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Wealth gap grows between black and white in U.S.
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Like the income gap between rich and poor, the wealth gap in America is growing larger. New research out from Brandeis University shows that white families are getting wealthier at a much faster rate than black families.
Wealth is defined as all assets a family holds (home equity, retirement accounts, savings, etc.) minus debt.
Tom Shapiro, director of the Institute on Assets and Social Policy at Brandeis, says that equal achievement between whites and blacks has had unequal results in the 25 years that he's been following his study subjects.
"For a typical white family, a $1 increase in average income over the 25 years returns about $5 of wealth," Shapiro says. "For [the] typical African-American family, that same $1 average increase in income returns only 69 cents in wealth."
Shapiro says it boils down to where a family starts when it comes to wealth. Most white families already have a leg up in the wealth game. They have a familial structure of support -- whether it's an inheritance or help with the first downpayment on a house -- that many black families don't have.
And just as equal income gains have different results, similar achievements in education also won't bridge the wealth gap.
When Shapiro first started the study in 1984, the total wealth gap between blacks and whites was $85,000. In 2009, that gap had tripled to $236,500.
And the largest single factor that's led to the gap? Home ownership.
Shapiro says that blacks take longer to save up enough money to buy a home. They may also face discrimination when it comes to financing. And where you end up buying a home is a major factor as well. Shapiro says that homes in traditionally white neighborhoods appreciate in value at a much faster rate than homes in more diverse or racially segregated neighborhoods.
"As homes are bought a little lower down in the socioeconomic ladder, housing wealth does grow," Shapiro said. "But the point is it doesn't grow nearly as much or as fast."
Unemployment has had a devastating effect on the wealth of black families as well. The unemployment rate for whites is 7%, while the black unemployment rate sits at nearly double that, 13.8 percent.
Shapiro tells the story of a college-educated black couple that started off making nearly $100,000 a year. They both lost their jobs during the recession and had to eat into the retirement savings to get by.
They went from planning for the future -- saving for a new car, putting money away for their kids' education -- to living day by day. Just one example of how unemployment can lead to massive depletion in wealth. And with unemployment disproportionately affecting African Americans, there's also been a disproportionate hit to their accumulated wealth.
It's not all bad news, says Shapiro. He says that the wealth in the African-American community has gone up tremendously over the past 25 years, just not at the same rate as white wealth. "We need to keep growing in a way that bring the African-American, or the communities of color, line closer -- that is, put it on the same trajectory of growth and prosperity as that of the white wealth growth line."
And if we don't, Shapiro says, "I fear. I know what toxic inequality looks like. Shared economic prosperity needs to be spread much more broadly for the United States to compete globally as an economy."
Two white men feigning astonishment at the disparity in the value and appreciation of black families' real estate vs white's; what next. Shall we have a blunt conversation about this subject? First we must eliminate the political correctness which only obfuscates the issues and look directly at the situation. A blunt conversation is what is needed to face this issue head on.
Let us look at a typical black neighborhood and consider why the properties may appreciate more slowly than those of a white neighborhood. First thing you will see is iron bars on the windows and doors. This is of course for security but how does this affect the desirability of the neighborhood to a prospective buyer? Not Positive.
The next thing you will see is a basketball goal in front of every third house. Basketball is a fine game and you may agree, but at night and until the wee hours of the morning one can hear the sound of a basketball bouncing on the pavement. This disturbs the sleep of anyone needing to rise early in the morning to go to work. How does one mask this sound at night? How will this affect the value of homes in the area?
Next, we should take note of the large number of black men standing around in the neighborhood all day, seemingly with nothing to do. You will not see this in a white neighborhood. Does this make a black neighborhood more attractive to a prospective buyer? A buyer that may bid up the price of the house that he likes? I think not.
How about the drive-by shootings? The so called drive-by shooting occurs in white neighborhoods almost never. In black neighborhoods it is a common occurrence. I live in Atlanta and I can tell you that this is a weekly event. Need we even ask how drive-by shootings may affect property values? Why would a prospective purchaser ever consider this hazard when looking for a prospective home for his family? I can go on about bodies found on abandoned houses, crime, drugs...Grocery stores with metal detectors at the front door.
Other minorities do not have these issues, at least to the extent that Blacks do. What we need is to work from within to address this problem. A white man cannot talk candidly about this subject for fear of being called a racist and a white man would rather be called a murder than a racist. It takes a high profile black entertainer/ sports figure/comic, etc with credibility in the black neighborhood. Bill Cosby, to his credit
, has made a valiant effort.
Others have also but there are many, Whoopy Goldberg, Denzel Washington, Eddie Murphy come to mind right off that have the necessary credibility and face recognition to make a real difference with nothing more that an occasional appearance or public service announcement on the television. There are a hundred others that could give a small effort each, and working together, could likely make an enormous difference. It will take time but time is all we have. Two intellectual white men discussing the problem on the radio are not the answer. Everyone knows the problem, this is not news. We need to do something, now.
I remain a loyal listener to your informative and interesting show.
Wayne Austin
A (Digital) Bridge Over Toxic Inequality
Marketplace has just aired two excellent, inadvertently related, and ultimately disturbing stories that also inform our work here at iMentor (www.iMentor.org).
Story 1: http://www.marketplace.org/topics/wealth-poverty/wealth-gap-grows-betwee...
Story 2: see http://www.marketplace.org/topics/tech/education/technology-increases-di...
Without realizing it, these two stories in combination--and the just released research on which they rely-- suggest that without intervention the digital divide documented in the second will continue to be both a contributing cause of and a predictable result from the ever-widening racial wealth gap documented in the first (due to the effect a neighborhood’s home values has on local school resources and vice versa).
Contemplating this vicious cycle encircling future generations of Americans, the author of one of the studies stated: “I fear. I know what toxic inequality looks like.”
I suppose what we do at iMentor (www.iMentor.org) could be considered a (digital) bridge over toxic inequality.
Thank you Marketplace for highlighting the issue and under-acknowledged, connected causes that can contribute to our understanding of effective interventions.
"For a typical white family, a $1 increase in average income over the 25 years returns about $5 of wealth," Shapiro said. "For that same typical African-American family -- that same $1 average increase in income -- returns only 69 cents in wealth...Part of the equation there is that that typical African-American family has less wealth to start out with than the typical white family."
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The other part of that is that our (alleged) "free market" system is fixed in ways small and large to insure that black entrepreneurial effort is crushed/thwarted/sandbagged (in the best case scenario) at every turn. Take it from a black entrepreneur who nonetheless still believes success can and will happen.
Could differences in family structure contribute to this gap? Married couples tend to do better financially than singles. In terms of percentages, fewer blacks marry compared to whites, and more babies are born out of wedlock among blacks than whites. I'd like to see a report that corroborates or disproves my question.
I too am curious about the "family structure" question...though I have to wonder how far apart blacks and whites really are when it comes to marriage and family cohesion. It may be true that fewer blacks marry and more black babies are born out of wedlock.Still...the "oow" rate for whites is not small.Couple that with the reality that whites divorce like it's a sport...and you have exponentially more white single-parent households.
Unfortunately, Mr. Shapiro's explanative the roots of a widening racial wealth gap is my fiduciary actuality. My husband (a college educated engineer) and I (multi-disciplinary designer) are college educated. I have an advanced degree. Yet, my family is less economically secure than other family members. We no longer can assist other family and friends in emergencies. Although I advocate for extended education, I advocate more demonstratively for entrepreneurialism .
