Black-White Wealth Gap Continues to Widen in U.S.

From Meizhu Lui, writing in the Washington Post:

The euphoria of our gambling spree is over. In the harsh glare of morning, the hangover is tough. And the latest data are from 2007, so they don't even capture the worst of the decline.

The net worth of the average American family is less than it was in 2001. We borrowed more for that trip to Vegas than we brought home. Everyone knows this now.

But here's something being talked about much less: The gap between the wealth of white Americans and African Americans has grown. According to the Fed, for every dollar of wealth held by the typical white family, the African American family has only one dime. In 2004, it had 12 cents.

This is not just a gap. It's a deepening canyon.

The overhyped political term "post-racial society" becomes patently absurd when looking at these economic numbers. This week, experts on asset building in communities of color are meeting with members of Congress to talk about closing the wealth gap. While the government is rescuing failing financial institutions as a short-term measure, those at the two-day Color of Wealth Policy Summit will make the case that the nation's long-term economic future depends on the inclusion of all Americans in opportunities to build wealth.

Why such a big gap? The biggest predictor of the future economic status of a child is the net worth of the child's parents. Even modest inheritances or gifts within a parent's lifetime -- such as paying for college or providing the down payment on a home -- can give a child a lift up the economic ladder. And historically, white families have enjoyed more government support and tax-paid subsidies for their asset-building activities.

The market-worshippers' explanation for the persistence of the racial wealth divide is cultural: people of color -- most raised by those damn single welfare moms -- just don't have the boot-strapitude to make it in our ruggedly individualistic economy.

But as I explained in a piece titled, "The American Dream, or a Nightmare for Black America?," that narrative misses the importance of "inter-generational assistance" in terms of economic outcomes. Check out the highlights after the jump...

While white men's incomes have been stagnant for the past three decades -- for both white and black families, most of the increase in family income was a result of women entering the work force rather than wages increasing -- the current generation of 30-something black men actually earn, on average, 12 percent less than their fathers did in the mid-1970s.

That trend toward downward mobility has an enormous impact on the black middle class. While children of middle-class whites tend to do better than their parents did at the same age, a majority of middle-class African American children do worse than theirs, both in income and in terms of their position on the nation's economic ladder. According to [a study cited], "only 31 percent of black children born to parents in the middle of the income distribution have family income greater than their parents, compared to 68 percent of white children from the same income bracket."

But looking at income alone misses a crucial part of the story. The differences in accumulated wealth -- in net worth -- are far greater than the differences in income, and that impacts black families' prospects of moving up in a big way.

In Being Black, Living in the Red, Dalton Conley, director of NYU's Center for Advanced Social Science Research, showed that white families, on average, had eight times the accumulated wealth of black families who earned the same, and that remained true even when you adjust for education levels and savings rates. It is, as Conley told me in an interview last year, "the legacy of racial inequality from generations past."