their graduation rates go up by 18 percent. The greatest inequality has been among women, driven by increases in college completion by the daughters of higher-income households—and the lack of opportunities for non-wealthy women.
Marcus’s family, like Miranda’s, placed a strong emphasis on attending college and college preparation. He went to a suburban public school that provided college-bound students with Advanced Placement classes, college counseling, and seminars for parents. While not as wealthy as Miranda’s family, Marcus’s family, also like Miranda’s, paid for the services of the burgeoning college-preparation industry to boost their child’s SAT scores. But in terms of family wealth, Marcus was on his own after high school, venturing into higher education and work without family resources and a financial safety net. As a consequence, in his thirties and forties, he will have more debts than assets.
Miranda and barista Tony share an important parental boost that college student Marcus didn’t have: Their parents passed on financial-preparation and money-literacy skills. Both children learned about money from parents who gave them allowances to manage and encouraged them to open bank accounts and save. Initial research suggests that financial literacy may be a more important factor than schooling in lifetime wealth accumulation and retirement savings. Tony learned thrift and debt avoidance. These skills are much more important in the current environment, with unregulated predatory lenders and a bewildering variety of student-loan products to choose from.
Tony will benefit from modest family-wealth transfers, thanks to a previous generation of social investments, which include his grandfather’s government-subsidized home mortgage. Tony will tap into what Sally Koslow, in her book Slouching toward Adulthood, calls the “middle class trust fund”: free room and board and cable and Internet access. Tony’s parents don’t consider their support for him a legacy advantage. They understand that the deck is stacked against their son, who will most likely never be rich without a winning lottery ticket or marrying into money. Their temporary housing and modest gifts—the purchase of a truck and money to get a trade license—are hedges against his downward mobility and destitution.
Cordelia’s parents did what they could to better her prospects, ensuring she was in a good elementary school and steered to engaging teachers. They found her affordable summer day camps and other enrichment experiences. But when it came time for her to consider college, Cordelia was flying solo. Like many talented low-income students, she didn’t apply to one of the nation’s selective schools. Only 5 percent of the total enrollment at the 28 most selective private colleges is from families in the bottom fifth of income distribution. But 70 percent of the enrollment consists of students in the highest-income distribution. Like the majority of low-income college students, Cordelia did not complete college. A key missing ingredient for Cordelia was effective college guidance, within her school and at home.
How young people finance college has its own disparities. Low-income and minority students that get proper guidance can sometimes obtain significant scholarships at private colleges and graduate with less debt than students attending public universities. Miranda’s parents paid full freight for her college. Marcus, navigating the college-financing jungle on his own, got little financial aid and signed up for a loan package that will cost him twice as much over time due to higher interest payments as the cheapest available plan. If Marcus were attending college 40 years earlier, he probably would have graduated debt-free as a result of lower tuition and public financial-aid programs.
One of the huge breakaway wealth advantages is unpaid internships in one’s career area, an essential leg up in the transition from school to work. Entry-level workers are now expected to show up with work experience. Research shows that half of college-graduate hires had previously interned at the firm where they were hired. While Miranda received family support to take unpaid internships, other college students like Marcus used every non-school hour to earn money in jobs outside their career area.
Family wealth also serves as a form of adversity insurance, as young adults face potential setbacks including prolonged unemployment, bad credit, health or addiction problems, criminal arrests, car breakdowns or accidents, or early parenthood. Young adults may make poor decisions or face unforeseen circumstances, but in almost every case, family wealth will help keep young people on track, whether it comes in legal assistance, treatment, or regular cash infusions.
Closing the Advantage Gap
What, if anything, can be done to offset the torrent of perks and advantages that wealthy parents confer to their progeny as they compete for slots in educational institutions, internships in their field of interest, entry-level jobs, affordable housing, and other resources?
The first step is to acknowledge the depth of the declining mobility and opportunity problem, a story that is just beginning to be understood after three decades of extreme inequality. The image of post–World War II white mobility still reverberates and dominates our national mythology, especially for our political class and whites over the age of 50. But the present inequalities of wealth have fundamentally altered the playing field for the next two generations.
Even ideological critics of social investment have begun to acknowledge the intergenerational class disparities. Conservative Reihan Salam acknowledges the “incumbent-protection story” of wealthy families, observing that “it is possible that non-black families in the top three-fifths of the income distribution are giving their children advantages that protect them from scrappy upstarts in ways that might damage our growth prospects.” Let alone principles of fairness, opportunity, and equity!
Sustained public investments in opportunity are critical to level a playing field that is constantly being upended by wealth advantage. We can’t remove the capacity of well-off families to help advantage their offspring, but we can give others more of a shot.
Other industrialized countries have demonstrated that public investments in health, education, and family well-being can offset the private advantages of wealth and improve social mobility. Initiatives like the “Baby College” of the Harlem Children’s Zone, Head Start, the U.S.’s Nurse-Family Partnership program, and universal preschool programs, such as those in France and Denmark, partially close the gaps in school achievement and subsequent wages. Several of these initiatives coach new parents on childhood health and wellness, discipline, brain development, and games and enrichment resources available to their children.
High-quality pre-kindergarten education, access to health care and nutrition, good K-12 public education, and early diagnosis of learning disabilities and special needs are key interventions that help people equalize life chances. The fact that inequalities of opportunity now accelerate as schooling begins is testament to the need to defend and expand funding for public education at all levels. More than three-fourths of undergraduate college students attend public universities and colleges, which are facing the worst state cuts.
There are also private-sector and personal interventions that could reduce runaway unequal opportunity. Community foundations can partner with business and cultural institutions to ensure that public and private funding for youth enrichment, arts and sports programs, summer camps, and stimulating after-school programs survive budget cutting. This must include resources for outreach to the most socially disconnected families to ensure their children have access to these opportunities.
The U.S. Department of Labor should police the unpaid and underpaid internship marketplace, cracking down on companies that replace paid positions with unpaid ones. Certain sectors that disproportionately offer unpaid internships as a stepping-stone to career networks—journalism, politics, and entertainment—should do deep soul-searching about the implications for the widespread exclusion of working- and middle-class youth. Private-sector and government agencies that offer internships should create stipend and compensation pools to ensure that non-wealthy young people have an equal shot at internships. Donors should fund internship positions at nonprofit organizations they care about, expanding the pool of young people that can intern there.
Privileged families will always seek to extend their own advantages to their children, but restoring greater progressivity to the tax system would ensure that wealthy families still contribute to the opportunities of others. Another intervention would be to eliminate or reduce the tax deductibility of contributions to private schools and colleges, except if directly used for scholarships for disadvantaged youth.
One elegant solution would be to tax wealth to broaden opportunity. Revenue from a steeply progressive estate or inheritance tax could capitalize an “education-opportunity trust fund” to provide debt-free college educations for first-generation college students.
Wealthy families concerned about declining social mobility should use their special privileges to stop the advantage arms race. They should match any family subsidies with tax dollars and donations to organizations that promote mobility. Without such interventions, the U.S. will further drift toward being a caste society, where opportunity, occupation, and social status are based on inherited advantage, fractured along class lines.
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