The Racial Wealth Divide Holds Back Black Earners at All Levels
It's no secret that there's a vast divide between the economic fortunes of black and white Americans. A new paper by the Equality of Opportunity Project attempts to shine a new light on just how hard that gap is to close. The study looked at the diverging fortunes of black and white men, and boys in particular. It found that even black men with affluent upbringings often fared worse than white men who grew up poorer.
As a splashy New York Times headline put it, the "Sons of Rich Black Families Fare No Better Than Sons of Working Class Whites." The paper's coverage noted pointedly that "broad income disparities still exist between black and white men even when they’re raised in homes with the same incomes and the same family structure."
This was a striking finding. But if anything, the study, and the Times report on it, failed to demonstrate the true depth of the problem. That's because, as my colleague Antonio Moore has pointed out, the study conflates income (the amount of money one makes) with wealth (the value of the assets one owns).
As those who study racial wealth inequality understand, the racial wealth divide occurs at every income level. Whites at the lowest income quintile (earning less than $18,420) have a median wealth of $3,000, while blacks and Latinos have a median wealth of $0, according to the 2014 Survey of Income and Program Participation.
This wealth divide carries all the way up to people in the highest income quintile (those making over $104,508 in annual income). In this high-income category, white median wealth is about $444,500, compared to $137,000 and $185,000, respectively, for Latinos and blacks.
Astonishingly, the New York Times and the Equality of Opportunity project report — written by leading researchers from Harvard, Stanford and the U.S. Census Bureau — repeatedly refer to high-income families as "wealthy." But having a high income isn't the same as having a lot of wealth.
They imply that the black families and white families who see such different economic results in their children came from similar wealth backgrounds. But this is never actually demonstrated.
When you factor in racial wealth inequality, you quickly understand why white boys coming from the highest income families are twice as likely to remain high income as black boys coming from the highest income families. Thanks to generations of inequality, as my coauthors and I relayed in a study for the Institute for Policy Studies and Prosperity Now, white households in the highest 20 percent of income earners have 2.4 times the wealth of African American households in the same percentile.
As research is increasingly showing us, wealth is a much stronger indicator of economic security and stability than income — and almost any other factor. Wealth means assets beyond income alone, which can support families through their ups and downs.
Unfortunately, the Times and the report authors appear to ignore the racial wealth divide and instead dive into other factors that historically are used to explain racial economic inequality, such as marriage rates, the presence of black fathers, etc.
I believe if these researchers had looked more seriously at racial wealth inequality, they would find that lower marriage rates are much more a result of the asset poverty found in the black community than its cause.
The study and its coverage may also suggest to some that racial economic inequality is driven solely by lower incomes among black men. But this reading leaves out black and Latino women, who also face large gaps when compared to both white men and white women.
Interestingly, as researcher Mariko Chang shows, African American men and women are remarkably equitable in terms of income and wealth when compared to white men and white women, as are Latinos. It is primarily among the most economically well off demographic groups where we see substantive income and wealth differences between men and women.
There's still much in the 100-plus-page Equality of Opportunity Center report that can contribute to a better understanding of racial economic inequality. But one cannot understand racial inequality without a focus on the racial wealth divide.
Blacks were imported to the United States as wealth for whites. So African Americans have been at the very foundation of wealth development in the United States from the beginning — but they have also been disproportionately excluded from investments in wealth building.
We as a nation will never get past our long, painful history of racial inequality without bridging that wealth divide.