Guest blogger Su Jin Gatlin of WestEd highlights the importance of wealth (as differentiated from income) in educational research

Largely due to data limitations, higher education research has focused chiefly on income and less on other socioeconomic proxies, with the specific role of wealth largely left unexplored. Wealth and income are markedly different. Wealth measures the total supply of financial resources available to a family, whereas income only measures the current stream of cash payments. As such, wealth better measures the financial well-being of families – it “signifies the command over financial resources that a family has accumulated over its lifetime along with those resources that have been inherited across generations”.

Wealth’s inclusion in the analysis of postsecondary access would greatly improve the understanding of the college choice process, just as it has enhanced the understanding of academic achievement, and racial inequalities. Research in these areas indicates that when looking at measures of social equality, disparities in wealth are much greater than disparities in income.

If wealth and income were strongly correlated, income would be an adequate measure of financial well-being, but they are not. When income stemming from assets is not included when measuring income, the correlation is 0.26. Wealth can provide income (and income may eventually build to wealth), but wealth also has other beneficial characteristics that income does not have. Wealth brings stability. It generally does not change drastically over time in the way that income may. It can be passed on from generation to generation. Unlike income, it is not used for daily expenditures; it is used to “create opportunities, secure desired stature and standard of living, or pass class along to one’s children”.

Research indicates that focusing solely on income to measure financial resources ignores the huge gaps in wealth by race. While the income gap between blacks and whites is still very large, the wealth gap is even larger. In 1998, black households earned sixty-two cents for each dollar earned by white households. In comparison, black households held between zero cents to twenty-five cents for each dollar of wealth held by white households.

Not only is the wealth gap between blacks and whites distressing, the proportion of black families that are nearly or totally without financial resources is alarming. Approximately 83% of black households did not have enough net financial assets (measured as assets minus debts and equity accumulated in a home or vehicle) to survive at the poverty line for six months without any income, as compared to only 43% of white households.

More importantly for studying issues of college access, the disparity in wealth between blacks and whites is present for households with children. Nearly twice as many black children as white children (almost 75% of all black children) grow up in households without any net financial assets. Even more striking, nearly 90% of black children are raised in households without the financial resources to support themselves at the poverty line through three months without income – slightly more than half of white children live in households with similarly dire financial situations.

Labels: College Admissions, College Success, income, Student Success, wealth