Losing Wealth - Matthew Desmond Evicted

Losing Wealth

During the Great Recession many Americans lost a lot of wealth, through lost wages from lost jobs and lost equity in homes as bankruptcies and mortgage defaults rocked the national economy. The Great Recession is a major factor that contributed to the housing crisis that Matthew Desmond looks at in his book Evicted. Additionally, it greatly contributed to the racial disparities in homelessness and poverty that Desmond explores and documents in the book.
Regarding the impact of the Great Recession to black and white families, Desmond writes, “between 2007 and 2010, the average white family experienced an 11 percent reduction in wealth, but the average black family lost 31 percent of its wealth. The average Hispanic family lost 44 percent.” He states that black and brown neighborhoods were targeted by banks pushing subprime mortgages, the vehicle that failed and ultimately crashed the entire banking and financial industry. Predatory mortgage and loan practices impacted many families, as the statistics in Desmond’s quote shows, but impacted black and brown families much more than white families.
The loss of wealth from the Great Recession will have a long tail. Wealth is different from income and can have long-term consequences for individuals and their family members for several generations. Wealth is the total value of the assets and property that an individual owns. Homes, cars, fancy paintings, family wedding rings, and cash in the bank all factor into a person’s wealth. Throughout American history, public policy and social norms have reinforced structures that allowed white Americans to generate wealth at the expense or exclusion of minorities. The result is a massive wealth gap today, even as minority populations have closed income gaps. Minorities may be on par with whites in terms of wages and salaries, but they are still far behind whites when it comes to total wealth and asset valuations.
Familial wealth allows individuals and families to weather storms like the Great Recession. Whites didn’t lose as much wealth as blacks and Hispanics because their families had more wealth that could be tapped into in order to keep up mortgage payments during an unemployment spell to avoid losing a home. Whites likely had better financial terms on their mortgages and loans because they had more wealth and could have wealthy family members co-sign mortgages or loans to improve the terms. The end result was that wealth helped protect wealth during the Great Recession, while minority populations who were already less wealthy than whites took a harder hit.

Generational Changes and How Millenials React to a New World

I’m a Millennial, and my generation often gets a bad rap for many of the ways we eschew traditions. We are often seen as lazy, wanting instant gratification, and as the “participation trophy” generation. However, like any branding of a particular generation, I think these views on Millennials are undeserved. My generation is responding to a lot of new pressures from changing globalized economies to social media connectedness, to global warming. In a world of quick and often chaotic change, it seems reasonable that my generation would develop new values and abandon longstanding traditions that feel irrelevant.

 

A harmless example of this, one instances I can remember from high school where my generation killed off a tradition that didn’t fit us anymore, was when my school chose a dorky nerd as prom king. In a  world of social media, popularity contests were held each day in online friend counts. Our school dances were often closely monitored by teachers, the lights were on, and no one knew how to dance anyway. Prom didn’t really hold a special place in anyone’s mind, and rather than taking the idea of prom king seriously, as I had seen in movies growing up, we laughed it off as an irrelevant relic of the past, as prom itself felt to me and many of my friends at that point.

 

More seriously, Millennials are also no longer sticking with economic traditions of generations that came before us. The world we live in makes it feel almost impossible to follow the same rout as our grandparents to financial success, and we have to take new routs toward careers and financial stability. This isn’t well understood by many people in older generations, and has created a generational friction that can be seen in things like OK Boomer. The example I want to focus on is Millennials switching jobs regularly and rarely working for a single company for 30 years, let alone more than 5 or 10 years. Job change is very common for Millennials which is not well understood by individuals from generations where it was common for someone to start in a job at the ground floor, and work 30 years to a higher position and salary.

 

In his book When, Dan Pink offers a good explanation of why so much job switching is taking place today. Particularly early in one’s career, switching jobs can make a big difference. Getting a good start in the job market can make a huge difference in where one ends up in the long-run, and that is a pressure that Millennials face and which shapes the decisions they make in terms of where they seek work. Pink writes,

 

“A large portion of one’s lifetime wage growth occurs in the first ten years of a career. Starting with a higher salary puts people on a higher initial trajectory. But that’s only the first advantage. The best way to earn more is to match your particular skills to an employer’s particular needs. That rarely happens in one’s first job. … So people quit jobs and take new ones – often every few years – to get the match right.”

 

When viewed through the lens that Pink uses, changing jobs and not holding to the traditional 30 years with a company followed by retirement makes sense. We have a limited amount of time to make an impact on this planet, and remaining in a position that does not value the particular skills that we have, and does not reward us for building and cultivating those skills, does not make sense. We can find better economic and financial opportunities in other companies, and we have more technology to help match us to those opportunities. In this sense, switching jobs early and often isn’t the historical negative that it was for older generations, but is a reflection of new values and an attempt to make sure we are not wasting the opportunities we have in life.

 

I think that many of the things Millenials are criticized for ultimately fall into this kind of category. I am certainly no fan of helicopter parenting, but I think it is more helpful to look at what is driving Millenial parents to hover over their kids so closely. Just like the example of jobs, I am sure that if you pulled back the surface, you would see how a changing lens of the world is influencing the behaviors that Millenials are so often criticized for in regard to parenting. The take-away is that generational changes reflect broader changes in society, and criticizing an entire generation is less helpful than understanding how the world has changed and how those changes influence the decisions of other generations.

Standing on the Shoulders of Giants

One of the things that struck me about Cory Booker’s United is  the way in which he draws unusual connections between people in society, particularly the connections he highlights between people who live during different times. Going back several generations, Booker’s family had lived in poverty as the descendants of slaves, something Booker did not actually know until he had an ancestry check as part of a television show. His parents were able to escape a cycle of poverty that had dominated both sides of his family. Growing up, his parents made him deeply aware of the sacrifices made by his family and by people in the United States that allowed him to have greater opportunities.

 

He writes, “I’ve said many times of my generation that we drink deeply from wells of freedom and opportunity that we did not dig, that we eat from tables prepared for us by our ancestors, that we sit comfortably in the shade of trees that we did not cultivate. We stand on the shoulders of giants.”

 

The saying, “shoulders of giants” was originally used to demean a politician, but Booker repurposes it to show how close we  truly are to the people who came before us. We benefit from the choices and decisions of our grandparents and ancestors and owe much of who we are to the people whose hard work helped create the situation and environment we were born into. Through our childhood we are supported and dependent on others to prepare a life for us where we can truly survive and thrive.

 

In a recent episode of the Brookings Cafeteria Podcast, Brookings Scholar Richard Reeves shares a section from his recent book, Dream Horders, and the section he shares describes the American Dream as an opportunity for man and woman to reach toward their full potential, unhampered by society. For so many of us, this potential is only possible thanks to the members of our family who made choices that paid off not so much for them, but rather for us. Booker recognizes how much our lives are influenced by what happened before we were born and when we are infants, and he points directly to the benefits we enjoy that we did not earn.