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.
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Income is used for everyday expenses whereas possessing wealth is seen as a "safety net" for unexpected crises or family emergencies.[2] 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 European American families. Children of 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.[1] 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.[1] As stated by a respondee interviewed for The Hidden Cost of being African American, "income supplies life support; assets provide opportunities."[1]
Whereas income is universally considered the money that a family receives from jobs or the government, wealth is diversified by class. Working class might consider wealth as money that can be used in emergency situations, or as a rainy day solution. Wealth for the working class is strictly a cushion that is meant to be preserved. Middle class members view wealth differently. Wealth to this class is viewed as a tool for power and freedom. Wealth that members from the middle class acquire, often from family members, can be used as leverage for extracurricular activities.[1]
Analyzing the relationship between income and wealth helps explain the benefits of transformative assets. Obtaining transformative assets aid in the production of economic mobility, social mobility, and upward mobility. These types of mobility are all related to different social arenas such as job availability, housing opportunities, selective school districts, and extracurricular activities such as social clubs, sports teams, music lessons, etc. For example, if two people were just married as well as recent graduates, they might not be able to afford to buy their own home (as they may not have an established income and/or credit), especially in a decent neighborhood. However, with the inheritance of transformative assets such as savings bonds from their parents and other relatives, they have a higher chance of becoming homeowners because they are able to make a down payment on the house. 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
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. A large variety of statistics show that a college graduate is more likely to earn a higher salary than those without. A higher salary can lead 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.[1]
Because middle class members are more likely to have wealth to use in extra activities, they therefore can spend more money on things such as education. This ability to select schools and live in nicer neighborhoods ultimately perpetuates the divide between working class and middle class and even further African Americans and whites. Selectivity in schooling and the ability to provide extra activities can further be described in Unequal Childhoods, by Annette Lareau. Lareau discusses several parenting styles such as the natural growth method and concerted cultivation which both are tied to different levels of wealth.
Home ownership is a major factor in finding differences between whites and blacks, and ultimately issues about wealth and class. Shapiro reported that only half of whites paid down payments on their homes. The other remaining half had help from family members. African Americans on the other hand, reported ninety percent paying the down payment themselves. This example shows how acquiring transformative assets is essential in maintaining wealth and staying above the asset poverty line. [1]
Information from 'Social Problems' indicates the extent to which there is a divide in the home ownership realm. This reading indicates that the difference between middle class whites and middle class blacks is almost as great as that of lower class blacks. Evidence to support this claim comes from observing neighborhoods in which middle class blacks are mixed with whites. The whites living in the neighborhood do not have as much wealth as the average middle class white family. This indicates that African Americans are at a disadvantage when it comes to housing. [3]
In Hidden Cost of Being African American, Shapiro discusses the use of an Asset Poverty Line (APL) to determine “the amount of assets a family needs to meet its basic needs over a specified period,” with the period being three months. This line differs from the standard income Poverty threshold that the U.S. government uses to determine which citizens are living in poverty. Data in Hidden Cost dramatically shows that poverty rates are much greater when assets are considered. This information concludes that families, predominantly African American, are greatly suffering from the lack of transformative assets.[1]
Studies have shown that the ability to obtain Transformative Assets and hence the ability to obtain social mobility is greatly dependent upon race. In general, studies show that African Americans are at a great disadvantage when it comes to obtaining these assets. This is due to several factors involving family involvement. Many African American families operate as single units, not opting to help out other extended family members. White families have stronger networks and therefore have more connections to individuals that might be able to provide them with transformative assets that would give them extra wealth.[1]
Family connections can greatly harm the ability for families to keep out of debt. Families with large networks of people in the same lower class category tend to end up in more debt due to the fact that they share money with everyone and cannot save money themselves. This tends to occur more in African American families rather than white families. Because the resources are spread so thinly, the ability for one family to acquire Transformative Assets is slim.[1]
Though the term “transformative asset” is currently cited with Shapiro in his book, other materials are starting to use this term when discussing assets and the difference between income and wealth. Shapiro greatly describes the way in which transformative assets are extremely beneficial, and also the extent to which many people lack this type of wealth. These assets stem from inheritances from family members and thus create a racial divide due to the different structure of white and African American families. These assets are also incorporated into a person’s wealth, which typically allows the person to gain social and economic mobility where others without transformative assets cannot. Therefore, as Shapiro implies, whites are at a great advantage when it comes to mobility, whereas African Americans are not. Transformative assets ultimately perpetuate the divide between income and wealth, which are commonly mistaken. The ability to obtain these assets also can help people live above the asset poverty line. Research from The Hidden Cost of Being African American implies that wealth is a very relative term that can be interpreted differently depending on which economic class is using the wealth. [1]