Monday, March 9, 2020
The Racial Wealth GapHistory and Current Trends
The Racial Wealth GapHistory and Current Trends The racial wealth gap refers to the substantial difference in the wealth held by white and Asian households in the U.S. compared with the vastly lower levels of wealth held by Black and Latino households. This gap is visible when looking at both average and median household wealth. Today, white households hold on average $656,000 in wealth- nearly seven times that of Latino households ($98,000) and about eight times as much as Black households ($85,000). The racial wealth gap has significant negative impacts on the quality of life and life chances of Black and Latino people. It is wealth- assets held independent of ones monthly income- that allow people to survive unexpected losses of income. Without wealth, a sudden loss of job or inability to work could lead to loss of housing and hunger. Not only that, wealth is necessary for investment in the future prospects of members of the household. It provides the ability to save for higher education and retirement and opens up access to educational resources that are wealth-dependent. For these reasons, many see the racial wealth gap as not just a financial issue, but an issue of social justice. Understanding the Growing Racial Wealth Gap In 2016, the Center for Equality and Diversity, together with the Institute for Policy Studies, released a landmark report that shows that the racial wealth gap grew considerably larger in the three decades between 1983 and 2013. The report, titled The Ever-Growing Gap, reveals that the average wealth of white households nearly doubled over that span of time, while the growth rate for Black and Latino households was far lower. Black households saw their average wealth increase from $67,000 in 1983 to $85,000 in 2013, which, at less than $20,000, is an increase of just 26 percent. Latino households did quite a bit better, with average wealth growing from just $58,000 to $98,000- a 69 percent increase- which means they came from behind to pass Black households. But during the same period, white households experienced a growth rate in average wealth of about 84 percent, climbing from $355,000 in 1983 to $656,000 in 2013. That means that white wealth grew at 1.2 times the rate of growth for that of Latino households, andÃ three timesÃ as much as it did for Black households. According to the report, if these current racialized rates of growth continue, the wealth gap between white families and Black and Latino families- currently about $500,000- will double by 2043 to reach a staggering $1 million. In these conditions, white households would enjoy, on average, an increase in wealth of $18,000 per year, while that figure would be just $2,250 and $750 for Latino and Black households, respectively. At this rate, it would take Black families 228 years to reach the level of average wealth held by white families in 2013. How the Great Recession Impacted the Racial Wealth Gap Research shows that the racial wealth gap was exacerbated by the Great Recession. The report by CFED and IPS points out that, between 2007 and 2010, Black and Latino households lost three and four times more wealth than did white households. Data shows that this is largely due to the racially disproportionate impacts of the home mortgage foreclosure crisis, which saw Blacks and Latinos lose their home at far greater rates than did whites. Now, in the aftermath of the Great Recession, 71 percent of whites own their homes, but just 41 and 45 percent of Blacks and Latinos do, respectively. The Pew Research Center reported in 2014 that the disproportionate home loss experienced by Black and Latino families during the Great Recession led to unequal wealth recovery in the recessions aftermath. Analyzing the Federal Reserves Survey of Consumer Finances, Pew found that though the housing and financial market crises that fueled the Great Recession negatively impacted all people in the U.S., during the three years that followed the end of the recession, white households managed to recoverÃ wealth, while Black and Latino households saw a significantÃ dropÃ in wealth during that time (measured as median net worth for each racial group). Between 2010 to 2013, during what is described as a period of economic recovery, white wealth grew by 2.4 percent, but Latino wealth fell by 14.3 percent and Black wealth fell by over a third. The Pew Report also points to another racialized disparity: that between the recovery of financial and housing markets. Because whites are much more likely to be invested in the stock market, they benefited from the recovery of that market. Meanwhile, it was Black and Latino homeowners who were disproportionately hurt by the home mortgage foreclosure crisis. Between 2007 and 2009, according toÃ a 2010 report from the Center for Responsible Lending, Black mortgage suffered the highest rate of foreclosure- nearly twice the rate of white borrowers. Latino borrowers were not far behind. Because property constitutes the majority of Black and Latino wealth, losing a home to foreclosure for those households resulted in a near-complete loss of wealth for most. Black and Latino homeownership continued toÃ decline, as did their household wealth, during the 2010-2013Ã period ofÃ recovery. Per the Pew Report,Ã Federal ReserveÃ data shows that Black and Latino households also experienced a greater loss of income during the recovery period. The median income of racial minority households dropped by 9 percent during the recovery period, while that of white households fell by just one percent. So, in the aftermath of the Great Recession, white households have been able to replenish savings and assets, but those in minority households have not been able to do so. Systemic Racism Caused and Fuels the Growth of the Racial Wealth Gap Sociologically speaking, its important to recognize the socio-historical forces that placed Black and Latino homeowners in situations in which they were more likely than white borrowers to receive the kinds of predatory loans that caused the foreclosure crisis. Todays racial wealth gap can be traced all the way back to the enslavement of Africans and their descendants; the genocide of Native Americans and theft of their land and resources; and the enslavement of Indigenous Central and South Americans, and theft of their land and resources throughout the colonial and post-colonial periods. It was and is fueled by workplace discrimination and racial pay gaps and unequal access to education, among many other factors. So, throughout history, white people in the U.S. have been unjustly enriched by systemic racism while people of color have been unjustly impoverished by it. This unequal and unjust pattern continues today, and per the data, seems only destined to worsen unless race-consciou sness policies intervene to make change.