The Racial Wealth Gap: Why Policy Matters (Demos)
The U.S. racial wealth gap is substantial and is driven by public policy decisions. According to our analysis of the SIPP data, in 2011 the median white household had $111,146 in wealth holdings, compared to just $7,113 for the median Black household and $8,348 for the median Latino household. From the continuing impact of redlining on American home ownership to the retreat from desegregation in public education, public policy has shaped these disparities, leaving them impossible to overcome without racially-aware policy change.
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America is becoming both a more diverse nation and a more unequal one. Over the past four decades, wealth inequality has skyrocketed, with nearly half of all wealth accumulation since 1986 going to the top 0.1 percent of households. Today the portion of wealth shared by the bottom 90 percent of Americans is shrinking, while the top 1 percent controls 42 percent of the nation’s wealth. At the same time, an increasing share of the American population is made up of people of color,and wealth is starkly divided along racial lines: the typical Black household now possesses just 6 percent of the wealth owned by the typical white household and the typical Latino household owns only 8 percent of the wealth held by the typical white household. These wealth disparities are rooted in historic injustices and carried forward by practices and policies that fail to reverse inequitable trends. As a result, racial wealth disparities, like wealth inequality overall, continue to grow.
Political thinkers increasingly recognize that rapidly growing inequality threatens economic stability and growth. But in a country where people of color will be a majority by mid-century, any successful push to reduce inequality must also address the structural racial inequities that hold back so many Americans. To create a more equitable future, we must confront the nation’s growing racial wealth gap and the public policies that continue to fuel and exacerbate it.
Stratospheric riches on the scale of the wealthiest Americans will never be accessible to the vast majority. Yet access to some degree of wealth is critical for every family’s economic security. Wealth functions as a financial safety net that enables families to deal with unexpected expenses and disruptions of income without accumulating large amounts of debt. At the same time, wealth can improve the prospects of the next generation through inheritances or gifts. Inter-generational transfers of wealth can play a pivotal role in helping to finance higher education, supply a down payment for a first home,or offer start-up capital for launching a new business. Because households of color have less wealth today, Black and Latino young adults are far less likely than young white people to receive a large sum—or any money at all—from family members to make these investments in their future. The result is that the racial wealth gap perpetuates from generation to generation, with profound implications for the economic security and mobility of future generations.
The racial wealth gap is reinforced by federal policies that largely operate to increase wealth for those who already possess significant assets. The Corporation for Enterprise Development finds that more than half of the $400 billion provided annually in federal asset-building subsidies—policies intended to promote home ownership,retirement savings, economic investment and access to college—flow to the wealthiest 5 percent of taxpaying households. Meanwhile, the bottom 60 percent of taxpayers receive only 4 percent of these benefits and the bottom 20 percent of taxpayers receive almost nothing. Black and Latino households are disproportionately among those receiving little or no benefit. Unless key policies are restructured, the racial wealth gap—and wealth inequality in general—will continue to grow.
http://www.demos.org/sites/default/files/publications/RacialWealthGap_1.pdf
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