After President Obama was elected there was sweet talk of America having become a “post-racial society.” If Arizona’s new immigration law isn’t enough of a wake-up call, a new study (PDF) by the Institute on Assets and Social Policy at Brandeis University should set off the alarm: It found that the gap in wealth between white and African-American families quadrupled over the last generation. Following the same families over a 23-year period beginning in 1984, researchers found that the financial assets among white families grew from a median value of $22,000 to $100,000, while the African-American families still had less than $5,000 in 2007.
Different data sets from the Federal Reserve Board’s Survey of Consumer Finance (SCF), which is collected every three years, corroborate that the black/white wealth gap grew between 2004 and 2007. A study released by the Insight Center for Community Economic Development in March found that the average single black woman under 50 had only five dollars to tap in the case of a financial emergency. According to SCF data, not only African Americans but all non-white groups had lower wealth levels than whites. Our nation is rolling backward on the track to racial equality.
Why be concerned about wealth? The essence of the much-vaunted American Dream is economic mobility, the ability to rise above the circumstances of your birth. The United States was envisioned as a nation where no one’s life would be circumscribed by inherited class status, with ownership of land and resources restricted to the few. But it takes more than income to achieve mobility. For European immigrants, homestead lands were given to them by the government so they could turn their work into wealth. But when African Americans were freed, the initial promise of 40 acres dissipated in the harsh reality of white resistance to their becoming equals. Recent public policies have exacerbated racial inequality: failure to regulate financial institutions that specifically targeted people of color for predatory products, tax policies favoring those with investment income or inherited estates, lack of enforcement of anti-discrimination policies in housing and labor markets.
Some believe that whites have more assets because they are harder working. But the report of the Institute on Assets and Social Policy shows that high-income blacks had far fewer financial assets than middle-income whites, so work is not the issue. Then is it because whites are better at saving? In one way, yes. If your parents were able to give you money for college tuition or for a down payment on a home, you have far less debt to repay. If you live in a white community where property values rise faster than in a black community where fewer people compete for homes on the market (and residential segregation is still a harsh reality), you’ll have more money to save. All these advantages are passed from one generation to the next; inheritance has become a major factor in the rigidity of the racial economic divide.
If as a nation we still believe in opportunity for all, if we still want children of all races to be able to walk hand in hand to economic prosperity, we need to match those dreams with public policies. We can ensure that people of color have access to the new jobs in transit, energy, and broadband. We can invest in scholarships for young people from poor school districts who have what it takes to become the scientists and engineers we’ll need for the future. We can provide access to capital and technical assistance to entrepreneurial women of color whose microenterprises are already an enormous and under-recognized sector of our economy. We can create a strong Consumer Financial Protection Agency that looks not only at how to protect individuals but how to ensure that communities of color are included in the financial mainstream. We can reform tax policies so they help the poor build assets rather than providing subsidies for the rich.
W.E.B. Dubois said a century ago that “to be a poor man is hard, but to be a poor race in a land of dollars is the very bottom of hardship.” The generation between 1984 and 2007 saw a growing black/white divide. Let’s not let that happen to the next generation. It is past time to turn the dream of a post-racial society into a sweet reality.
Meizhu Lui, Director, Closing the Racial Wealth Gap Initiative, Insight Center for Community Economic Development, Oakland, CA