The Racial Economic Gap Is Not Just About Money
Written by Jasmin Sethi and published in Forbes.
The race economic gap has been studied from the perspective of income, unemployment, and wealth. Yet, economics is about more than money. The only way to make an impact on the race economic gap in the US is to understand that it is derived from several component factors that also exhibit gaps across society.
Every individual has at least four assets: money, skills, time, and networks. Traditionally, we think of financial assets, which is only the first category - money. There, we look at income and wealth. Our policy solutions are targeted at money, e.g., baby bonds. But money, if not spent in a way that brings about financial security will not solve the race economic gap from generation to generation.
We also consider skills - what economists call human capital. For this we have poured tremendous amounts of money into education, grant programs, student loans, etc. We can continue to do so, and we could funnel our attempts at closing the economic gap, e.g., through policies, such as financing education to build human capital. Education might allow individuals of different backgrounds to achieve a higher socioeconomic status. Unfortunately, however, economic mobility in the US has been found to be below what one might expect from the American Dream. The problems that come along with student loans and insecure job prospects do not necessarily go away with education. Indeed, education has been shown to increase intergenerational mobility. None the less, it also has the effect of reinforcing differences in family background, reducing its efficacy in narrowing the socioeconomic gap within a generation.
