Transformative asset
Encyclopedia
Transformative assets are assets that may provide resources for social
and economic mobility
. Examples of transformative assets include homeownership
and inheritance
s. These asset
s enable families to have access to resources or to achieve a social status
that they would otherwise be unable to achieve based on their income alone. Thomas Shapiro
first used the term in his book The Hidden Cost of Being African American to describe the "inherited wealth lifting a family beyond their own achievements." Transformative assets contribute to the wealth gap between working-class and middle-class families and individuals.
is used for everyday expenses whereas possessing wealth
is seen as a "safety net" for unexpected crises or family emergencies. Although there are discrepancies between incomes of African American
and Caucasian families, there is a much larger gap between wealth of African American families and European American
families. Children of affluent families typically have parents that set up accounts, funds, and bonds for them to use when needed. Some parents just give their children the money when asked. White Americans usually do not even touch their inheritance
and when they do it is typically to better their circumstances and advantages over everyone else. For White Americans the income gap is yet another benefit because they utilize their incomes to increase their wealth; whereas Black Americans sometimes live paycheck to paycheck. They usually have just enough income to make it. Wealth portrays more ownership of resources and is more permanent, whereas income portrays salary and is variable. As stated by a respondee interviewed for The Hidden Cost of being African American, "income supplies life support; assets provide opportunities."
Whereas income is universally considered the money that a family receives from jobs or the government, wealth is diversified by class. Working class
might consider wealth as money that can be used in emergency situations, or as a rainy day solution. Wealth for the working class is strictly a cushion that is meant to be preserved. Middle class
members view wealth differently. Wealth
to this class is viewed as a tool for power and freedom. Wealth that members from the middle class acquire, often from family members, can be used as leverage for extracurricular activities.
, social mobility
, and upward mobility. These types of mobility are all related to different social arenas such as job availability, housing opportunities, selective school districts, and extracurricular activities such as social clubs, sports teams, music lessons, etc.
For example, if two people were just married as well as recent graduates, they might not be able to afford to buy their own home (as they may not have an established income and/or credit), especially in a decent neighborhood. However, with the inheritance of transformative assets such as savings bonds from their parents and other relatives, they have a higher chance of becoming homeowners because they are able to make a down payment on the house. Housing and inheritance are the two most common sources of wealth in the US. As the author reveals in this text, these two sources can account for the inequality between white middle class and black middle class persons
Transformative assets could also increase one's likelihood of attaining higher education
. Some high school graduates are not able to go to college because they or their parents do not have the money for tuition. On the other hand, those who have access to transformative assets will be able to obtain a degree. A large variety of statistics show that a college graduate is more likely to earn a higher salary than those without. A higher salary can lead to a better chance of saving money for children. As demonstrated above and discussed in The Cost of Being African American Shapiro reveals that assets, just as poverty, have a domino effect
and can also be passed on for generations.
Because middle class members are more likely to have wealth to use in extra activities, they therefore can spend more money on things such as education. This ability to select schools and live in nicer neighborhoods ultimately perpetuates the divide between working class and middle class and even further African Americans and whites. Selectivity in schooling and the ability to provide extra activities can further be described in Unequal Childhoods, by Annette Lareau
. Lareau discusses several parenting styles such as the natural growth method and concerted cultivation which both are tied to different levels of wealth.
Information from 'Social Problems' indicates the extent to which there is a divide in the home ownership realm. This reading indicates that the difference between middle class whites and middle class blacks is almost as great as that of lower class blacks. Evidence to support this claim comes from observing neighborhoods in which middle class blacks are mixed with whites. The whites living in the neighborhood do not have as much wealth as the average middle class white family. This indicates that African Americans are at a disadvantage when it comes to housing
.
that the U.S. government uses to determine which citizens are living in poverty. Data in Hidden Cost dramatically shows that poverty rates are much greater when assets are considered. This information concludes that families, predominantly African American, are greatly suffering from the lack of transformative assets.
is greatly dependent upon race. In general, studies show that African Americans are at a great disadvantage when it comes to obtaining these assets. This is due to several factors involving family involvement. Many African American families operate as single units, not opting to help out other extended family members. White families have stronger networks and therefore have more connections to individuals that might be able to provide them with transformative assets that would give them extra wealth.
Family connections can greatly harm the ability for families to keep out of debt. Families with large networks
of people in the same lower class category tend to end up in more debt due to the fact that they share money with everyone and cannot save money themselves. This tends to occur more in African American families rather than white families. Because the resources are spread so thinly, the ability for one family to acquire Transformative Assets is slim.
and economic mobility
where others without transformative assets cannot. Therefore, as Shapiro implies, whites are at a great advantage when it comes to mobility, whereas African Americans are not. Transformative assets ultimately perpetuate the divide between income and wealth, which are commonly mistaken. The ability to obtain these assets also can help people live above the asset poverty line. Research from The Hidden Cost of Being African American implies that wealth is a very relative term that can be interpreted differently depending on which economic class is using the wealth.
Social mobility
Social mobility refers to the movement of people in a population from one social class or economic level to another. It typically refers to vertical mobility -- movement of individuals or groups up from one socio-economic level to another, often by changing jobs or marrying; but can also refer to...
and economic mobility
Economic mobility
Economic mobility is the ability of an individual or family to improve their economic status, in relation to income and social status, within his or her lifetime or between generations...
. Examples of transformative assets include homeownership
Owner-occupier
An owner-occupier is a person who lives in and owns the same home. It is a type of housing tenure. The home of the owner-occupier may be, for example, a house, apartment, condominium, or a housing cooperative...
and inheritance
Inheritance
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...
s. These asset
Asset
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...
s enable families to have access to resources or to achieve a social status
Social status
In sociology or anthropology, social status is the honor or prestige attached to one's position in society . It may also refer to a rank or position that one holds in a group, for example son or daughter, playmate, pupil, etc....
that they would otherwise be unable to achieve based on their income alone. Thomas Shapiro
Thomas Shapiro
Thomas M. Shapiro is a professor of Sociology and Public Policy at Brandeis University and is the author The Hidden Cost of Being African American and the co-author of Black Wealth/White Wealth. Shapiro's current professional titles include the Pokross Professor of Law and Social Policy and the...
first used the term in his book The Hidden Cost of Being African American to describe the "inherited wealth lifting a family beyond their own achievements." Transformative assets contribute to the wealth gap between working-class and middle-class families and individuals.
Income versus Wealth
IncomeIncome
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...
is used for everyday expenses whereas possessing wealth
Wealth
Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...
is seen as a "safety net" for unexpected crises or family emergencies. Although there are discrepancies between incomes of African American
African American
African Americans are citizens or residents of the United States who have at least partial ancestry from any of the native populations of Sub-Saharan Africa and are the direct descendants of enslaved Africans within the boundaries of the present United States...
and Caucasian families, there is a much larger gap between wealth of African American families and European American
European American
A European American is a citizen or resident of the United States who has origins in any of the original peoples of Europe...
families. Children of affluent families typically have parents that set up accounts, funds, and bonds for them to use when needed. Some parents just give their children the money when asked. White Americans usually do not even touch their inheritance
Inheritance
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...
and when they do it is typically to better their circumstances and advantages over everyone else. For White Americans the income gap is yet another benefit because they utilize their incomes to increase their wealth; whereas Black Americans sometimes live paycheck to paycheck. They usually have just enough income to make it. Wealth portrays more ownership of resources and is more permanent, whereas income portrays salary and is variable. As stated by a respondee interviewed for The Hidden Cost of being African American, "income supplies life support; assets provide opportunities."
Whereas income is universally considered the money that a family receives from jobs or the government, wealth is diversified by class. Working class
Working class
Working class is a term used in the social sciences and in ordinary conversation to describe those employed in lower tier jobs , often extending to those in unemployment or otherwise possessing below-average incomes...
might consider wealth as money that can be used in emergency situations, or as a rainy day solution. Wealth for the working class is strictly a cushion that is meant to be preserved. Middle class
Middle class
The middle class is any class of people in the middle of a societal hierarchy. In Weberian socio-economic terms, the middle class is the broad group of people in contemporary society who fall socio-economically between the working class and upper class....
members view wealth differently. Wealth
Wealth
Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...
to this class is viewed as a tool for power and freedom. Wealth that members from the middle class acquire, often from family members, can be used as leverage for extracurricular activities.
Advantages of Transformative Assets
Analyzing the relationship between income and wealth helps explain the benefits of transformative assets. Obtaining transformative assets aid in the production of economic mobilityEconomic mobility
Economic mobility is the ability of an individual or family to improve their economic status, in relation to income and social status, within his or her lifetime or between generations...
, social mobility
Social mobility
Social mobility refers to the movement of people in a population from one social class or economic level to another. It typically refers to vertical mobility -- movement of individuals or groups up from one socio-economic level to another, often by changing jobs or marrying; but can also refer to...
, and upward mobility. These types of mobility are all related to different social arenas such as job availability, housing opportunities, selective school districts, and extracurricular activities such as social clubs, sports teams, music lessons, etc.
For example, if two people were just married as well as recent graduates, they might not be able to afford to buy their own home (as they may not have an established income and/or credit), especially in a decent neighborhood. However, with the inheritance of transformative assets such as savings bonds from their parents and other relatives, they have a higher chance of becoming homeowners because they are able to make a down payment on the house. Housing and inheritance are the two most common sources of wealth in the US. As the author reveals in this text, these two sources can account for the inequality between white middle class and black middle class persons
Transformative assets could also increase one's likelihood of attaining higher education
Higher education
Higher, post-secondary, tertiary, or third level education refers to the stage of learning that occurs at universities, academies, colleges, seminaries, and institutes of technology...
. Some high school graduates are not able to go to college because they or their parents do not have the money for tuition. On the other hand, those who have access to transformative assets will be able to obtain a degree. A large variety of statistics show that a college graduate is more likely to earn a higher salary than those without. A higher salary can lead to a better chance of saving money for children. As demonstrated above and discussed in The Cost of Being African American Shapiro reveals that assets, just as poverty, have a domino effect
Domino effect
The domino effect is a chain reaction that occurs when a small change causes a similar change nearby, which then will cause another similar change, and so on in linear sequence. The term is best known as a mechanical effect, and is used as an analogy to a falling row of dominoes...
and can also be passed on for generations.
Because middle class members are more likely to have wealth to use in extra activities, they therefore can spend more money on things such as education. This ability to select schools and live in nicer neighborhoods ultimately perpetuates the divide between working class and middle class and even further African Americans and whites. Selectivity in schooling and the ability to provide extra activities can further be described in Unequal Childhoods, by Annette Lareau
Annette Lareau
Annette Lareau is a sociologist working at the University of Pennsylvania. She is a graduate of U.C. Santa Cruz and earned her PhD in Sociology from U.C. Berkeley. She started her career at South Illinois University at Carbondale and also previously worked as a Professor of Sociology at Temple...
. Lareau discusses several parenting styles such as the natural growth method and concerted cultivation which both are tied to different levels of wealth.
Home Ownership
Home ownership is a major factor in finding differences between whites and blacks, and ultimately issues about wealth and class. Shapiro reported that only half of whites paid down payments on their homes. The other remaining half had help from family members. African Americans on the other hand, reported ninety percent paying the down payment themselves. This example shows how acquiring transformative assets is essential in maintaining wealth and staying above the asset poverty line.Information from 'Social Problems' indicates the extent to which there is a divide in the home ownership realm. This reading indicates that the difference between middle class whites and middle class blacks is almost as great as that of lower class blacks. Evidence to support this claim comes from observing neighborhoods in which middle class blacks are mixed with whites. The whites living in the neighborhood do not have as much wealth as the average middle class white family. This indicates that African Americans are at a disadvantage when it comes to housing
House
A house is a building or structure that has the ability to be occupied for dwelling by human beings or other creatures. The term house includes many kinds of different dwellings ranging from rudimentary huts of nomadic tribes to free standing individual structures...
.
Asset Poverty Line
In Hidden Cost of Being African American, Shapiro discusses the use of an Asset Poverty Line (APL) to determine “the amount of assets a family needs to meet its basic needs over a specified period,” with the period being three months. This line differs from the standard income Poverty thresholdPoverty threshold
The poverty threshold, or poverty line, is the minimum level of income deemed necessary to achieve an adequate standard of living in a given country...
that the U.S. government uses to determine which citizens are living in poverty. Data in Hidden Cost dramatically shows that poverty rates are much greater when assets are considered. This information concludes that families, predominantly African American, are greatly suffering from the lack of transformative assets.
Racial Differences in Obtaining Transformative Assets
Studies have shown that the ability to obtain Transformative Assets and hence the ability to obtain social mobilitySocial mobility
Social mobility refers to the movement of people in a population from one social class or economic level to another. It typically refers to vertical mobility -- movement of individuals or groups up from one socio-economic level to another, often by changing jobs or marrying; but can also refer to...
is greatly dependent upon race. In general, studies show that African Americans are at a great disadvantage when it comes to obtaining these assets. This is due to several factors involving family involvement. Many African American families operate as single units, not opting to help out other extended family members. White families have stronger networks and therefore have more connections to individuals that might be able to provide them with transformative assets that would give them extra wealth.
Family connections can greatly harm the ability for families to keep out of debt. Families with large networks
Social network
A social network is a social structure made up of individuals called "nodes", which are tied by one or more specific types of interdependency, such as friendship, kinship, common interest, financial exchange, dislike, sexual relationships, or relationships of beliefs, knowledge or prestige.Social...
of people in the same lower class category tend to end up in more debt due to the fact that they share money with everyone and cannot save money themselves. This tends to occur more in African American families rather than white families. Because the resources are spread so thinly, the ability for one family to acquire Transformative Assets is slim.
Summary of Shapiro
Though the term “transformative asset” is currently cited with Shapiro in his book, other materials are starting to use this term when discussing assets and the difference between income and wealth. Shapiro greatly describes the way in which transformative assets are extremely beneficial, and also the extent to which many people lack this type of wealth. These assets stem from inheritances from family members and thus create a racial divide due to the different structure of white and African American families. These assets are also incorporated into a person’s wealth, which typically allows the person to gain socialSocial mobility
Social mobility refers to the movement of people in a population from one social class or economic level to another. It typically refers to vertical mobility -- movement of individuals or groups up from one socio-economic level to another, often by changing jobs or marrying; but can also refer to...
and economic mobility
Economic mobility
Economic mobility is the ability of an individual or family to improve their economic status, in relation to income and social status, within his or her lifetime or between generations...
where others without transformative assets cannot. Therefore, as Shapiro implies, whites are at a great advantage when it comes to mobility, whereas African Americans are not. Transformative assets ultimately perpetuate the divide between income and wealth, which are commonly mistaken. The ability to obtain these assets also can help people live above the asset poverty line. Research from The Hidden Cost of Being African American implies that wealth is a very relative term that can be interpreted differently depending on which economic class is using the wealth.