African American Wealth Gap Quadruples

High-income blacks have less wealth than middle-class whites

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.

ACROSS THE WEB
  • http://www.kidz4money.com Garry Lawrence

    Great article! We have an organization that speaks directly to this issue, Kidz 4 Money. Recently, we presented a lesson called the Black Dollar: To Live or To Let Go. During the month of June and July, we will be hosting our 3rd Annual Financial Teen Summit Summer Series, throughout Metro Atlanta. Our rites are humble, but our fight is passionate and relentless.

    • Andrea

      Hi Gary,
      Please let me know, what other projects you are currently working on.  I recently moved to Atlanta, and would love to join forces with your organization. I’ve been a financial advisor for 10 years and looking forward to serving our communities.  Thanks.

  • http://www.kidz4money.com Garry Lawrence

    Great article! We have an organization that speaks directly to this issue, Kidz 4 Money. Recently, we presented a lesson called the Black Dollar: To Live or To Let Go. During the month of June and July, we will be hosting our 3rd Annual Financial Teen Summit Summer Series, throughout Metro Atlanta. Our rites are humble, but our fight is passionate

  • http://hushmoblack.com Jimmy Cameron

    The disparrity in wealth between Americans of African discent and Americans of European discent is because the Americans of African discent are owed financial reparations to be made whole. There is no other reason. Please check out the book— The Water Boy- The Life and Trials of Jimmy C Cameron— it does a real good job of shedding light on the subject.

  • Ross

    So difficulty accessing credit (aka debt) is the reason we (African Americans) are so mired in debt???? How can not being able to get debt, be the reason we are mired in it? This article is missing the fundamental problem. We black folks are not saving and investing at the rates of white. Worse than that we aren’t teaching our kids how to save and invest just perpetuating the cycle. Instead of looking at the government or racism we need to look at something we can control “OUR OWN BEHAVIOR”! Save & invest at least 10% of what you make over your whole life and you WILL end up wealthy.

    • http://blackenterprise.com Deborah Creighton Skinner

      Many African Americans are investing and doing everything they should do, but the wealth gap is still widening. And that gap will have a future adverse economic affect on families.

      If you are unable to get a bank loan or mortgage at a favorable interest rate, sometimes people will use credit cards, which have high interest rates and is considered bad debt. Here’s more on good vs. bad debt here:
      http://www.blackenterprise.com/blogs/2009/04/17/do-as-i-say-not-as-i-do/

    • Emma

      I agree with Ross. I think it’s an investing issue as well. Merely saving isn’t enough. It’s also about educating ourselves and each other. I’ve found that since knowledge in certain areas isn’t free or cheap, others aren’t willing to share it once they’ve attained it therefore we need to take it upon ourselves to acquire the wisdom. We also seem to be the ones to fall for get rich quick schemes; if it sounds too good to be true, it probably is.

  • Ronny J

    Most of my black friends all live beyond their means. They drive cars they cannot afford and buy clothes that cost way too much. Some, however, live modest lives and manage to save LOTS of money…

  • http://www.auburnmountain.com Jim Robinson

    There are some who would argue that Financial Literacy programs would solve this problem. A proliferation of new Financial Literacy programs began in the 1990s and has continued. It’s not surprising that so many financial literacy courses are funded by creditors. There is a shocking lack of evidence that financial literacy is effective…a number of studies show that financial management programs have no effect on literacy or behavior”.
    Financial Literacy Programs to be effective need to be Product neutral without the product spin…most are not. Insurance, Banks, Consumer credit and debt counseling agencies offer so call Financial Literacy courses that include everything from helping a consumer fix his finances to flim-flam outfits that charge high frees and leave a borrower in worse shape than before. Subprime lenders created “consumer advocacy” organizations and offered financial literacy advice. Insurance and Investment companies offer programs and workshops that invoke enticement to buying high commission products and services. The providers of financial literacy programs were and still are a diverse group. The providers that have the propensity to deliver bias in programs are Banks, Insurance and Investment companies. The providers that would tend to deliver product neutral information would be employers, state cooperative extension services, community colleges, faith-based groups, and community-based organizations. Non-Conflicted providers would also include Federal Reserve Banks, National Housing Institute, and the FDIC.

  • http://www.auburnmountain.com Jim Robinson

    1.Minority communities need Financial Services Professionals not only trained in the skill sets to build, protect and manage wealth, but also those that share the culture sensitivity of the underserved population and those that can teach the uninformed and underserved how to direct income to wealth building strategies. 2. Minority communities need more Financial Services Professionals that understand the importance of long term relationships with minority clients as well as the long term effects of solid wealth planning strategies deployed by clients from the underserved populations. 3. Banks, Insurance and Investment companies need to structure compensation programs that would not penalize Financial Services Professionals serving the minority communities. These programs would recognize efforts and not penalize them for low production. This allows the professionals to concentrate on building wealth and not selling product. 4.Bank, insurance and Investment companies must make a commitment to refrain from delivering low grade diversity insurance and investment advisors to the communities they serve. Competent, Credentialed professionals are needed in these deserving communities.

  • hoodtechie,miami

    Totally agree with Ross, stop making excuses for our people not saving.Like it has been said many times before save something out of your working life and watch how compound interest works it majic.how many of us have sat down with our kids or even been taught how saving and compound interest work, very few. Stop blaming everyone else when I see how many blacks riding around on $4000 dollar rims and tires, constantly playing the lottery everyday, fancy cell phones and the bills that come with them,thata is money that can be saved Don’t even start on the homes and cars just to keep up with the Jones. Until we learn the true discipline of saving money we will always end up in this situation,still waiting on the government to do something we can do for ourselves.

  • iamme73

    I find it amazing that an article and people who are studying the wealth disparity come up with factual information to explain the wealth gap, but in the comments section some want to completely ignore those causes and recommendations to talk about what their perceptions of how much black people save versus others.

    The article CLEARLY states that black people of similar incomes save about the same percentage as white people. So with that being the case how can lack of saving be the cause, when again according to the study black people when matched on income save about the same as white people.

    Some people no matter the facts will just believe what they want to believe and usually where it concerns black people, people tend to believe the worst about us.

    • http://blackenterprise.com Alfred Edmond, Jr.

      Our tendency to believe the worst about ourselves as black people, no matter what the facts say, is the central theme of the book Brainwashed by Tom Burrell. I highly recommend that all black Americans read this book. Read my review of Brainwashed to see why.

    • Ross

      I have to disagree with iamme73. I could not find where it says black save the same amount as whites in the article, but After rereading I did find one telling sentence, “One in 10 African Americans owed at least $3,600 in 2007, nearly doubling their debt burden in real terms since 1984, IASP said.” Doubling our debt burden is certainly not the way to wealth.
      I don’t see how being black affects your return on investment (ROI). If i invest in the same stocks that a white person invests in we will get the same return. Cash doesn’t care about your colors if you know the rules of money you will be able to become affluent over your lifetime regardless of color.
      That being said I agree with all the other comments that say we as black people need to educate ourselves. We can’t wait depend on a credit card company or bank or the government for that matter to educate us we have to do it ourselves!

      I don’t want to “believe the worst about ourselves as black people” but I am being realistic. If we educate ourselves, live within our means, and stop using so much d%mn consumer credit, we can close the wealth gap in just a few years. If we sit around and wait for someone else or the government to take charge of our financial future then we are DOOMED!

  • Dan

    When you decide to use African-American to replace the word black, then you need to do the same with white, such as European-American.

  • Ross

    The problem I have with this article is it seems like its implying that the financial future of African Americans is dependent on either the government stepping in or eradicating every racist or prejudice feeling/thought in America. but I believe we each have more impact on our own net worth than the gov’t or racist people. This article is so depressing to me because, in my opinion, the article in so many words states that we have no control over fixing this problem. Its up to white America to change their ways or the government to regulate us to wealth (which will NEVER happen)

    So for all those that disagree, let me ask the question: What is the answer to the problem? I’ve read education quite a but a few keystrokes on the internet or a trip to the library will reveal PLENTY of info on personal wealth, so how do you force people to educate themselves? IN addition how could the government possibly regulate how much wealth a person accumulates?

    • Emma

      A lot of people have chosen to educate themselves as a result of what has occurred over the past few years. Others are cutting back and looking for ways out. At the end of the day, education, action, and paying it forward are the solutions in my opinion and the “recession” has certainly helped. My dad always said experience is the best teacher. For some people, struggling long enough will cause them to look for a solution and be proactive about it – although it should not always come to that.
      Other cultures strongly believe in community and helping each other out and I don’t feel like black Americans do as good a job as others when it comes to wealth building.

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  • CrowdPleeza

    How is it that Blacks continue to have these wealth issues while we also have close to a trillion dollars in spending power??