What do Black Americans need to know about the racial wealth gap?
Last week was a glass half-full segment, with a stellar jobs report. I want to talk about a new report from the Corporation For Enterprise Development (CFED) and the Institute For Policy Studies. The report examined the growing racial wealth divide for Black and Latino households and the ways that accelerating concentrations of wealth at the top compound and exacerbate this divide. Looking at data and trends in wealth accumulation from 1983 to 2013, the authors found that it would take 228 years for Black families to amass the same wealth as white families. This morning, I want to unpack this a little bit to talk about what the trends are, what is driving them, and what can be done.
How do they come to this number?
To reach this number, CFED and IPS analyzed 30 years of data from the Federal Reserve’s Survey of Consumer Finances, including information on Americans’ balance sheets, income, and pensions. They found that over the past 30 years, the average wealth of white families has grown by 84%, compared to 28% among African-American families. To put that in dollars, if the past 30 years were repeated, whites Americans’ wealth would increase by nearly $18,000 a year and Latino household wealth would increase by $2,250, while wealth for African-American families would grow by just $750 a year. Using those trends, it would take until the year 2241 for the average Black family to accumulate wealth equal to what white families have today.
What is behind these trends?
Obviously, there are historical, structural factors that have prevented Blacks from accumulating wealth over the nation’s history. On top of this, the authors attribute the trends of the past 30 years to tax policies aimed at helping households protect and build wealth, save for retirement, buy a new home, start a business or pay for college—policies they say disproportionately benefit families that already have assets rather than those families that are working to begin accumulating wealth. On top of these policies, the gap has been exacerbated by higher rates of foreclosure in the Black community, as well as higher rates of unemployment.
Did the report offer recommendations to close the gap?
Thankfully the authors do offer some suggestions, such as identifying policies that perpetuate the wealth divide through a government-wide audit, reforming the tax code to ensure they help families of color build wealth, and adopting policies to “reduce the wealth concentration at the top,” such as closing federal estate-tax loopholes. Outside of the authors, others are highlighting the wealth gap and seeking solutions. Fed chairwoman Janet Yellen has pointed out that the racial wealth gap trends are “extremely disturbing” and said that the Fed will dedicate more attention to addressing these issues. But clearly, we have a long way to go when it comes to reducing the economic inequalities between racial groups.