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In the Media

article imageStudy: Racial wealth gap tripled since Reagan era

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By Brett Wilkins
Feb 28, 2013 in Politics
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Waltham - A new study has revealed that the wealth gap between white and black Americans has nearly tripled since the Reagan years.
"The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide," a study by Thomas Shapiro, Tatjana Meschede and Sam Osoro of Brandeis University's Institute on Assets and Social Policy (IASP), was released on Wednesday. It found that between 1984 and 2009, the gap between white and black household wealth increased from $85,070 to $236,500 among the families studied. That's just the gap between median wealth. In 2009, median net worth among the white households studied was $265,000, while median black household worth was just $28,500, or less than 1/9 of the white worth.
"Growing concerns about wealth inequality and the expanding racial wealth gap have in recent years become central to the debate over whether our nation is on a sustainable economic path," the report's authors wrote. "All families need wealth to be economically secure and create opportunities for the next generation. Wealth-- what we own minus what we owe-- allows families to move forward by moving to better and safer neighborhoods, investing in businesses, saving for retirement and supporting their children's college aspirations."
"In the US today, the richest 1 percent of households owns 37 percent of all wealth. This toxic inequality has historic underpinnings but is perpetuated by policies and tax preferences that continue to favor the affluent."
The study examined the same set of 1,700 families over a 25-year period and investigated "a wide range of possible explanations" for the shocking increase in disparity. At the end of the study, the researchers were able to identify key forces behind the racial wealth gap.
"Our analysis found little evidence to support common perceptions about what underlies the ability to build wealth, including the notion that personal attributes and behavioral choices are key pieces of the equation," the researchers wrote.
"Instead, the evidence points to policy and the configuration of both opportunities and barriers in workplaces, schools, and communities that reinforce deeply entrenched racial dynamics in how wealth is accumulated and that continue to permeate the most important spheres of everyday life."
These factors include:
-Home Ownership: Whites are 28 percent more likely to own a home, and whites have benefited from greater access to credit and family assistance to purchases homes. Blacks are also more likely to have high-risk mortgages and be victims of predatory lending than whites, leading to more foreclosures. Because more whites own their own homes, they are much more likely to build equity, which increases long-term wealth and financial stability.
"Home are the largest investments that most American families make and by far the biggest item in their wealth portfolio..." the report states. "Yet for many years, redlining, discriminatory mortgage lending practices, lack of access to credit and lower incomes have blocked the home ownership path for African Americans while creating and reinforcing communities segregated by race."
- Income and Employment: Outside the IASP study, the US Census Bureau reported that the average white American earned $29,401 in 2011, while the average black American made just $18,357. According to the Census Bureau, a staggering 27.6 percent of black Americans are living in poverty, compared to just 9.8 percent of whites. The IASP study found that for every dollar increase in average income over the 25-year research period, white households added $5.19 in wealth while black households added only $0.69. The study also found that blacks have been devastated by unemployment and employment discrimination.
"The dramatic difference in wealth accumulation from similar income gains has its roots in long-standing patterns in discrimination, hiring, training, promoting and access to benefits..." the report states. "Due to discriminatory factors, black workers predominate in fields that are least likely to have employment-based retirement plans and other benefits."
"Unemployment affects all all workers," the study continues, "but due to... discriminatory factors... black workers are hit harder, more often, and for longer periods of time."
- Inheritance: According to the study, whites were five times more likely to receive an inheritance than blacks during the research period. And "among those receiving an inheritance, whites received about 10 times more wealth than African Americans."
- College Education: "As a result of neighborhood segregation, lower-income students, especially students of color, are too often isolated and concentrated in lower-quality schools," the report states. This leads to a lower percentage of blacks attending and graduating from college and, as the study's authors assert, "obtaining a college degree is vital to economic success and translates into substantially greater lifetime income and wealth." Skyrocketing college tuition-- the study found costs soared by 60 percent in the past two decades-- and crushing student loan debt, which affects blacks more than whites, also hamper black success.
- Social and Cultural Factors: Here, the researchers focused on the effect of marriage on the wealth gap, a favorite topic of many conservative commentators. The study found that while getting married increased the median wealth of white families by $75,635, marriage had no statistically significant impact on black households. This is because single white individuals are "much more likely to possess positive net worth, most likely due to benefits from substantial family financial assistance, higher-paying jobs, and home ownership" than blacks.
The study concludes by offering suggestions on how to close the yawning racial wealth gap. These include:
- "Ensur[ing] that mortgage and lending policies and fair housing policies are enforced and strengthened."
- "Raising the minimum wage, enforcing equal pay provisions, and strengthening employer-based retirement plans and other benefits."
- Investment in affordable, high-quality child care and early childhood development, and "support[ing] policies that help more students from low- and moderate-income families of color attend college and graduate." Reduce student loan debt burden.
- "Diminish the advantages passed along to a small number of families" by addressing "preferential tax treatment for large estates."
As bleak a picture as the IASP study paints, figures from the US Census Bureau tell an even more alarming story. In 2011, the Bureau placed median white household net worth at $113,149, Hispanic net worth at $6,325 and black net worth at just $5,677. According to the government, the average white household is worth 20 times as much as the average black household.
"It is time for a portfolio shift in public investment to grow wealth for all, not just a tiny minority," the IASP study concludes, echoing figures from the Congressional Budget Office that showed income for the top 1 percent of Americans soared by 275 percent since 1979 while remaining more or less stagnant for the bottom 20 percent. "Without that shift the wealth gap between white and black households has little prospect of significantly narrowing. A healthy, fair and equitable society cannot continue to follow such an economically unsustainable trajectory."
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