Disparities in Socioeconomic Outcomes of Term Paper

  • Length: 15 pages
  • Sources: 16
  • Subject: Urban Studies
  • Type: Term Paper
  • Paper: #11494769

Excerpt from Term Paper :

This is stated to be because "whites devoted a greater share of their income to saving, but racial differences in savings rates are not significant" after controlling for income.. Yet, there would have been at least a narrowing in the savings gap between whites and African-Americans, had African-Americans been as "devoted to saving..." As were whites during the same period. Stated by Gittleman and Wolff as the primary source of data in the 2004 study is the "PSID, which had followed about 5,000 U.S. families since 1968, interviewing them annually." (2004) the PSID measures net worth by "adding the values of the home, real estate other than the main residence, the farm or business, and vehicles together with holdings in stocks, checking and savings accounts and 'other savings' and then subtracting the non-mortgage debt." (Gittleman and Wolff, 2004) Gittleman and Wolff point out the necessity in understanding to a great degree the differentials of wealth and accumulation and its components differ by race. Additionally enabling a "division of changes in net worth into saving, capital gains and transfers.." is stated to be the "information on asset levels and flows..." (Gittleman and Wolff, 2004) Because "gross saving is not the same as saving traditionally defined as the difference between income an expenditures, because gross saving can be funded by any source of funds, not just income." (Gittleman and Wolff, 2004)

Gittleman and Wolff propose that "the rate of return to capital may vary by race" due to differences in the composition of the portfolio combined with rate of return to specific assets differentials and stated as well is that it is interesting to note that "economic theory does not offer unambiguous predictions about the effect of racial discrimination in the small business credit market with respect to the rate of return to business ownership for African-Americans relative to whites." (2004) it is possible that the business that a similarly qualified white individual would be capable of starting would be denied of the African-American entrepreneur meaning that the African-American entrepreneur would be expected to be more qualified than the white entrepreneur in order to produce a high return rate. Attributed as well to the differences by race in savings in terms of its proportion of current income show that the savings amount rises along with a rise of income and since "whites have higher levels of current income than do African-Americans..." (Gittleman and Wolff, 2004) then the proportion of savings is larger than that of African-Americans proportion of income to savings. The following table labeled Figure One shows the 'wealth by characteristics of head and family income in 1994 for African-Americans and whites.

Wealth by Characteristics of Head and Family Income (1994)

Source: Gittleman and Wolff, 2004

Findings of this study state that "given the vast gap between the races in mean wealth levels, it is not surprising that in each period the overall absolute climb in wealth is greater for whites than for African-Americans, and virtually always the case in increases in each of the five categories are larger as well." (Gittleman and Wolff, 2004) Additionally there is no evidence to support the idea that "over the time span examined...that capital gains play a more important relative role for whites than for African-Americans. For the period as a whole, in fact capital gains account for 41% of the increase in wealth for African-Americans, more than double the 18% share for whites." (Gittleman and Wolff, 2004) in addition, the contribution made to wealth accumulation by savings is greater for whites than for African-Americans stated at sixty-six percent and fifty-five percent respectively. Finally, "among whites, changes in household composition are responsible for a nonnegligible portion of wealth accumulation whereas change sin household composition make virtually no contribution to wealth gains among African-Americans." (Gittleman and Wolff, 2004)

Notable differences are noted in this study by race "in the individual components of wealth accumulation" and calculated is that "whites have a higher average saving rate than African-Americans, with this difference being statistically significant in two out of three cases." (Gittleman and Wolff, 2004) the savings rate for whites in the 10-year period in this study is "nearly double...for whites..." when compared to the savings rate of African-Americans" with these rates stated at 7.6% of family income and 3.9% of family income respectively. These savings rates are translated in wealth gains through multiplication of these rates by the "ratio of income accumulated over the 10-year span to wealth at the start of the period, which is 4.38 for white and 9.84 for African-Americans...because of a higher income-to-wealth ratio, the slower saving rate of African-Americans actually translates into a faster increase in wealth, 38% versus 33%." (Gittleman and Wolff, 2004)

This study concludes that by having used the 1984, 1989, and 1994 wealth supplements of the PSID that patterns of wealth accumulation by race were examined and that while a great percentage of higher wealth among whites indicates "that the absolute amount of wealth accumulation was much greater for them than for African-Americans, there were notable differences in the pattern of wealth accumulation." (Gittleman and Wolff, 2004) Additionally, this study concludes that wealth accumulation for whites was raised by differences in savings as compared to savings rates of African-Americans. Additionally concluded in this study is that had African-American and white inheritances been relatively the same or there would be a narrowing of the gap between African-Americans and whites in terms of the wealth accumulation over this ten-year period. Gittleman and Wolff state the study reported has only documented the "proximate causes of race differences in wealth accumulation" as "variation in wealth can result both from conscious individual choices and from circumstances outside the control of the individual such as differences in inheritances and natural ability or shocks that affect the economic resources of some more than others." (2004)

V. Worker-Wage Disparity

The work of Arthur H. Goldsmith, Darrick Hamilton, and William Darity, Jr. entitled: "From Dark to Light: Skin Color and Wages Among African-Americans" states that "conventional wisdom in the social sciences holds that there is a fundamental difference in the construction and understanding of racial categories between most communities in Latin American countries and most communities in the United States of America." (2004) This work states that it is believed by social psychologists that "human categorization is a fundamental cognitive process." (Goldsmith, 2004) Group membership differentiation among human beings was "documented early in the previous century in extensive anthropological observations compiled by Sumner (1906)." (Goldsmith, Hamilton and Darity, 2007) the distinction between "in-group and out-group" was made by Sumner who posited that in-group over out-group preferences "is a universal characteristic of social existence." (Goldsmith, Hamilton and Darity, 2007) Emerging has been a convention for representation of in-group and out-group status "along the racial axis on a bivariate scale with white as the in-group and not white as the out=group." (Goldsmith, Hamilton and Darity, 2007) Evidence of treatment that is preferential when comparing that received by black and white individuals this convention is reportedly departed from in this study and stated is a belief that "patterns of socialization in the United States may be consistent with a gradational model of in-group and out-group with regard to phenotype." (Goldsmith, Hamilton and Darity, 2007)

VI. Social Identity Theory

Social Identity Theory is used in psychology for providing the reason why those who belong to an in-group exhibit prejudice toward members of an out-group." The assertion of the Social Identity Theory is that "people have a fundamental need for self-worth and self-esteem. An individual's self-worth of self-esteem is enhanced by their group's success and achievements - due to a perception of common fate." (Goldsmith, Hamilton and Darity, 2007) This means the individual's outcomes are linked to the outcomes of their group. Goldsmith states that the perspective offered in this work is the theory of "the preference for whiteness" which is a theory that asserts that the possession of the characteristics of the (white) in-group "leads to preferential treatment of workers with lighter skin tone" and makes a prediction of an interracial wage gap "that rises as the shade of the workers darkens and there will be an intraracial wage gap that is greater when the skin-shade differences are larger." (Goldsmith, Hamilton and Darity, 2007) the study concludes: "The evidence we report, which is based on several different model specifications using two different data sets collected over ten years apart, is consistent with the notion that among blacks in the United States, lightness -- "possessing white characteristics as measured by skin shade -- "is rewarded in the labor market." (Goldsmith, Hamilton and Darity, 2007)

VII. Assessment of Affirmative Action

The work of Harry Holzer, David Neumark (2000) Assessing Affirmative Action" states that Affirmative Action is the United States in terms of the future is "uncertain." California passed Proposition 209 in 1996 with prohibits all government institutions from discriminating against or giving f preferential treatment to any individual or group in public contracting…

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