U.S. millennials, the racial wealth divide, and asking parents for rent

It seems a lot of twenty-somethings in the United States who are trying to make it in the big city have a secret weapon: Mom and Dad. A new article for The Upshot by Quoctrung Bui chronicles a new survey that finds that a growing number of millennials in their twenties—40 percent—still rely on their parents to help pay their everyday living expenses, receiving an average of $3,000 a year.

In a labor market in which mobility is declining and skilled jobs are increasingly moving to expensive cities, family wealth is playing an increasing role in helping post-graduates find their footing, especially if they move to urban areas.  Of course, not every family can afford to help their adult children out. Bui doesn’t go into the demographics of who these families are, but the research tells us that they are likely disproportionately white. This means that the barriers of entry to some of the nation’s best jobs and opportunities, which are becoming concentrated in these expensive, high-rent cities, could deepen even further along racial lines.

Parents’ ability to help their children comes down how much they have in assets, and it’s no secret that a major wealth gap between white families and families of colors has persisted for years. Policies both past and present have helped build the white middle class while deepening the racial divide for black and Latino families, who now have 6 percent and 8 percent, respectively, of the wealth of a typical white household, according to a new Demos report. An influential study by the Brookings Institution’s William Gale and University of Wisconsin’s John Karl Scholz finds that 20 percent of net worth is due to non-inheritance transfers from family members throughout one’s lifetime. Wealth, as opposed to income, is important because it can serve as a springboard for the next generation’s long-term financial security.

This does not just mean that white offspring are more likely to receive a sizeable inheritance after their parents’ death. According to Brandeis University sociologist Thomas Shapiro, white children are also more often the recipients of financial assistance throughout their lifetime as well. We don’t necessarily register these “gifts” as inheritance. But whether it’s paying their children’s college tuition, covering medical expenses, or helping with rent or a down payment on a house, this head-start can help white kids find more opportunities to build wealth.

The effects of a parental safety-net—or lack thereof—also influences more immediate choices. A kid that has a parental safety net to fall back on is much more likely to be able to afford to move to a more expensive city, pay for career development activities, or go into occupations that are riskier or have higher barriers of entry. Mel Jones, writing for the Washington Monthly, calls this reality the “second racial wealth gap.”

“If you have to decide between paying for a professional networking event or a cell phone bill, the latter is more likely to win out,” Jones explains. “When this happens once or twice, it’s not a big deal. It’s the collective impact of a series of decisions that matter, the result of which is displayed among ethnic and class lines.” Education only goes so far, as demonstrated by the fact that black and Latino students who want to build wealth similar to that of white high-school dropouts must not only to finish high school but also graduate from college.

When economists and other social scientists talk about the racial wealth gap, they tend to focus on the way that it’s stifled upward mobility for black and Latino households in terms of homeownership, education, and weathering periods of financial hardship. Reversing the numerous discriminatory policies that caused this to happen in the first place will help, but it won’t remove the barriers to entry that are now higher than ever because many white families are starting off far ahead. The small inequalities have always mattered, but in an era in which wealth begets wealth, they may represent an even bigger barrier to long-term economic security for communities of color.