Racial Disparities in Post-Recession America

Thursday, February 19, 2015

While some would point to obvious indicators of the growing political and economic power of African Americans, when it comes to creating wealth, the color of one's skin absolutely still matters.

In a 2013 report, the Urban Institute found that, while the income gap stayed roughly the same between 1983 and 2010, the wealth gap grew. In 1983, average family wealth for whites was roughly five times that of blacks and Hispanics. It grew to roughly six times that of blacks and Hispanics by 2010 (for example, $632,000 versus $103,000). In part, this reflects the importance of initial asset holdings for later wealth accumulation, but it's also about how access to institutions and the differential effects of some policies help to determine who benefits from wealth-creating engines in the United States today.

Pew analysis finds record wealth gaps between whites and households of color. Plummeting housing values are largely to blame, particularly since homeownership is one of the few viable avenues to wealth building available to many African-American and Latino families. Commentary at the Center for American Progress points to 'institutional racism' and the need for structural reforms to create wealth even where income disparities persist, and to stop the hollowing out of the balance sheets of households of color.

And the post-recession period has only made this chasm deeper, as communities of color have yet to benefit from the economic recovery proportionately to the gains enjoyed by white Americans, or, certainly, to the pains they suffered when the economy was at its lowest.

And, yet, the policy prescriptions advanced to address economic insecurity and catalyze upward mobility often fail on one of two, opposing fronts: either they are seen as too narrowly targeted to the most disadvantaged communities of color, in which case they suffer the backlash of those opposed to anything that feels like 'welfare' or, conversely, they are designed to so broadly appeal that they fail to have an ameliorative effect on these particular households' disadvantages, disproportionate as they are compared to even the well-being of other disadvantaged households. In other words, policies designed to directly address the economic injustices confronted by African Americans and Latinos, for example, are often rejected as too redistributive, while broader 'middle-class economics' may do little to curb the growing racial wealth gap, rather than merely lifting everyone somewhat.

Here, Children's Savings Accounts and other asset initiatives may have a real edge, both in outcomes and in rhetorical flair.

CSAs appeal to Americans' sense that people should work for what they have and that rewards should accrue to those who invest of themselves. They're not handouts, but instead redeem the promises we want to believe about ourselves, while building on children's greatest hopes for their own futures.

And, because they not only build asset balances but also increase educational outcomes, CSAs can work particularly well for children of color, currently doubly disadvantaged on economic as well as academic indicators. By closing the racial achievement gap and providing an initial asset base from which to leverage future wealth, CSAs can position African-American students and others whose race or ethnicity correlates with poorer economic measures for greater prosperity, in today's recovery and in future inevitable downturns.

Figures like the one above--and, more importantly, the lives represented in those lines--must matter to us every day, not just in February. The future of our nation depends on bending those curves up, and on closing the divide. Indeed, it's findings like these that we have to make 'history'.

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