Scholar Chuck Collins talks with DiversityInc about a new report, which found that if public policy changes are not made, Black and Latino families won’t match white wealth for centuries.
By Sheryl Estrada
According to a new report released this week, a Black household would need 228 years to accumulate the same wealth a white household has today, if the average Black family wealth continues to grow at the same pace it has for the past 30 years.
“If we stay on the current trajectory, with modest gains in average Black wealth, we will not attain racial wealth parity,” Chuck Collins told DiversityInc.
Collins is an author of “The Ever-Growing Gap: Without Change, African-American and Latino Families Won’t Match White Wealth for Centuries,” an analysis from theInstitute for Policy Studies (IPS) and the Corporation For Economic Development.
Three decades of trends in wealth accumulation, from 1983 to 2013, are reviewed in the report. The report also offers projections of what the next 30 years might bring. For example, the findings indicate it would take 84 years for the average Latino family to accrue the same wealth as a white family.
The authors, including Dedrick Asante-Muhammad, Josh Hoxie and Emmanuel Nieves, analyzed data from the Federal Reserve’s Survey of Consumer Finances, which contains information on financial wealth such as income, stocks, bonds, business capital and real estate.
The study found the wealth of white families has grown by 84 percent over the past 30 years. This is three times the rate of growth for Black families and approximately 1.2 times the rate of growth for Latino families.
If the past 30 years are to repeat, the following is estimated to occur:
|Average Yearly Wealth Increase Per Year|
“Wealth is a multi-generational measure of well-being,” Collins,a senior scholar at IPS, said. “Wealth, what you own minus what you owe, is where the past shows up in the present where the legacy of racial discrimination in wealth building is reflected in people’s bank accounts.
“Average white households have an average wealth of $656,000, over six and seven times greater than the average wealth of Latino, $98,000, and Black households, $85,000, respectively.”
The authors estimate that by 2043 the year in which it is projected that people of color will make up the majority of the U.S. population the wealth divide between white families and Latino and Black families will have doubled.
Chart from “The Ever-Growing Gap”
Collins said wealth disparity is a “human and policy created disaster.” He said housing policies created in the 1940s were designed to widen the economic gap between white households and households of color, and between the wealthy and the rest of the population.
“The U.S. government has actively promoted homeownership, especially since the mid-1940s, with substantial tax incentives and subsidies,” Collins explained. “As a result, between 1940 and 1965, the homeownership rate went from about 45 percent to over 65 percent.
“Because of racial discrimination in mortgage lending and residential segregation, Blacks and Latinos were unable to take advantage of these major wealth-building programs.”
A 2015 study, “Home Mortgage and Small Business Lending in Baltimore and Surrounding Areas,” conducted by The National Community Reinvestment Coalition (NCRC), found tremendous disparities in home lending for Black and white residents. Baltimore’s Black residents seeking home loans are consistently denied by mortgage lenders.
“Whites got on the express train to wealth, with homeownership rates today of 72 percent,” Collins added. “Meanwhile, the homeownership rate for Blacks is 41 percent and 45 percent for Latino households.”
He said that a solution to lessening the racial wealth gap is to redirect the massive wealth-building subsidies that currently exist.
“The U.S. government spends billions to help individuals build wealth,” Collins said. “In 2015, we spent $660 billion in tax breaks for homeownership, retirement incentives, college savings and more.The problem is most of the benefits of these subsidies flow to those who already have substantial wealth.
“For example, someone with $1 million in income will get $147,000 in tax breaks while a family with a $50,000 annual income will receive $174 in benefits.”
He also asserts reforms to programs such as Home Mortgage Interest Deduction, which he said is also known as the “mansion subsidy,” would be helpful “since its biggest beneficiaries are wealthy homeowners.”
“Cap the deduction and redirect the incentives to those who have been historically excluded from wealth and asset building programs in the U.S.,” Collins said. “These subsidies are upside down.”
The authors also suggest the growing crisis can be addressed by conducting an evidence-based, government-wide audit of federal policies.
“I hope that there is a majority in Congress for an evidence-based approach to understanding what policies reduce racial wealth disparities and which worsen them,” Collins said. “But, fortunately, this does not require an act of Congress.A president or lawmakers could instruct the Government Accountability Office or another agency to conduct such an audit.
“The Institute for Assets and Social Policy at Brandeis University has already done research on the drivers of racial wealth disparities and designed an audit approach.”
Policy recommendations also include removing barriers to retirement savings and expanding eligibility for the Earned Income Tax Credit.
The report does not include the racial wealth gap statistics for Native American households due to limited economic data available, or for Asian Americans and Pacific Islander households as “the collective Asian label obscures the different economic realities of dozens of AAPI ethnicities.”
But the authors note both demographics are “facing great economic challenges as well.”
Chuck Collins is co-editor of Inequality.org, author of the new book, “Born on Third Base,” and co-author with Bill Gates Sr. of “Wealth and Our Commonwealth.”