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Consumer Researchers Should Understand the Racial Wealth Gap

Posted by mefa0707 on November 15, 2010

Wealth is what you own minus what you owe

Suppose you had a white-collar job that affords you what you consider a comfortable—but not lavish—lifestyle. One unfortunate day your supervisor informs you that you have been downsized. “You will be laid off for up to three months, and maybe not even that long. Once we re-organize I should be able to re-hire you (at your current salary and benefits) if you can stick it out.”

After you get over the shock of being laid off, how you think about the next 90 days probably says something about how wealthy you are.

“Who does this clown think he’s kidding? Wait for three months? I’ll be out on the street or close to it in less time than that!”

“I don’t know about three whole months, but if I dip into savings and put off that cruise until next year I can probably make it—at least until I can find something else if I need to. If push comes to shove I can hit my parents up for a loan or tap into my 401k a little early.”

“Maybe this is a blessing in disguise. I can work on some of those home repairs I’ve been putting off or maybe go see the Grandparents in Florida.”

For a distressingly large number of Americans who we commonly consider “middle class,” the second and third responses are all but unthinkable. There are no savings, and The Bank of Mom & Dad™ has less to lend than it once did. A temporary layoff, an underwater mortgage, or an unexpected medical- or automobile expense can quickly throw a family into financial ruin.

What is the racial wealth gap?

The racial wealth gap remains a vexing social and public policy problem in the US. According to data compiled by the Closing the Racial Wealth Gap Initiative, wealth accumulation is an outright crisis for families of color. In 2007 they collectively owned assets worth 16 cents for every dollar’s worth of assets owned by white families. For Latino families it is 12 cents on the dollar. For African American families it is 10 cents (.pdf). Black and brown families own less wealth than whites with only high school educations. Black and brown middle- and high-income earners are more likely than whites to make deposits rather than withdrawals at The Bank of Mom & Dad™. The origin of the racial wealth gap is bound up in public policy that for most of the country’s history openly privileged whites in the wealth accumulation game. But the gap’s persistence is also the outcome of contemporary and ongoing policies and business practices that continue to disadvantage the non-white and the non-wealthy.

Understanding consumer implications of the racial wealth gap

Recently Victor Corral, Program Manager for the Insight Center for Community Economic Development, was kind enough to offer a webinar to Marketing Ethnic Faculty Association (MEFA) members. Titled Understanding the Racial Gap in Building Wealth in America (link to the entire webinar, 56:26, at the end of the post), it provides an overview of the racial wealth gap, its historical underpinnings, and policy-oriented approaches to addressing the problem.

Why should consumer researchers care? Consumer scholars know surprisingly little about the role wealth plays in consumption independent of income. To this point, only policy-oriented sociologists, economists, and a few finance scholars have shown much interest in wealth but none really explore consumption in any depth. But, from the micro/cognitive level to the institutional level consumer research could be enriched by incorporating wealth (and its intersection with race and gender) into analysis. Think of the myriad ways wealth could impact consumer interactions with everyday products and services, attitudes towards credit and financial risk, mental accounting, as well as health and social behaviors. As illustrated in the scenario above, wealth can act as a buffer against loss, perhaps granting those who possess it higher tolerance for risk-taking in some domains.

Check out the webinar by clicking the link below. (It will open in the present window.) Then, stop by the Insight Center website at This is an area of research ripe for engagement by consumer scholars. I think the sociologists and economists have uncovered a very interesting way of looking at inequality–from 50,000 feet in the air. They’ve given us the (very) macro view. A next potentially interesting step is to look at how wealth operates at the meso (e.g., family, neighborhood) and micro (e.g., individual/cognitive) levels. We already have senior scholars (e.g., John Sherry, Linda Price) and junior scholars in the field (e.g., Tonya Williams Bradford and Amber Epp) beginning to look at wealth. I think they may be onto something.

Webinar (opens in this window)

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