Transformative asset

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Transformative assets are assets that may provide resources for social and economic mobility. Examples of transformative assets include homeownership and inheritances. These assets enable families to have access to resources or to achieve a social status that they would otherwise be unable to achieve based on their income alone. Thomas Shapiro first used the term in his book The Hidden Cost of Being African American to describe the "inherited wealth lifting a family beyond their own achievements."[1] Transformative assets contribute to the wealth gap between working-class and middle-class families and individuals.[2]

Contents

[edit] Income versus Wealth

Income and Wealth are often thought of as being very similar by most people. However, the two terms are actually very different indeed. Income can be thought of as periodic earnings, whereas wealth can be viewed as a person's assets (fluid, transformative). Upon research it was discovered that those who possess assets are those persons who view the two terms as being very different. Persons that typically have transformative assets are Caucasian or affluent. Income is used for everyday expenses whereas possessing wealth is seen as a "safety net" for unexpected crises or family emergencies.[3] Although there are discrepancies between incomes of African American and Caucasian families, there is a much larger gap between wealth of African American families and Caucasian families. Children in White or affluent families typically have parents that set up accounts, funds, and bonds for them to use when needed. Some parents just give their children the money when asked. White Americans usually do not even touch their inheritance and when they do it is typically to better their circumstances and advantages over everyone else.[4] For White Americans the income gap is yet another benefit because they utilize their incomes to increase their wealth; whereas Black Americans sometimes live paycheck to paycheck. They usually have just enough income to make it. Wealth portrays more ownership of resources and is more permanent, whereas income portrays salary and is variable.[5] As stated by a parent in The cost of being African American, “income supplies life support; assets provide opportunities.[6]

[edit] Advantages of Transformative Assets

The primary of advantages of possessing transformative assets are social mobility or upward mobility, and of course economic mobility. [7] Transformative assets can assist a person in becoming a homeowner. For example, if two persons were just married and just out of college they normally would not be able to afford to buy their own home, especially in a decent neighborhood. But, with a transformative asset such as savings bonds from their parents they can become homeowners. Housing and inheritance are the two most common sources of wealth in the US. As the author reveals in this text these two sources can account for the inequality between white middle class and black middle class persons.[8] In a study performed by Shapiro he found some interesting information. For the most part, roughly two thirds of the white population that own their own homes owe it to transformative assets from the parents or families [9] When it comes to the African American families, only one fourth of them are homeowners being assisted by their families.[10] Transformative assets could also increase one's likelihood of attaining higher education. Some high school graduates are not able to go to college because they or their parents do not have the money for tuition. On the other hand, those who have access to transformative assets will be able to obtain a degree. As most persons know, a college graduate or person with degree is more likely to earn a higher salary. A higher salary leads to a better chance of saving money for children. As demonstrated above and discussed in The Cost of Being African American Shapiro reveals that assets, just as poverty, have a domino effect and can also be passed on for generations. [11]

[edit] Conclusion

Transformative assets are very advantageous to those who possess them. They are usually in the form of inheritance. These assets are incorporated into a person’s wealth typically allowing the person to gain social and economic mobility where others cannot. Wealth and income, although sometimes viewed as having the same meaning, are often misunderstood. Wealth is for the most part a permanent source of financial value, whereas income tends to be more variable by labor. Although they have different meanings there exists a racial gap between Caucasians and African American for both. On average, African American families are about double the asset poverty rates of White Americans.[12] This concept becomes important when attempting to measure the poverty rates in the United States. Currently the United States use family and individual income to determine the poverty level. However, measuring asset poverty would prove to be a better form of measuring poverty in the United States. Two persons or families could have the exact same income but very differing levels of wealth. Wealth is also passed down through the family and is therefore a more permanent form of measurement.[13]

[edit] See also

Intergenerational Mobility

[edit] References

  1. ^ Shapiro, Thomas. The Hidden Cost of Being African American: How Wealth Perpetuates Inequality. New York: Oxford University Press, 2004.
  2. ^ Shapiro, Thomas M. (2006). Race, homeownership and wealth. Journal of Law and Policy, 20 (53), 53-74.
  3. ^ Shapiro, Thomas M. (2006). Race, homeownership and wealth. Journal of Law and Policy, 20 (53), 53-74.
  4. ^ Shapiro, Thomas M. The Hidden Cost of Being African American: How Wealth Perpetuates Inequality. New York: Oxford University Press, 2004.
  5. ^ Shapiro, Thomas M. The Hidden Cost of Being African American: How Wealth Perpetuates Inequality. New York: Oxford University Press, 2004.
  6. ^ Sherraden, Michael W. Inclusion in the American Dream: Assets, Poverty, and Public Policy. Oxford University Press, 2005
  7. ^ Shapiro, Thomas M. 2006). Race, homeownership and wealth. Journal of Law and Policy, 20 (53), 53-74.
  8. ^ Shapiro, Thomas M. The Hidden Cost of Being African American: How Wealth Perpetuates Inequality. New York: Oxford University Press, 2004.
  9. ^ Sherraden, Michael W. Inclusion in the American Dream: Assets, Poverty and Public Policy. Oxford University Press, 2005.
  10. ^ Sherraden, Michael W. Inclusion in the American Dream: Assets, Poverty and Public Policy. Oxford University Press, 2005.
  11. ^ Shapiro, Thomas M. The Hidden Cost of Being African American: How Wealth Perpetuates Inequality. New York: Oxford University Press, 2004.
  12. ^ Sherraden, Michael W. Inclusion in the American Dream: Assets, Poverty and Public Policy. Oxford University Press, 2005.
  13. ^ Shapiro, Thomas M. The Hidden Cost of Being African American: How Wealth Perpetuates Inequality. New York: Oxford University Press, 2004.