According to a new research report, America’s racial wealth gaps will persist until public policy reforms provide every family the opportunity to build wealth.
“Less than Equal: Racial Disparities in Wealth Accumulation,” from the Urban Institute’s Opportunity and Ownership project, analyzed data and trends from 1983-2010. Over these years, the average household income of whites remained double that of either black or Latino families. But when wealth was considered, the amount of available assets remaining after all indebtedness was deducted, white families’ wealth grew at a rate six times greater than black or Latino families’ wealth had grown.
“When it comes to economic gaps between whites and communities of color in the United States,” the report stated, “income inequality tells part of the story. But let’s not forget about wealth. Wealth isn’t just money in the bank; it’s insurance against tough times, tuition to get a better education and a better job, savings to retire on and a springboard into the middle class. In short, wealth translates into opportunity.”
The report also found that although the Great Recession years of 2007-2009 hit communities of color particularly hard, the type of financial losses varied. With black unemployment double that of the rest of the nation, black retirement assets fell by 35 percent during these years. This data point suggests that lower-income black families withdrew money from retirement savings following a job loss or other adverse events. For Latinos, the average retirement asset decline was 18 percent.
By contrast, the Great Recession years took half of Latino family home equity, compared to an average of 25 percent for black and white families. To better understand this lost wealth, it is relevant to note that in 2010, only half of black and Latino families owned their homes, while 75 percent of whites were homeowners.
With more assets and diversified income streams, white wealth declined 11 percent during the Great Recession. But black wealth dropped 31 percent during these same years and Latino wealth dropped 44 percent.
Yet despite these findings, it is equally true that many families of color still desire to own a home and their own piece of America. Their dreams may be deferred, but still remain strong. As the nation’s economy continues to struggle towards prosperity, tightened mortgage lending, higher FHA fees and continued discussions of federally mandated down payments do not bode well for more families of color reaching the American Dream.
For the Urban Institute, the answer to these growing and disturbing disparities is reconsidering public policies.
“Families of color were disproportionately affected by the recession. However, the fact that they were not on good wealth-building paths before this financial crisis calls into question whether a whole range of polices (from tax to safety net) have actually been helping minorities get ahead in the modern economy,” the report states.
Contrasting programs such as the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families as two social safety programs designed to provide basic essentials, the report noted how tax subsidies for homeownership and retirement policies actually help to build wealth.
“The federal government spends hundreds of billions of dollars each year to support long-term asset development,” the report stated. “But these asset-building subsidies primarily benefit high-income families, while low-income families receive next to nothing.”
The Urban Institute’s conclusions are strikingly similar to those reached earlier this year by Brandeis University’s Institute on Assets and Policies.
“The evidence points to policy and the configuration of both opportunities and barriers in workplaces, schools and communities that reinforce deeply entrenched racial dynamics in how wealth is accumulated and that continue to permeate the most important spheres of everyday life,” Brandeis stated.
Here’s hoping that those entrusted with policy decisions are listening.
Charlene Crowell is a communications manager with the Center for Responsible Lending.
