Rise Of The Super-Rich, Population Changes Drive Racial Wealth Gap, Report Says
A new report focusing on the racial dimensions of inequality in America connects the richest 10 percent of households getting richer and the wealth of the median, or typical, American family declining.
The Institute for Policy Studies (IPS) report also cites low levels of black and Latino wealth, combined with their growing proportion of the population, as key factors in the overall decline in median household wealth from about $84,000 in 1983 to $82,000 in 2016. Together, blacks and Latinos make up about 30 percent of the U.S. population.
“As we become a majority black-and-brown society, it is a problem that a huge percentage of the economy has stagnating wealth,” said Chuck Collins, one of the authors of “Dreams Deferred: How Enriching the 1% Widens the Racial Wealth Divide.”
The study uses information from the Federal Reserve Board which measures wealth in terms of net worth — the sum of all assets, including the market value of real estate, minus all liabilities.
The IPS report covers 1983 through 2016. Other key findings include:
- Since the early 1980s, median wealth among black and Latino families has been stuck at less than $10,000. White household median wealth grew from $105,300 to $140,500, adjusting for inflation.
- The median white family has 41 times more wealth than the median black family and 22 times more wealth than the median Latino family.
- 37 percent of black families and 33 percent of Latino families have zero or negative wealth, meaning their debts equal or exceed the value of their assets. For white families, the zero or wealth percentage is 15.5.
The reports points to some good news: The proportion of Latino families with zero or negative net worth dropped 19 percent between 1983 and 2016.
Referring to data from the Hispanic Wealth Project, Collins said a couple of factors may explain the improvement.
“In certain regions, particularly the southwest and California, Latino home ownership has gotten a boost thanks to increasing population, high labor-force participation rates and household formation,” he said. “And Latino workforce participation is higher than any other ethnic or racial group, at 66.1 percent.”
Bill Emmons, an economist with the Federal Reserve Bank of St. Louis, points to progress not highlighted in the IPS report.
“Among families without four-year college degrees, we see some improvement among black and hispanic families — both relative to the overall population and relative to white families without college degrees,” he said.
It’s for this reason, among others, that Emmons is more cautious about linking population changes to the overall decline in median American household wealth.
“I’d say that the connections — though possible, though suggestive — are certainly not ironclad,” Emmons said. “I’d be a little more hesitant than the authors to try to connect those two issues.”
Left at the station
Emmons said the report is most effective when it highlights facts that demonstrate just how wide the disparities are.
“When you think about why are the gaps so big, you have to go back in history hundreds of years to see how we got here,” he said. “And it is sometimes difficult to talk about these issues, these historical, deeply embedded sources of disadvantage that existed in the distant past — but even in the not-so-distant past — how they continue to have relevance today, and it shows up precisely in these numbers.”
In terms of the distant past, Collins points to “lower wages and the legacy of racism in other forms of wealth creation, such as business start-up funds, inheritances.” Also, he said, homes in black and Latino neighborhoods don’t appreciate at the same rate as white neighborhoods.
More recently, families of color were denied access to homeownership.
“In the decades after World War II, billions in federal housing subsidies lifted up white first-time homebuyers,” Collins said. “But these were highly discriminatory against black and Latino potential buyers. So millions of white buyers got on the express train to homeownership and middle-class wealth, while people of color were left at the station.”
The IPS report also links the widening of the wealth gap with the “extreme concentration of U.S. wealth.” According to the Fed’s data, the wealthiest 10 percent of households have grown richer, while millions “face poverty and deep-seated economic insecurity.”
Again, Emmons is cautious:
“I think they could be related, but I wouldn’t highlight wealth and income inequality as being the primary source of the racial-wealth divide,” he said.
While the median American family saw their wealth drop three percent between 1983 and 1986, the richest 10 percent have seen their wealth jump 133 percent.
Poverty rate: A family of four is living in poverty if they have a household income of $25,100 or less.
According to the U.S. Census Bureau, the national poverty rate is about 12.3 percent — which amounts to about 40 million people. By comparison, it was about 14 percent in 1983 and dropped to 12 percent in 1984.
The poverty rate for Missouri is 13.4 percent, and the rate for the St. Louis region is 11.6 percent.
The IPS report uses startling statistics to make its point about the racial-wealth divide.
For example: “If current trends continue, it would take the typical black family over 52 million years to reach the wealth of the Walton family today and Latino families 24 million years.”
And: “If the trajectory of the past three decades continues, by 2050, the median white family will have $174,000 of wealth; while Latino median wealth will be $8,600, and black median wealth will be $600. The median black family is on track to reach zero wealth by 2082.”
“That’s one of the things reports like this do, Emmons said. “Is simply raise awareness about how big these gaps are. It’s not too surprising to say that if it took hundreds of years to create this situation; It could take hundreds of years to close it. Of course, that’s not a satisfactory way to think about it, but I agree with (the report’s) conclusion about just how big the gaps are and how slowly they’re closing."
IPS is a self-described “progressive think tank." It’s “Dreams Deferred” report has four recommendations for policy makers:
- A baby bond program to help low-wealth households build wealth
- A tax on the wealthiest 0.1 percent, to reduce distortions caused by concentrated wealth and generate revenue marked for expanding opportunity for low-wealth households
- An audit of federal-government policies, to evaluate their impact on the racial wealth divide
- Targeted reparations to address the legacy of racism in wealth building
Read the "Dreams Deferred" report here.
Holly Edgell is lead editor for Sharing America, a collaborative covering the intersection of race, identity and culture. This new initiative, funded by the Corporation for Public Broadcasting, includes reporters in Hartford, St. Louis, Kansas City, and Portland, Oregon. Follow Holly on Twitter @hollyedgell.