Commentary: Close the racial wealth gap

Closing the racial wealth gap needs to be at the forefront of efforts to achieve economic opportunity in the 21st century.

Without sufficient assets, it is difficult to lay claim to economic security or true opportunity in American society.

Fifteen years ago, my work with Melvin Oliver identified the racial wealth gap as a fundamental axis of racial inequality, finding that African-Americans owned eight cents of wealth for every dollar owned by whites.

The good news is that the wealth (median net worth) of non-whites increased $6,600 per person from 1998 to 2007. The bad news is that the racial wealth gap is widening.

[...]

In short: non-white wealth grew slowly and incrementally while wealth in white families grew 40 percent. Why such a huge gap?

As demonstrated in my books, "Black Wealth/White Wealth" and "The Hidden Cost of Being African-American," wealth is accumulated in specific historical contexts that produce varying levels of wealth for different families and social groupings. Even now, social forces serve as a powerful deterrent to black ambitions for wealth.

Even when blacks have similar educations and incomes, they lag far behind their white counterparts in their quest to accumulate assets. For African-Americans, equal achievement does not translate to anything near similar wealth.

Some white families historically have enjoyed the benefits of government support and tax policies to buy homes, start businesses, grow wealth and prepare for retirement. Looking at one important historical example, few if any African-Americans were able to take advantage of the Homestead Acts that provided landowning opportunities for many whites.

[...]

As wealth accumulation among African-American families had begun to expand recently, recession, declining stock prices, the foreclosure meltdown and processes of financial institutions converged to shrink, strip and consume it.

[...]

Inheritance is another critical factor creating and maintaining the huge racial wealth gap. My work shows how even small inheritances or gifts can become "transformative assets," which jump-start a child with college, a career and little debt. This puts him or her on the road to economic success. The starting line for young African-Americans is very different because they are less likely to inherit money from their families.

Residential segregation is the linchpin of race relations in America, producing far less housing wealth in African-American communities. Homes appreciate more in value in predominantly white communities than in integrated communities, and homes appreciate even less when located in minority neighborhoods, especially in urban minority neighborhoods.

[...]

The current housing meltdown and foreclosure crisis affects all communities. But it has a greater impact on minority communities, because subprime and predatory loans are disproportionately located in those neighborhoods. Wealth is thus being stripped from these communities while opportunities to build wealth through home ownership are riskier.

The racial wealth inequality is the hidden fault line of American democracy. We need a new civil rights movement for the 21st century that focuses on economic opportunity and inclusion and closing the racial wealth gap.

This means focusing on reforms that make tax code benefits like the home mortgage interest deduction more equitable; that enforce fair housing and lending laws already on the books, that provide consumer protection in home and education loans and credit cards and that insure equity in federal programs to rework risky home mortgages. These measures would be a good start.