Equitable Growth in Conversation is a recurring series where we talk with economists and other academics to help us better understand whether and how economic inequality affects economic growth and stability. In this installment, Austin Clemens, senior fellow at the Washington Center for Equitable Growth, speaks with Alexandra (“Sasha”) Killewald, a professor of sociology at the University of Michigan, the director of the Stone Center for Inequality Dynamics at Michigan, and the Robert F. Schoeni Research Professor at the university’s Institute for Social Research. In their conversation, Clemens and Killewald discuss:

• The work and culture at the Stone Center for Inequality Dynamics
• Research on wealth inequality and intergenerational wealth mobility
• Wealth inequality, racial wealth gaps, and policies to close those gaps
• Baby boomers and the next major turnover of intergenerational wealth
• The dynamics behind the gender wealth gap
• New areas for research on income and wealth mobility in the United States

 
Austin Clemens: You’re the new director of the Stone Center for Inequality Dynamics at the University of Michigan. Congratulations.

Sasha Killewald: Thank you so much.

Clemens: You’re taking it over from Fabian Pfeffer, a close friend of Equitable Growth who studies wealth mobility, and is someone you’ve co-authored with in the past. So, to start out, what drew you to the Stone Center and what are you hoping you can do there as the new director?

Killewald: Three things stood out to me when I visited the Stone Center. One is that it’s very rare to have a research center that elevates scholarship specifically on wealth inequality. There are many ways to study inequality. Different centers with different focuses are valuable. But because I’m a wealth inequality scholar, it’s exciting to be able to be in conversation and close physical proximity with other wealth inequality scholars.

Second, I’m really passionate about mentorship and advising graduate students and undergrads. The strong emphasis at the center on building up the next generation of inequality scholars really stood out to me. And third, I really like community. I can look out my office now and see people talking to each other and graduate students at different stages giving advice to each other. We have this space that people actually like to be in, especially after the pandemic. Not everyone has to come in five days a week, but it’s a space that in general people enjoy being in. And I like having those opportunities for informal conversation and collaboration.

We also do formal events to build intellectual community. We do a lab meeting once a month where people can share early-stage research ideas. We have a speaker series to host external scholars. We have two days a month of writing retreats, where people get breakfast and lunch and try to block off that time for writing. All of these ways we foster belonging and community really appeal to me.

Clemens: That sounds like a lot of fun. Let me riff on that idea of community a little. One thing I noticed looking at your website is that there’s lots of economists and sociologists, as you would expect, but you have fellows who are in psychology, social work, education, even architecture. You’ve described this very collaborative atmosphere. What can economics and sociology learn from these other disciplines? And what can the interdisciplinary aspect of this teach us?

Killewald: That’s a great question. First, I’d say that just getting economists and sociologists in the same place is itself an achievement. Inequality itself, though, is such a broad topic and there are so many people trying to approach it in different ways. Talking to some of our colleagues in architecture, they think a lot about how the built environment contributes to inequality. Well, that sounds related to topics that people in sociology and economics might study, whether it’s spatial inequality and neighborhoods effects, or whether it’s housing and segregation. There are lots of connections there.

That’s something that’s really struck me, and I really credit Fabian for it. He built this whole community of affiliates across a range of different institutional homes within the university. As I’ve gotten to get to know them this year, I’ve found our affiliates are interested in all kinds of topics related to wealth inequality, like the study of college savings accounts by Willie Elliott in the School of Social Work.

Sometimes bringing scholars together from different disciplines and units across the university allows us to learn from a really different perspective. Sometimes we end up realizing that people who have similar perspectives are just located in different places within a big university and may not have had the opportunity to connect yet. The Stone Center allows us to make those connections. Sometimes people have a surplus of resources of one kind, but they need a different kind of resource. So maybe they have a grant and are looking for a graduate research assistant, but they don’t have a graduate student with the specific skills they’re looking for. We can help connect them to someone.

Clemens: That sounds like a valuable service. Let’s turn to your research now. One common area of research for you is wealth and intergenerational wealth mobility. And one thread I picked up on reading some of your pieces is you talk about the cumulative nature of wealth. Unlike income, it’s inherited, and has cumulative impacts over a person’s lifetime. How does that change how scholars think about the transmission of opportunity between generations?

Killewald: I think there is an unresolved debate in the wealth literature about how much of the persistence of wealth across generations comes from direct transfers. Something that Fabian and I find in our paper “Generations of Advantage: Multigenerational Correlations in Family Wealth” is that, at least descriptively, direct money transfers from one generation to the next don’t explain a particularly large share of that intergenerational association in wealth. They explain some, but not as much, say, as the fact that wealthier parents are more likely to have kids who get a four-year college degree.

Now, is some of that association between parental wealth and offspring education due to direct wealth transfers? Maybe. Paying for your kids’ four-year college degree absolutely is a kind of wealth transfer.

But of course, there are other reasons that wealthy parents might have kids who are more likely to get four-year degrees. They live in different kinds of neighborhoods with different kinds of exposures, whether it’s to fewer environmental risks or other aspects of the neighborhood, or whether they have access to different kinds of schools in those neighborhoods.

I do think there is something special about wealth, that it can be directly transferred. But I was a little bit surprised by how much of the intergenerational association in wealth seems to go through these more indirect processes.

Homeownership is another example—wealthier parents are more likely to have kids who own their homes. Again, could that be in part because parents are helping with the down payment? Yes. But it could also be through other kinds of processes, such as the investments parents make that help their kids go to college, get a high-income job and so on.

So that’s the intergenerational piece. I also think about wealth inequality as it arises across the life course. Most young adults have basically no wealth. And then by the time they get to middle age, there’s a huge amount of variation in wealth. I’m very interested in how wealth piles up across the life course and who gets to accumulate wealth more rapidly than others.

Thinking about wealth as a cumulative outcome shapes how I think analytically, too. So often we have, for example, tried to predict wealth using current income. But wealth is influenced by all past incomes, not just current income. So, conceptually, at least, researchers should be thinking about that entire process — entire income histories, entire histories of partnerships and fertility and neighborhood residence, and debt taken on throughout the entire life course—not just looking at what’s happening today.

Clemens: What you just said strikes me as maybe a little more optimistic than I sometimes feel about wealth inequality. Getting more kids into a four-year college education feels like a solvable policy problem, whereas it’s more difficult to do something about parents giving their kids huge bequests. One thing policymakers think about a lot in the wealth mobility space is race gaps on wealth. These are very, very large, and fairly resistant to change in the recent past. Given the cumulative nature of wealth inequality, are these kinds of gaps inevitable? Can those racial wealth be closed by policymakers?

Killewald: As you say, these racial wealth gaps are staggeringly large, much bigger than gaps in income, bigger than disparities by education. And strikingly, they have not consistently narrowed over time. I guess I would distinguish between optimism about what’s conceptually possible to narrow the racial wealth gap and optimism about what policy changes will happen. So conceptually, do I think reparations would narrow the race gap in wealth? You bet. Do I think it’s inevitable that the federal government will authorize reparations? Of course not. I think wealth inequality is socially constructed, so I think we, as a society, have the power to change it. Do I think that narrowing race gaps in wealth will require more than marginal policy tweaks? Of course.

Something that comes up in some of my research with Brielle Brian, who is an assistant professor at Rice University, is that racial disparities in wealth come from everywhere. Some of it is a legacy of inequality that leads to racial disparities in parental resources, giving kids of different racial and ethnic groups different starting points. We estimate those disparities in social origins can explain about half of racial and ethnic disparities in wealth accumulated through young and middle adulthood. But the rest, we recreate fresh in the current generation. That’s disparities in education and income and homeownership, and the returns to homeownership, which persist even above and beyond those unequal class starting points.

To me, that suggests if policymakers want to make real progress on narrowing the race gap in wealth, then they have to recognize that racial inequality and racism is systemic in the United States, which means that meaningfully narrowing the race gap in wealth will require targeting racial inequality in every social institution we have. We can’t just tweak one thing and expect everything to get better.

One sort of provocative simulation that Brielle and I have done in our other research is to examine how homeownership contributes to the race gap in wealth. If you could equalize years of homeownership by race, you narrow the gap. If you could equalize the returns people get to homeownership by race, you narrow the gap. And that’s because homeownership is an inequality-generating process. And then we say, imagine a world where there was no homeownership, or imagine a world where nobody got any wealth benefits from homeownership. And in proportional terms, the gap doesn’t narrow, or doesn’t narrow much. That’s because all the other wealth-generating processes are also inequality-generating. So when you take out one unequal process and you leave the others, proportionally, things don’t necessarily get any better.

That means that researchers and policymakers alike have to always be thinking about the whole ball of wax. Yes, it’s the labor market. Yes, it’s housing. Yes, it’s schools. Yes, it’s bequests. But when I think about really enormous sources of disparities, our nation’s legacy of discrimination and exclusion have generated both historic and contemporary disparities by race. Reparations is a significant policy that would make a difference to the race gap in wealth.

Second, both between and within racial and ethnic groups, income makes a big difference for wealth. It is not the only thing, but it is a very important contributor. Most people gain wealth primarily through savings out of their incomes, which then can of course go toward a down payment for a house or investments in retirement accounts that then accumulate value across the life course. That means policies that narrow or reduce income inequality can also help reduce wealth inequality. More progressive taxation, for example, would likely have the consequence of reducing wealth inequality.

I think there are also policies that policymakers could enact that are not strictly about reducing wealth inequality but might act to reduce its consequences. One could imagine alternative higher education financing systems that would not require as large out-of-pocket costs for students and their parents. That could be one piece of a policy to reduce how strongly parental wealth is associated with offspring education.

Clemens: One final wealth question. It’s about the next big turnover of intergenerational wealth that’s coming soon. Baby boomers are getting older and the population of the United States is aging in general. Who’s going to benefit from that? What’s going to be the impact on wealth inequality in the United States?

Killewald: My collaborator and predecessor at the Stone Center, Fabian Pfeffer, says that we have to keep in mind that for the offspring of wealthy parents, the kinds of parents who can leave bequests, these bequests are what he calls the cherry on top. By the time you receive a bequest from your wealthy parents, you are often in your own middle age. Bequests are most common in the 50s.

By this time, people have had substantial opportunity already to reap their own benefits of all those earlier advantages that you and I discussed. Bequests further enhance inequality and tend to make those who are rich already through these indirect processes even richer through the direct transfer.

Clemens: Another line of your research focuses on family dynamics, parenthood, sharing household work, divorce, and how all those things impact work, wealth, and income for individuals. What does that work tell us about income and wealth accumulation for women, in particular?

Killewald: This is not unique to my research, but one clear finding is that there remain substantial consequences for women of motherhood, in terms of their employment and their income across the life course. And I want to be really clear up front that I don’t have a position about whether parents should fully engage in paid work or how they should balance paid and unpaid work across the course of their lives. My goal is that people, regardless of their gender, are able to balance paid and unpaid work and caregiving responsibilities in a way that makes sense for them and for their family.

What we see is that it is disproportionately women who take on the bulk of the caregiving responsibilities. Women are more likely to step back from their paid employment. When they become parents, men on average just don’t experience that same kind of change. So we really see pretty substantial consequences of parenthood for women’s income, and as a result, also for their income as a share of a couple’s total income.

I think what these processes highlight is, in part, that women’s financial welfare often remains somewhat tied to their marital statuses. Being able to absorb those economic costs of parenthood is more feasible when you have a partner who is employed full time. Not all men are employed full time, but disproportionately, this means that women married to men are better off financially, better able to cushion those costs of motherhood than women in other family arrangements.

Clemens: There’s a lot of discussion at the federal level about policies that can help to rectify some of those imbalances. There’s paid leave, and the care responsibilities that fall on women. Is that imbalance something that some countries have managed to address where we see these big differences? Or is it a lot of it culturally constructed? How do you think of our ability to equalize some of this treatment?

Killewald: One challenge is that we can think of work family policy as falling into two different buckets. One bucket is the kinds of policies that incentivize or encourage or facilitate moms maintaining high levels of paid employment. High-quality, accessible, subsidized child care is an example of such a policy. We can also think about policies that make it easier for families to get by financially, even if one parent cuts back paid work. Child allowances might be such an example.

Both of these policies are legitimately pro-family policies. They are giving resources to people with children. But they don’t have the same consequences, necessarily, for women’s paid employment. It’s important to keep in mind that there are a lot of goals with these kinds of policies.

Because these policies may go in somewhat different directions when it comes to facilitating gender pay equality, countries that provide lots of financial and in-kind support to parents may or may not have smaller gender pay gaps or motherhood penalties.

Clemens: We like to kind of end these conversations with a discussion about research more generally, and what has really caught your eye recently. When you’re thinking about mobility research over the past couple of years, what do you think are some really fertile new areas where people are doing really interesting work?

Killewald: I think all the time about this paper, “Educational Inequality, Educational Expansion, and Intergenerational Income Persistence in the United States,” by Deirdre Bloome, Shauna Dyer and Xiang Zhou, in the American Sociological Review. Their research looks at changes over time in income mobility, between the National Longitudinal Survey of Youth 1979 cohort and the 1997 cohort.

What is really amazing to me is that, broadly speaking, there’s no change in mobility. But it’s almost an accident of different pieces of the process going in different directions. They find that the relationship between parents’ income and their offspring’s education got stronger. They also find that the relationship between one’s own education and one’s income got stronger. So that would seem like it’s going to reduce mobility, but it was offset by other kinds of changes.

This is not some fancy causal inference identification paper. It’s a very nice decomposition, reminding researchers of the social processes at work in intergenerational reproduction, and reminding us to think about how those different social processes can move in different directions over time. Simultaneously, it shows this striking finding that mobility hasn’t necessarily changed, and shows us how wrong it would be to conclude from that that social inequality hasn’t changed, or that how we get to that level of mobility hasn’t changed over time.

I also think about a recent stream of research that is encouraging us to think about the long-term consequences of racialized policy, exclusionary policy, and segregation, on contemporary racial and ethnic inequality. The research by [New York University’s] Jacob Faber on the consequences of redlining stands out to me, as does [University of North Carolina sociologist] Regina Baker’s work on historical racial regimes and their very long-term consequences. I think this is an area of research that’s going to continue to grow as we have the combination of increasingly digitized, quantitative historical records, and a growing body of scholarship on wealth inequality more generally, alongside increased interest in these long-term consequences of racialized policy. So that’s an area of research that I’m really excited to watch grow over the next few years.

Clemens: Are there some questions that you’re really interested in right now that you think people really need to tackle?

Killewald: I find very impressive the scholars who are able to really bring a social institution’s perspective to stratification research. Whether that means asking about how a particular policy has long-term consequences, or whether it’s saying, ‘okay, let’s pull out the role of the housing market for inequality,’ in detail. Some of the research by [University of Illinois, Chicago sociologist] Junia Howell, Elizabeth Korver-Glenn, and others about racialized housing appraisal processes, for example, is important. Mapping these inequalities, examining how they happen, and understanding what the housing appraisal process looks like and why they lead to unequal appraisals is extremely productive.

Similarly, I follow the research being done by my Stone Center colleague Davon Norris on racial inequality in city government credit ratings and Faber’s work on the racial dynamics in the subprime mortgage market at its peak, as well as others doing work on the rise of alternative financing institutions, predatory loans, and check cashing institutions to understand the contributions of these financial products and services to perpetuating racialized inequality. I think those connections between what I would call stratification scholarship and the more economic sociology institutional scholarship is incredibly productive.

I’m also interested in research on how people think about wealth and wealth accumulation. There is some research that does that already. I’m thinking of Mariko Chang’s research, Shortchanged, about why women accumulate less wealth, and [Brandeis University sociology and public policy professor] Tom Shapiro’s book, The Hidden Cost of Being African American: How Wealth Perpetuates Inequality, which includes interviews with parents about how they spend money to provide opportunities to their kids. But we need more qualitative scholarship investigating how people think about money and the processes underlying wealth inequality and persistence.

Clemens: Well, maybe some young enterprising sociologist will read this and go out and do those interviews.

Killewald: Yeah, that sounds great.

Clemens: Thanks, Sasha, for this fascinating conversation.

Killewald: You’re welcome. It’s been a delight.