African-Americans’ Wealth A Fraction That Of Whites Due To Systematic Inequality

 

This year marks the 400th anniversary of the arrival of captive Africans to Virginia, where they were sold into slavery. February marks Black History month — a time when Americans reflect on the legacy and ongoing contributions African-Americans have provided to our country’s success. Despite racism and the systematic obstacles placed in front of African-Americans they continue to achieve greatness. However, even today, 400 years later with much progress accomplished, African-Americans still lack the same opportunities of economic security and mobility as their white counterparts.

The massive wealth gap between African-Americans and whites starkly illustrates this. African-Americans only have a fraction of the wealth that whites have . This leaves them much less prepared for an emergency and with fewer resources to invest in their own future such as moving to a good neighborhood, starting a business, and sending their children to college. African-American economic mobility consequently remains well below that of whites. And they tend to face more struggles in old age with less wealth.

Wealth – the difference between what families own such as a house, a business, retirement savings and bank accounts, among others, minus what they owe in mortgages, credit cards and student loans, for example – serves several purposes. First, families can dip into their savings such as checking and savings accounts, but also their retirement savings, when they face an emergency such as an unexpected illness, a layoff or a divorce. Their savings serve as a backstop when incomes abruptly fall and costs rise. Second, wealth is also a means to invest in a family’s future. They can use savings for the down payment on a house, to start a business, to move to a new job when a better one comes along and to help pay for their children’s education. Wealth is a crucial way for families to gain more economic opportunities. And third, wealth is a means to enjoy a secure retirement, to decide when to leave the labor force, for example due to ill health or family obligations and to pursue volunteer opportunities.

Yet, wealth is highly and increasingly unequally distributed, especially between African-Americans and whites. At the median, non-retired African-Americans had $13,460 in wealth in 2016 or only 9.5% of the median wealth of $142,180 that whites had at that time . The racial wealth gap in fact widened in the wake of the Great Recession. In 2007, just before the recession started, median African-American wealth was 13.7% of the median white wealth — $25,841 compared to $188,756 (in 2016 dollars). This gap was also abysmal, just not as bad as the difference in more recent years. In fact, over the past 30 years, African-American wealth at the median never amounted to more than about one-fifth of white wealth.

The racial wealth gap is the result of systematic disadvantages that African-Americans face on a regular basis. A substantial racial wealth difference persists by education, income, age and marital status. African-Americans with a college degree had less median wealth in 2016 than whites without a college degree – $57,250 compared to $81,650. That is, standard economic and demographic factors often used to explain wealth differences do not explain the massive wealth between African-Americans and whites. Other factors such as occupational steering, residential segregation and outright discrimination are also regularly at play and substantially contribute to the wealth differences between African-Americans and whites.

The disproportionately larger drop in African-American wealth during the economic and financial crisis from 2007 to 2009 also shows that they encounter systematic obstacles in building and maintaining wealth. African-American wealth fell more precipitously during the economic and financial crisis because their wealth was more concentrated in home equity. That is, African-Americans had fewer financial reserves outside of their house than whites did, often because they work in jobs that pay less and have fewer retirement and other benefits than is the case for whites. And, African-Americans regularly suffered from much worse unemployment rates sooner and longer than was the case for whites. They then had to rely on their savings to a larger degree and for longer, making it harder to rebuild their wealth after the crisis.

The wealth gap between African-Americans and whites is so large that it will require sustained, large and targeted policy interventions. Otherwise, the promise of equal opportunity will remain an empty one for African-Americans.

 

Christian Weller: I am a professor of public policy at the University of Massachusetts Boston and a senior fellow at the Center for American Progress. I joined academia in 2007 after working full time in Washington, DC, think tanks for almost a decade. My research has focused on retirement issues, including Social Security, private and public pensions and retirement savings such as 401(k) accounts for the past two decades. I have written and published extensively on retirement issues, including my recent book Retirement on the Rocks. My goal is to support retirement policy through meaningful research, especially in a time of growing economic risks that both increase the need for more savings and make it harder for people to save. I regularly speak to a wide variety of audiences such as financial service providers, union leaders and retirement activists and I frequently appear on national radio and TV.

 

 

By : Christian Weller
Date : February 14, 2019
Source : Forbes
https://www.forbes.com/sites/christianweller/2019/02/14/african-americans-wealth-a-fraction-that-of-whites-due-to-systematic-inequality/#12a39f304554

 

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