White households have all the stuff. Minorities are on the Road to Zero Wealth
The Institute for Policy Studies and Prosperity Now (formerly the Corporation for Enterprise Development) published a new 25-page study this week – the Road to Zero Wealth – that has grim news on the economic racial divide. The team of four authors scrutinized what it means to be middle class by examining the wealth gap rather than income from now through 2024 as well as for 2043. That is when it’s predicted the majority of the U.S. population will be non-white.
By Meteor Blades
One key finding: we’re on a path that will put the median wealth of black families at zero by 2053 and for Latino families by 2073. In short, the authors “find that without a serious change in course, the country is heading towards a racial and economic apartheid state.”
Getting OFF the Road to Zero Wealth
To make that change of course, they recommend “policy interventions” to reverse trends now in place, some of them for decades. While the IPS has a long history of decidedly left-wing analysis, there’s nothing that can be described as radical in their proposals. The authors say:
For several years, politicians, researchers, journalists and the public have focused their attention on growing economic inequality in theUnited States. Most often, this focus is on income (i.e., the wages earned from a job or from capital gains) rather than on wealth (i.e.,the sum of one’s assets minus their debts). Income inequality, while stark, pales in comparison to the vast economic divide exposed by examining disparities in wealth. For example, a recent study by the Organisation for Economic Co-operation and Development (OECD) found that while the top 10% of income earners in United States receive almost 30% of the nation’s income, the wealthiest 10% own an astounding 76% of the country’s wealth. That means less than a quarter of the nation’s wealth is left for the bottom 90% of the American population.
As stark and as overlooked as these disparities are, they are particularly acute along racial lines as a disproportionate share of the nation’s wealth is held in White hands while households of color own a shrinking slice of the proverbial pie. Today, this translates into a racial wealth divide in which the median net worth of Black and Latino families stands at just $11,000 and $14,000, respectively—a fraction of the $134,000 owned by the median White family. Even more disturbing is that when consumer durable goods such as automobiles, electronics and furniture are subtracted, median wealth for Black and Latino families drops to $1,700 and $2,000,respectively, compared to $116,800 for White households (see Methodology for more details).
What’s important to recognize is that this situation in which white families do far better than families of color is not a product of deficits in individual behaviors but is “rooted in our social systems and structures.”
The authors note that while attention has been given to how government policies have put the economic squeeze on white working-class communities, a large proportion of policies and practices throughout the nation’s history have “worked to benefit white families at the expensive of communities of color.” While the study focuses on black and Latino wealth disparity, the authors caution that other people of color also compare unfavorably when their wealth is measured against that of whites.
The policies aren’t merely decaying relics of the past. The impacts of both historical and modern public policies “have metastasized across a whole range of economic inequities, leaving communities of color far short of their economic needs and unable to achieve financial security, let alone build wealth.”
Among these are decades of federal housing discrimination that didn’t officially end until 1968, perpetuation of financial insecurity by the criminal justice system, and denial of benefits to military service members by, for example, leaving administration to the states of the 1944 G.I. Bill‘s wealth-building opportunities. This included low-cost home mortgages, low-interest business loans and tuition assistance. When 13 Mississippi cities were surveyed, it was revealed that African American military veterans had received just two of 3,229 loans made by the Department of Veterans Affairs for homeownership, business and farming purposes. Such discrimination wasn’t a factor only in the states of the old Confederacy.
Here are excerpts from a few key findings of The Road to Zero Wealth:
• “Earning a middle-class income does not guarantee middle-class economic security. White households in the middle-income quintile (those earning $37,201-$61,328 annually) own nearly eight times as much wealth ($86,100) as middle-income black earners ($11,000) and ten times as much wealth as middle-income Latino earners ($8,600). […]
• “If the middle class were to be defined by wealth rather than by income, black and Latino families in the middle-income quintile would need to earn 2-3 times as much as white families in order to enter the middle class. If we were to define the middle class in terms of wealth, households would need to own between $68,000-$204,000 in wealth to qualify for the middle class. Under these terms, only black and Latino households in the highest income-quintile (those earning more than $104,509) would qualify for middle-class status or higher, compared to white households in the top three income-quintiles who already own wealth in excess of this threshold. In fact, only black and Latino households with an advanced degree have enough wealth to be considered middle class, whereas all white households with a high school diploma or higher would be considered middle class. […]
• “The accelerating decline in wealth over the past 30 years has left many black and Latino families unable to reach the middle class. Between 1983 and 2013, the wealth of median black and Latino households decreased by 75 percent (from $6,800 to $1,700) and 50 percent (from $4,000 to $2,000), respectively, while median white household wealth rose by 14 percent (from $102,200 to $116,800). […]
• “By 2024, median black and Latino households are projected to own 60-80 percent less wealth than they did in 1983. By then, the continued rise in racial wealth inequality between median black, Latino and white households is projected to lead white households to own 99 and 75 times more wealth than their black and Latino counterparts, respectively.
• “If the racial wealth divide is left unaddressed and is not exacerbated further over the next eight years, median black household wealth is on a path to hit zero by 2053—about 10 years after it is projected that racial minorities will comprise the majority of the nation’s population. Median Latino household wealth is projected to hit zero twenty years later, or by 2073. In sharp contrast,median white household wealth would climb to $137,000 by 2053 and $147,000 by 2073.”
The Road to Zero Wealth also offers recommendations:
• Understand the problems facing low-wealth households (including collecting better economic data)
• Invest in low-wealth households (including making the tax code more progressive with various measures, such as a annual net worth tax on fortunes of more than $50 million)
• Improve access to lifelong wealth-building opportunities (including government-mandated Children’s Savings Account funded, say, with an automatic $2,000 loan to such accounts when a child is born).
• Generate more income at the bottom of the wage spectrum (including strengthening the Earned Income Tax Credit and significantly raising the minimum wage)
• Encourage and enable savings
• Increase opportunities to own wealth-building assets (including reinstating and making permanent the first-time homebuyer tax credit)
• Protect household wealth against wealth-stripping practices (such as curbing “contract for deed” abuses
(Originally appeared at DailyKos.)