The wealth gap between white and African-American families has increased more than four times between 1984-2007, according to a new study. In addition, middle-income white households now have far more wealth than high-income African Americans.
The study, released by the Institute on Assets and Social Policy (IASP) at Brandeis University, reported that many African Americans hold more debt than assets and at least 25% of African American families had no assets to turn to in times of economic hardship. Public policies, such as tax cuts on investment income and inheritances, which benefit the wealthiest and discrimination in housing, credit, and labor markets are responsible for this chasm, according to researchers.
“Even when African Americans do everything right — get an education and work hard at well-paying jobs — they cannot achieve the wealth of their white peers in the workforce, and that translates into very different life chances,” said Thomas Shapiro, IASP director and co-author of the research brief, in a press release. He is also the author of “The Hidden Cost of Being African American: How Wealth Perpetuates Inequality” and the co-author of “Black Wealth/White Wealth.”
The growth of the racial wealth gap significantly affects the economic future of American families. Without wealth, which is what you own minus what you owe. African Americans are not able to buy a home, start a business, buy a home, invest, or send their children to college – all means to securing a stable retirement.
Over the 23 years detailed in the study, the racial wealth gap increased by $75,000 – from $20,000 to $95,000, according to the analysis of the data. Financial assets, excluding home equity, among white families grew from $22,000 to $100,000 during that period while African Americans saw very little increase in assets in real dollars and had a median wealth of $5,000 in 2007.
One in 10 African Americans owed at least $3,600 in 2007, nearly doubling their debt burden in real terms since 1984, IASP said. The center also found that by 2007, the average middle-income white household had accumulated $74,000 in wealth, an increase of $55,000 over the 23-year period, while the average high-income African-American family owned $18,000, a drop of $7,000. That resulted in a wealth gap of $56,000 for an African-American family that earned more than $50,000 in 1984 compared to a white family earning about $30,000 that same year.
However, solely increasing wages for African Americans won’t lead to wealth, security and economic mobility for blacks, according to the report. Because African Americans face discrimination and unfair practices when it comes to accessing credit and housing, the changes for their economic mobility are decreased. The analysis points directly to the difficultly in accessing credit as a reason why African Americans are so mired in debt.
As a solution the IASP supports the Obama administration’s plan to create a Consumer Financial Protection Agency, which is now being debated in Congress.