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White Families Have 20 Times the Wealth of Black Families: How Racism's Legacy Created a Crushing Depression In Black America

The economic crisis has hit most families hard--but since many black families had less wealth to start with, its impact on them has been nothing short of disastrous.

Racism is real and measurable, and it definitely impacts economic outcomes. But at a time when overt, in-your-face institutional racism is largely a thing of the past, discrimination alone can't explain the entire black-white achievement gap – African Americans' lower average incomes and persistently higher levels of poverty and unemployment.

But a large part of that gap can be explained by differences in accumulated wealth. If you look at black and white families with the exact same incomes, the white families will have far more accumulated wealth – cash in the bank, retirement savings, investments, real estate, etc.

That wealth gap has widened into a yawning chasm in recent years. In 2007, white families, on average, had 10 times the accumulated wealth of black families earning the same amount. That was significant, but then, between 2005 and 2009, the average white household's wealth dropped by 16 percent, while the average black family's dived by 52 percent, and, as the New York Times reported, by 2009, the “median wealth of whites [was] 20 times that of black households.” As a result, we now have “the largest [racial] wealth disparities in the 25 years that the [Census] bureau has been collecting the data.”

It’s crucial to understand the relationship between wealth accumulated over generations and one's economic prospects today. Central to that relationship is the concept of “intergenerational assistance.” That’s a fancy way of saying that a person’s chances to advance economically are very much impacted by whether his or her family can help get him or her started on the path to prosperity.

Think of the difference it makes when a young couple’s parents can give them a down payment on their first home—that couple starts building equity right out of the starting gate, instead of throwing away money on rent. Small businesses don’t begin with a good idea; they begin with an idea and start-up capital. If you’re already established, you can get that cash from a bank or find an investor. Before then, your best chance is to hit up your family for a loan. The wealthy don’t pass on their status to their kids through inheritance alone; they also do it by smoothing the way for their children's ascent to the top of the pile.

Dalton Conley, the director of NYU’s Center for Advanced Social Science Research, compared two hypothetical kids—one from a family with some money and the other from a poor family. Both are born with the same level of intelligence, both are ambitious and both work hard in school. In a meritocracy, the two would enjoy the same opportunities to get ahead. Yet the fact that one might graduate from college free and clear, while the other is burdened with $50,000 in debt makes a huge difference in terms of their long-term earnings prospects.

That’s only one of the myriad ways that parents pass their economic status on to their children, Conley explained. “When you are talking about the difference between financing their kid’s college education, starting a new business, moving if they need to move for a better job opportunity—[differences] in net worth might make the difference between upward mobility and stagnation.”

Education also plays a crucial role in reproducing African Americans’ lower economic status in their kids. Schools are primarily funded through state and local taxes, which leads to dramatic differences in the facilities that are available to kids in wealthier and poorer communities. According to the Urban Institute’s annual report on the State of Black America , African American children got an average of 82 cents on the white education dollar in 2008. You get what you pay for, and twice as many black children as whites are taught by instructors with fewer than three years of experience.