An Urban Institute study found the following:
The Urban Institute study found that the racial wealth gap yawned during
the recession, even as the income gap between white Americans and
nonwhite Americans remained stable. As of 2010, white families, on
average, earned about $2 for every $1 that black and Hispanic families
earned, a ratio that has remained roughly constant for the last 30
years. But when it comes to wealth — as measured by assets, like cash
savings, homes and retirement accounts, minus debts, like mortgages and
credit card balances — white families have far outpaced black and
Hispanic ones. Before the recession, non-Hispanic white families, on
average, were about four times as wealthy as nonwhite families,
according to the Urban Institute’s analysis of Federal Reserve data. By
2010, whites were about six times as wealthy.
The dollar value of that gap has grown, as well. By the most recent
data, the average white family had about $632,000 in wealth, versus
$98,000 for black families and $110,000 for Hispanic families.
“The racial wealth gap is deeply rooted in our society,” said Caroline
Ratcliffe, one of the authors of the Urban Institute study. “It’s here,
it’s not going away, and we need to care about it.”
Many experts consider the wealth gap to be more pernicious than the
income gap, as it perpetuates from generation to generation and has a
powerful effect on economic security and mobility. Young black people
are much less likely than young white people to receive a large sum from
their parents or other relatives to pay for college, start a business
or make a down payment on a home, for instance. That, in turn, makes
their wealth-building prospects shakier as they move into adulthood.
Two major factors helped to widen this wealth gap in recent years. The
first is that the housing downturn hit black and Hispanic households
harder than it hit white households, in aggregate. Many young Hispanic
families, for instance, bought homes as the housing bubble was inflating
and reaching its peak, leaving them saddled with heavy debt burdens as
house prices plunged in places like suburban Phoenix and inland
California.
Black families also were hit disproportionately by the housing collapse,
because heading into the recession housing constituted a higher
proportion of their wealth than for white families, leaving them more
exposed when the market crashed. Higher unemployment rates and lower
incomes among blacks left them less able to keep paying their mortgages
and more likely to lose their homes, experts said.
Discriminatory lending practices were also a factor. “We know that
communities of color, their rate of subprime or predatory loans was
twice what it is in the overall population,” said Tom Shapiro, the
director of the Institute on Assets and Social Policy at Brandeis
University.
Black families also suffered bigger hits to their retirement savings,
the Urban Institute found. On aggregate, the value of black families’
retirement accounts shrank 35 percent between 2007 and 2010, while white
families’ accounts actually gained 9 percent over the same period. With
lower earnings and higher unemployment rates leaving them with a
thinner safety net to begin with, black families were more likely to
take funds out of the market when it was depressed, leaving them out in
the cold as the market recovered.
“That reservoir of what you can dig into for emergencies and
contingencies is a lot shallower in communities of color,” Professor
Shapiro said. “That pushes black families to sling off assets, like
I.R.A.’s or stocks, that you might have had another goal in mind for.”
Something similar may be happening as the housing recovery takes hold.
“Some people talk about it in terms of a land grab,” said Professor
Hamilton of the New School, as mainly white investors are buying
foreclosed homes from disproportionately minority owners. “As the
housing market starts to appreciate, some of those minority buyers might
not be back.”
All in all, Hispanic families lost 44 percent of their wealth between
2007 and 2010, the Urban Institute estimates, and black families lost 31
percent. White families, by comparison, lost 11 percent of their
wealth. The economic turbulence worsened a gap that has persisted for as
long as social scientists have measured it, and has its roots in
institutional racism, they said, which, for instance, prevented black
Americans from benefiting fully from the G.I. Bill back in the 1940s and
1950s.
Usually in these kinds of stories, you see a statement from some education reformer claiming bad teachers and failing school are at fault for the wealth gap and if we just address address the problems with public schools, much of the wealth gap will magically disappear.
But as this Urban Institute study shows, the problem is so complex, it builds upon generations of institutionalized racism, predatory lending, and economic turbulence that keeps people from ever getting ahead.
Here were the solutions proposed:
Even if blacks and Hispanics make progress in the years ahead as the
economy improves, the persistence of the wealth gap has pushed many
public policy scholars to recommend the adoption of more ambitious
programs to help reduce worsening inequality.
The Urban Institute suggests reforming government policies that
encourage savings but disproportionately benefit the already wealthy and
families with high incomes, like the home mortgage interest deduction.
Automatic savings vehicles also might help lower-income and lower-wealth
families start saving, it said.
Professor Hamilton has proposed “baby bonds,” granting savings accounts
to infants, seeded with funds that allocate greater sums to families
with less wealth. (Such accounts would be race-blind, Professor Hamilton
emphasized.) Accountholders could tap that money as young adults, to
pay for college or start a business. “That’s really going to break the
link of intergenerational poverty, and the intergenerational wealth
gap,” Professor Hamilton argued.
But in the absence of such far-reaching measures, scholars and advocates
remain generally pessimistic that the wealth gap will narrow even as
members of minority groups increase their share of the American work
force.
“The growth in the wealth divide is going to be very hard to close,”
said Dedrick Muhammad, the senior director of the economic department at
the National Association for the Advancement of Colored People, the
civil rights organization. “I don’t have a positive feeling about racial
wealth inequality resolving itself with the recovery.”
Don't worry - charterizing the entire public school system and handing the reins over to for-profit and "non-profit" charter management organizations will solve everything!
