Close the racial wealth gap.
Happy Wednesday! As we continue to analyze the economic impact of racism, we can't forget to acknowledge its lasting legacy. Sydney, one of our newest writers and a high school senior, outlines how our legacy of racism is evident when we look at wealth, particularly wealth accumulation and generational wealth.
Early early readers will be reminded of our Black-owned business newsletter that we wrote fifty years ago (aka June).
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– Nicole
TAKE ACTION
Support local Black-owned businesses. Refer your friends to the businesses that you have positive experiences with to increase their number of consumers.
Support political candidates who advocate for reparations and programs that are geared toward bridging the racial wealth divide. An executive summary of 10 possible solutions to narrowing the racial wealth gap is linked here.
GET EDUCATED
By Jami Nakamura Lin (she/her)
The drastic divide between Black and white households’ wealth reveals how centuries of discrimination and inequality have thwarted the African American community from achieving economic prosperity. The racial wealth gap dates all the way back to when the enslavement of Black people began in the 1600s and is still prevalent to this day. While African Americans worked tirelessly on plantations and unwillingly did domestic housework, white people were simultaneously profiting off of their free labor and generating wealth that would later be inherited by their descendants. After years of working without receiving monetary compensation, African Americans were severely disadvantaged because they possessed hardly any assets or money. Once slavery ended, African Americans were abruptly cast into society with little-to-no financial footing, making it incredibly difficult to accumulate wealth. Legal and social barriers such as redlining, segregation, and institutionalized racism prevented African Americans from advancing in society, subsequently prohibiting a majority of the population from amassing generational wealth.
The racial wealth gap refers to the disproportionate divide between Black and white households’ average wealth: “Almost all studies calculate wealth by adding up total assets (e.g., cash, retirement accounts, home, etc.) then subtracting liabilities (e.g., credit card debt, student loans, mortgage, etc.) The resulting figure is your net worth” (Forbes). A typical household’s wealth is made up of ⅔ of housing equity. According to the Economic Policy Institute, the median household wealth for white people is $134,230, compared to Black people’s median of only $11,030. African Americans’ median household wealth is less than 1/10 of their white counterparts’.
A vast majority of statistics that compare wealth and income among races prove that the racial wealth gap is both dramatic and unequal. Even minorities who have received high-level education and come from stable home environments only possess a fraction of what white people in their same position do. “Even the typical black family with a graduate or professional degree had more than $200,000 less wealth than a comparable white family” (Economic Policy Institute). Considering that education is meant to be directly correlated with greater financial success, it is appalling that Black families who have the same level degree as their white counterparts are still not treated as equals. If education is not the way that Black people can become more socially mobile, then what is?
Disparities between the earnings of Black and white people are undeniable. According to Vox, white people aged 16 and older earned a median of $823 per week, compared to only $621 for Black people and $600 for Hispanic people. The gap between racial earnings reflects the presence of discrimination in the workforce and exposes the United States’ inherent racism. The Harvard Business Review stated that “since 1990 white applicants received, on average, 36% more callbacks than black applicants and 24% more callbacks than Latino applicants with identical résumés”. There has been little change since the findings of this study were examined, which proves that hiring rates among Black applicants have remained relatively stagnant. While there are multiple factors that could deter an employer from hiring a certain applicant, it is still evident that there is a noticeable trend of selecting white people over their equally-qualified Black counterparts, which exposes racial bias in the work environment.
The benefits of wealth extend far beyond the possession of material goods. Wealth allows people to purchase houses in safe neighborhoods, receive necessary healthcare, get a strong education, save for retirement, and ultimately pass money down from generation-to-generation. When a family possesses a large sum of generational wealth, their descendants automatically have a safety net that enables them to start businesses, attend costly universities, and make investments.
Because of the cyclical poverty that has been imposed on the Black community as a result of years of oppression, generational wealth among African Americans is much smaller than that of white people. “The Urban Institute found in 2013 that both black people and Hispanic people were five times less likely to receive large gifts or inheritances (of over $10,000, in either case) than white families, and that those gifts were thousands of dollars larger for white families than the minority groups” (Vox). Lack of generational wealth puts the Black community at a severe disadvantage because while white families continue to thrive off of the money they inherit, a considerable amount of African American families have to “start from scratch.” According to the Economic Policy Institute, an inheritance at the median increases wealth by more than $100,000 for white families and only $4,000 for black families. The obvious difference in the amount of inheritances that are afforded to white households versus Black households proves that generational wealth is a leading contributor to the maintenance of white people’s position at the top of the economic pyramid.
Narrowing the racial wealth gap would provide African Americans with a fairer chance at financial success, and bring society one step closer toward repaying the Black community. The United States has not made any significant strides toward bridging the racial wealth gap, so it is imperative that we elect politicians who will advocate for policies that would benefit underprivileged Black families.
KEY TAKEAWAYS
The racial wealth gap results from years of slavery, sharecropping, redlining, institutionalized racism, and discrimination in the workplace.
Because the gap has been consistently widening for so many years, it will take a lot of time and the implementation of several government policies to fix the problem.
The racial wealth gap is a reflection of how the United States has systematically failed Black people.
RELATED ISSUES
6/11/2020 | Support black-owned businesses.
6/20/2020 | Support reparations.
8/9/2020 | Understand the unemployment gap | COVID-19
9/2/2020 | Rally for fair appraisals.
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