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The Racial Wealth Gap Is Not Going to Improve

Feb 06, 2017

What if everything we thought we knew about race, behavior, and progress was wrong?

A new report out this morning called The Asset Value of Whiteness: Understanding the Racial Wealth Gap purports to shatter traditional explanations for the lack of financial progress in African American and Latinx households as compared to white ones in the U.S.

The report is a collaboration between Demos, a liberal public policy research organization, and the Institute for Assets & Social Policy (IASP) at Brandeis University’s Heller School for Social Policy and Management. “No metric more powerfully captures the persistence and growth of economic inequality along racial and ethnic lines than the racial wealth gap,” says the report. Citing data from the Federal Reserve’s Survey of Consumer Finances, the median white household had $13 in net wealth for every dollar held by the median black household in 2013. That same year, median white households had $10 for each dollar held by the median Latinx household. But that’s just for starters.

Here's the tough part. The report shows that typical markers of success in white households – and the chosen interventions in the lives of others – are not translating into lasting wealth and security in households of color.

Specifically:

  • Attending college does not close the racial wealth gap.
  • Raising children in a two-parent household does not close the racial wealth gap.
  • Working full time does not close the racial wealth gap.
  • Spending less does not close the racial wealth gap.

Bottom line, for people of color, working ourselves to the bone and doing all the right things is getting us nowhere.

“Our research shows that when it comes to wealth, racial privilege can outweigh a college education, a fundamental key to economic mobility for millions of people. Although higher education is associated with greater household wealth for Americans of every race and ethnicity, going to college isn’t enough to overcome deeply rooted racial disparities in wealth," Amy Traub, associate director of policy and research at Demos told raceAhead. “Now more than ever we need policymakers to understand the racial wealth gap and create policies that reverse it.”

Part of that understanding comes from the direct link that history plays in the lives of people of color today, and how even exemplary government efforts like the GI Bill largely excluded black veterans from favorable financing for home ownership. It, along with other interventions, built the white middle class while leaving others permanently behind.

But it’s not just policymakers who need to think this through. Corporate funders spend millions of direct and matching dollars for education and community development programs every year, and as a result, are in a position to influence the bigger policy forces that continue to allow barriers to advancement. They’re also in a position to make a real difference with their employees of color who are living with that wealth gap - by reconsidering a wide variety of things, like how they present and promote their 401(k)s, to understanding how a lack of family wealth impacts an employee of color's ability to make career decisions.

It's hard to accept a history that's not really in the past, and that a widespread system has left millions of families with limited options, even generations after slavery. But just understanding the context changes the conversation. And only then can real solutions be found.

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