Diminished Economic Return of Socioeconomic Status for Black Families

Background: According to the Minorities' Diminished Return theory, socioeconomic status (SES) systemically generates larger gains for Whites compared to Blacks. It is, however, unknown whether the effects of baseline SES on future family income also varies between Blacks and Whites.

Aims: Using a national sample, this study investigated racial variation in the effects of family SES (i.e., family structure, maternal education, and income) at birth on subsequent household income at age 15.

Methods: This 15-year longitudinal study used data from the Fragile Families and Child Wellbeing Study (FFCWS), which followed 1471 non-Hispanic Black or White families from the time of birth of their child for 15 years. Two family SES indicators (maternal education and income) at birth were the independent variables. Family income 15 years later was the outcome. Maternal age, child gender, and family structure at baseline were covariates. Race was the focal moderator. Linear regression models were used for data analysis.

Results: In the pooled sample, maternal education (b = 11.62, < 0.001) and household income (b = 0.73, < 0.001) at baseline were predictive of family income 15 years later. Race, however, interacted with maternal education (b = -12,073.89, < 0.001) and household income (b = -312.47, < 0.001) at birth on household income 15 years later, indicating smaller effects for Black compared to White families. These differential gains were independent of family structure, mother age, and child gender.

Conclusions: The economic return of family SES is smaller for Black compared to White families, regardless of the SES indicator. Policies should specifically address structural barriers in the lives of racial and ethnic minorities to minimize the diminished return of SES resources across racial minority groups. Policies should also reduce extra costs of upward social mobility for racial minorities. As the likely causes are multi-level, solutions should also be also multi-level. Without such interventions, it may be very difficult if not impossible to eliminate the existing Black-White economic gap.