Racial wealth gap widened steadily over the last generation.
The primal economic divide in America remains the chasm between the wealth of black and white families, and it has widened steadily over the last generation.
And that largely reckons — as demographic data trails a year or two behind economic reality — without the toll taken by the Great Recession, which several economists forecast will most likely deepen this divide. These conclusions arise from a study released today by Professor Thomas M. Shapiro and his colleagues at the Institute on Assets and Social Policy at Brandeis University. They studied the same 2,000 black and white families between 1983 and 2007, and found that the racial wealth gap “has more than quadrupled over the course of a generation.”
Mr. Shapiro and his colleagues say their data points to a “stampede toward an escalating racial wealth gap.” Other analysts might pick their own adjectives, but the bones of the study present a disturbing take.
White families saw “dramatic growth” in their financial assets, from a median value of $22,000 in 1983 to $100,000 in 2007; black families experienced only the slightest growth in wealth during this same period, measured in 2007 dollars. This held true even at higher income levels. Middle-income whites, for instance, accumulated $74,000 in assets by 2007, as opposed to high-income black families, whose median assets totaled just $18,000 in 2007. (For both races, middle income was defined as $40,000 to $70,000 in 2007 dollars.)
At the bottom of the economic pyramid, at least 25 percent of black families in 2007 could draw on no assets whatsoever to see themselves through the economic storm.
So why does this matter?
In short, wealth begets wealth, and the lack of wealth perpetuates the same. Black families — who save at the same rate as white families — have less money to pay for college tuition, less money to invest in business and less money to tide them through rough times. “The gap is opportunity denied and assures racial economic inequality for the next generation,” Mr. Shapiro notes.
The reasons for this gap are rooted deep in this nation’s racial history. Government policy shut many blacks out of homeownership during the depths of the Depression. And during the post-World War II boom years, federal, state and city policies, and discriminatory bank lending and real estate practices steered even higher-income blacks to segregated neighborhoods and towns, where real estate appreciation lagged far behind that of predominantly white areas.
Also, even high-income blacks most often hail from families of humble economic origins. These families had far fewer dollars to pass on to their children. (As any young person who has cadged a down payment from parents can attest, intergenerational wealth transfers are a particularly efficient way of gaining a foothold in homeownership and so building wealth.)
Government tax policy in the past three decades has broadened this racial gap, even if inadvertently. When Congress cuts inheritance and capital gains taxes, its actions keep more money in the pockets of those families who already have it, which is to say disproportionately upper-income white families.
There is finally the looming question of the toll taken by the recession. Certainly, many millions of white families have suffered grievously, losing houses and jobs. At the low point in 2009, white families had lost more than $1 trillion in wealth.
But the recession fell even more heavily on blacks, as the average black family has far more of its wealth wrapped up in a home. (Whites, again for reasons of racial and economic history, tend to have diversified portfolios, with more stocks, pensions and the like.)
“Given differential employment rates, loss of wages, loss of health insurance, to the extent that all of these are worse for African-Americans, it has to make the wealth divide worse,” said William A. Darity, a professor of African-American studies and economics at the Sanford School of Public Policy at Duke University. “All the arrows are pointing down.”
Via New York Times