A disturbing new study shows African American families have fewer economic resources to fall back on during this economic crisis than do white families, mainly due to discrimination and tax policies that favor the rich.
The study by the Institute on Assets and Social Policy at Brandeis University reveals that the wealth gap between blacks and whites has more than quadrupled over the course of a generation from $20,000 to $95,000. The researchers studied the same set of families over 23 years (1984-2007) and found that white families were able to build assets-what you own minus what you owe, excluding home equity-while blacks essentially lost assets. In fact, a typical white family is now five times richer than its African-American counterpart of the same class.
That means blacks had little or no money to start businesses, send children to college or ensure a secure retirement, the authors say. In fact, because many low-wealth families are forced to turn to high-interest rate credit for emergencies, about 25 percent of all African Americans owe more than they own. Read the entire study here.
Many minority families end up turning to predatory lenders because they have no other option, the study says. Also African Americans and Hispanics were at least twice as likely to receive high-cost home mortgages as whites with similar incomes, the study says.
A federal consumer financial protection agency that would ensure fairness for consumers of all financial products would greatly help cash-strapped families to borrow money at decent rates, the study says.
The dramatic increase in the wealth gap in such a short time also reflects tax policies that favor the wealthy. Taxes on unearned income, such as investments and inheritance, fell sharply and are much lower than taxes on pay.
At the same time, persistent discrimination in housing, credit and employment also play a significant role in the gap between whites and blacks, according to the study..
In an interview with the Guardian newspaper, one of the study’s co-authors, Thomas Shapiro, says one of the most disturbing aspects of the study shows wealth among the highest-income African Americans has actually fallen in recent years, while among whites of similar class and income it has surged. In 1984, high-income black Americans had more assets than middle-income whites. That is no longer true.
Shapiro told the Guardian:
This represents a broken chain of achievement. In the United States context, when we are thinking about racial equality and the economy we have focused for a long time on equal opportunity. The assumption in a democracy is that merit and achievement are going to be rewarded and the rewards here are financial assets. We should see some rough parity and we don’t.