The Growth of the Suburbs - and the Racial Wealth Gap
Developed by David M. Seiter

Grade Levels: 11th & 12th grades
Subject Matter: Economics, Social Studies, American History
Time Allotment: up to 4 class sessions
Description: This lesson explores structural racism by revealing the important role that family wealth plays in shaping life chances how opportunities to accumulate wealth have been racialized, and the roots and consequences of the current race-based wealth gap.

David M. Seiter is in his 30th year of teaching and currently teaches Economics, AP European History, and World History at Northridge High School in Layton, UT. He is a former National Social Studies Teacher of the Year.

OVERVIEW

Wealth is not just about luxury. It plays a significant role in shaping a family's life chances and creating opportunities - in ways we often don't notice. Currently, the typical white family has about eight times the wealth of the typical African American family. Even in the same income bracket, whites have on average twice the wealth of Blacks. Much of the difference lies in the value of their homes.

This lesson explores how structural racism - in the form of a history of discriminatory government housing policies and practices - helped create the racial wealth gap. Several pre-viewing activities help students understand the difference between family income and net worth, appreciate the impact family wealth has on future opportunities, and see that net worth is shaped not only by one's own efforts but also by external factors.

The video screening, discussion questions and readings that follow help render visible the historical processes and forces that have contributed to unequal wealth accumulation are not only felt in the past but set the starting line for the next generation.

Finally, the capstone and extension activities help students deepen their understanding and apply what they've learned to other situations. These include evaluating strategies for ameliorating the wealth gap using the device of a Presidential Briefing.

NOTE: The lesson includes more activities than you may have time for. Teachers should feel free to pick and choose the activities most appropriate for their class.

BACKGROUND

RACE - The Power of an Illusion, Episode 3: "The House We Live In," is the first film on race to focus not on individual attitudes and behaviors but on the role that our institutions and public policies play in shaping life opportunities and one's ability to accumulate wealth.

Government housing programs and policies helped generate much of the wealth that so many white American families enjoy today. By lowering down payment requirements and extending the term of home loans from 5 to 30 years, revolutionary New Deal programs like the Federal Housing Administration made it possible for millions of average Americans to own a home for the first time.

But the government also set up a national neighborhood appraisal system that explicitly tied mortgage eligibility to race. Integrated and minority communities were ipso facto deemed a financial risk and made ineligible for low-cost home loans, a policy known today as "redlining." Between 1934 and 1962, the federal government backed $120 billion of home loans. More than 98% went to white homebuyers.

These government programs made possible the new segregated, all-white suburbs that sprang up around the country after World War II. Government subsidies for municipal services helped develop and enhance these suburbs further, in turn fueling commercial investments. Property values soared in these communities, and white families were able to reap the benefits of increased home equity.

Meanwhile, African Americans and Latinos, largely confined to the inner city, saw their neighborhoods decline as urban renewal destroyed available housing and cut freeways through the heart of their communities and as welfare agencies dumped more and more poor families in their midst. Denied home loans, many remained renters and were not able to accumulate wealth through home equity. Those who were able to purchase homes saw their property values stagnate or fall since 80% of the market, the white population, refused to buy in their neighborhoods. As whites left, so too did grocery stores and services and many of these communities fell into a cycle of decline.

Although many of the worst policies and practices have been outlawed, past discrimination continues to affect families today, as wealth (or the lack of it) accumulates from one generation to the next. As sociologist Dalton Conley points out, a family's net worth is not simply the finish line. It's also the starting point for the next generation. Those with wealth pass their assets on to their children - financing a college education, lending a helping hand during hard times, or assisting with the down payment for a new home. It also provides financial security in retirement. Not surprisingly, the racial wealth gap - and the head start enjoyed by white families - appears to have grown since the gains of the Civil Rights Movement.

Wealth, more than income, is an indicator of life outcomes and performance. Dalton Conley has found that when we compare the performance of families across racial lines who hold similar net worth, many of the huge racial disparities that we see in education, graduation rates, welfare usage and other outcomes disappear. The "performance gap" between whites and non-whites is a product not of 'nature' or race per se but the legecy of a long history of socio-economic inequality. This suggests that remedying the wealth gap is key to addressing other types of race-based inequities.

Colorblind policies that treat everyone the same, no exceptions for minorities, are often counter-posed against affirmative action or other racial remedies. But colorblindness in a society that is unequal by color, merely bolsters the advantages that have long benefited white people at the expense of other groups.

OBJECTIVES

Students will be able to:

• Analyze how structural racism affects everyone, not just people of color
• Distinguish between the advantages afforded by family income and those conferred by family wealth, or net worth
• Explain the importance of home ownership to family wealth building
• Demonstrate how family wealth doesn't just affect savings and consumption levels, but impacts the life opportunities and outcomes of future generations
• Explain how government money and policies made possible the growth of segregated white suburbs after WWII and contributed to a race-based wealth gap
• Trace how and why segregated housing patterns continue to channel wealth disproportionately to white families
• Hypothesize, compare and evaluate different public policy strategies aimed at asset building

MATERIALS

• RACE - The Power of an illusion, Episode 3: The House We Live In (video or DVD)
• RACE companion Web site at www.pbs.org/race:
  • Where Race Lives section
• Handouts (below)

ACTIVITY 1: Previewing - Introducing the Concept of Family Wealth

1. Write the following words on the board. Make sure the class can define each word and provide some examples of the first two:

• Assets
• Equity
• Liabilities
• Debt
• Net worth
• Family or household wealth

Family (or household) wealth is the same as family (or household) net worth. It is determined by adding up one's assets and then subtracting one's liabilities.

2. Copy and distribute the three asset and liability profiles below. Have students quickly calculate the total net worth of each family. (Note that asset value is determined by current market value, not original cost)

Net Worth Profiles Family A Assets Market Value Liabilities Amount Automobiles $22,000 Auto loans $14,000 Clothes $3,000 Other loans $17,000 Household goods $25,000 Credit card debt $3,000 Stocks/bonds $35,000 Home mortgage $185,000 Bank accounts $7,000 Health insurance -0- Home $350,000     Retirement fund $45,000     TOTAL ASSETS   TOTAL LIABILITIES   TOTAL NET WORTH OF FAMILY A: _______________ Family B Assets Market Value Liabilities Amount Automobiles $7,000 Auto loans $1,500 Clothes $2,000 Other loans $15,000 Household goods $8,000 Credit card debt $9,000 Stocks/bonds -0- Home (rent/year) $10,800 Bank accounts $1,500 Health insurance $2,500 Home (rents) -0- Retirement fund -0- TOTAL ASSETS   TOTAL LIABILITIES TOTAL NET WORTH OF FAMILY B: _______________ Family C Assets Market Value Liabilities Amount Automobiles $6,000 Auto loans $5,000 Clothes $4,000 Other loans $12,000 Household goods $8,000 Credit card debt $7,000 Stocks/bonds $2,000 Home mortgage $108,000 Bank accounts $3,500 Health insurance $8,500 Home $120,000     Retirement fund $4,000     TOTAL ASSETS   TOTAL LIABILITIES   TOTAL NET WORTH OF FAMILY C: _______________

Discussion Questions for Net Worth Profiles:

1. Which asset tends to make the biggest difference in family wealth? [Note: 42% of all American household net worth is home equity]

2. As a group activity, compile a list of factors that might affect students' ability to accumulate wealth over their lifetimes. A few examples might include:

• Good schooling
• College and post-graduate degrees
• Connections - how people find out about job or internship opportunities. Some studies suggest that 80-95% of jobs are obtained not through want ads but word of mouth. Are your friends and relatives managers and professionals? Construction workers or members of a union? Employees of McDonald's?
• Skill set - e.g., auto mechanic, machinist, electrician, computer programming, etc.
• A job with promotional opportunities ("career ladders")
• Ability to obtain the cash needed for a down payment on a home
• Ability to qualify for a home mortgage loan (co-signer?)
• Owning a home in a desirable neighborhood
• Savings that make it possible to take advantage of opportunities
• Money inherited from wealthy parents or relatives
• Other?

3. Sort the factors above into two categories: those that are determined solely by one's own aptitudes and efforts and those that are influenced by outside, or external, conditions. (Note that "externality" is a term used by economists to denote outside factors beyond the immediate control of the economic actor, like the weather)

4. Discuss: Do you think one's race is an externality that significantly affects wealth accumulation? Why or why not?

ACTIVITY 2: Sources of Family Wealth Disparities

To further explore the impact of externalities on asset accumulation, ask each student to review the following list and give him or herself one point for each item that is true:

Factors Influencing Family Wealth: A Self-Audit My parents and grandparents were able to purchase or rent housing in any neighborhood they could afford. I can take a job with an employer who believes in affirmative action without co-workers suspecting I got it because of my race. I grew up in a home owned by my parents. I live in a safe neighborhood and attended good schools. I live in a neighborhood where most residents own their own homes. I have a savings account, stocks or bonds that were given to me by parents or relatives. I can tap my parents' resources to go to college. I can tap my parents' resources to buy a house. I'll be able to get help from my parents or other relatives and weather the storm if I lose my job or otherwise run into trouble. If I get into trouble with the law for the first time, I can be pretty sure the police and the DA will be lenient. I don't have to worry about helping my parents out when they retire. I never think twice about calling the police when trouble occurs. I can be pretty sure that when I speak to the "person in charge," he or she will see me as smart, honest and responsible. I stand to inherit a tidy sum of money when my parents or other relatives pass away

Discussion: After reviewing the list and adding up their points, ask the class:

• Who ends up with the most and fewest points?
• What kinds of patterns emerge?
• Might people's answers have been different if they were a different race?
• How might family wealth provide deeper economic security than family income?

Note: Especially if your class is racially homogenous, you might consider revisiting these questions after viewing the video and/or exploring the "Tale of Two Families" Web interactivity to see if your students' ideas have changed.

ACTIVITY 3: Film Screening

View the second half of RACE - The Power of an Illusion, Episode 3: "The House We Live In," beginning with this line of narration: "Perhaps the best example of how European ethnics would finally gain the full benefits of whiteness to the exclusion of others would come with an innovation in housing at the end of World War II."

NOTE: This occurs approximately 26:15 into the show and runs 30 minutes. If using the DVD, go to Scene 10 then back up about 13 seconds.

This story reveals how government policies helped create the segregated white suburbs, racializing family wealth accumulation and other outcomes.

For a complete transcript of Episode 3, click here.

After Viewing - Comprehension/Discussion Questions:

1. How did the new Federal Housing Administration (FHA) change down payment requirements and loan terms for home mortgages? What effect did this have on home buying in America?
2. What is Levittown and what is its significance? Was Levittown an exception or the norm? Why?
3. What is 'redlining' and how did the term originate? What are the consequences of redlining on housing patterns? What attitudes and beliefs might such practices reinforce?
4. How much of the $120 billion in home loans underwritten between 1934 and 1962 went to non-whites? Why? What effect did that have on such families?
5. Explain the terms "white flight," "blockbusting" and racial "steering." Why do property values decline when a neighborhood changes from white to nonwhite? How are the reasons given by the film different from what you've heard or what people commonly believe?
6. Who benefits from segregated housing? Who doesn't? Why are all-white communities and all-minority communities not equal?
7. A typical (median) white family has a net worth how many times that of a typical African American family? Why? If we do nothing to address the gap, will it go away on its own or continue to grow? Why?
8. What happens to measures of racial disparities like graduation and welfare rates once groups of similar income AND wealth are compared? How does that change our understanding about the reasons why people perform differently?

ACTIVITY 4: A Tale of Two Families

If students have access to a high-speed Internet connection in the school's computer lab or at home, ask them to explore the "Where Race Lives" section of the series companion Web site at www.pbs.org/race, particularly the feature called "A Tale of Two Families." (From the home page, click on "Learn More," then "Where Race Lives," then finally "A Tale of Two Families.") This brief slide show depicts how race affected the life course of the families of two people- one Black, one white - who make the same income.

In class, ask students to share their thoughts about what they saw. After viewing, revisit the Family Wealth Disparities Self-Audit (Activity 2), and ask the students to "grade" both individuals, Max and Byron, featured in "A Tale of Two Families." What do they find? What government policies might level the playing field for Max and Byron?

ACTIVITY 5: Deepening Understandings of Race and Family Wealth Accumulation: Six Jigsaw Readings

The degree to which race affects one's ability to accumulate wealth and take advantage of opportunities may be new to many students. In part, this is because people often think about racism in terms of individual attitudes and behaviors rather than on an institutional level. The readings below will help the class deepen their understanding of institutional racism.

Break the class into six groups and assign each group one of the six readings below concerning race and family wealth. Ask each group to discuss the main points of their reading and then, as a group, write answers to the attached questions. When finished, each group in turn should summarize the reading and report their answers to the whole class.

Alternatively, assign all six reading assignments and their respective questions to all the students as a two-day homework assignment.

The readings are from on-camera interviews conducted for RACE - The Power of an Illusion. The interviewees are:

• Dalton Conley, Professor of Sociology at New York University and author of Being Black, Living in the Red
• Melvin Oliver, Dean of Social Sciences, University of California, Santa Barbara and author (with Thomas Shapiro) of Black Wealth, White Wealth
• john a. powell, Professor of Law at Ohio State University and Executive Director of the Kirwan Institute for the Study of Race and Ethnicity

[NOTE: The full transcripts of these interviews are quite illuminating. They can be read in the "Society" portion of the Background Readings section of the series companion Web site at www.pbs.org/race.]

Click on a link below to open up a new window containing the handout listed:

• READING A
• READING B
• READING C
• READING D
• READING E
• READING F

ACTIVITY 6: Essays or Class Discussion

Choose several of the following questions for students to answer, either as an in-class discussion or as homework assignments. Their responses should draw from the film, the readings and their class discussions.

1. In the film, legal scholar john a. powell says, "The slick thing about whiteness is that most of the benefits can be obtained without ever doing anything personally. Whites are getting he spoils of a racist system even if they are not personally racist." What does he mean?
2. Do the results of the Family Wealth Self-Audit (Activity 2) confirm or refute powell's contention? Why or why not?
3. What's the difference between personal racism, where the beliefs and / or the actions of an individual reflect prejudice or result in discrimination, and institutional racism?
4. We all like to think we made it because of our own grit, merit and hard work. How have whites benefited from their race in ways that others have not?
5. We like to think that anyone can "pull themselves up by their own bootstraps" in America. What difference does access to financial and other resources make?
6. Why should white people be concerned about the wealth gap? How might we as a society address this problem?
7. Supreme Court Justice Harry Blackmun wrote, "To overcome racism, one first must take race into account." What does he mean? Do you agree or disagree, and why?
8. Some people believe that the government should pay reparations to the African American community as compensation for past economic injustices. But some white people argue it would be unfair if they had to bear this burden since they weren't responsible for slavery; indeed, their families may not even have been living in America back then. How might an advocate of reparations respond, based on what you've learned in this lesson?

ACTIVITY 7: Presidential Briefing: Steps to Narrow the Wealth Gap

This activity can serve as a culminating assessment activity.

Divide the class into small groups that will research policies to narrow the wealth gap and then make recommendations to the President of the United States. Consider grouping students the same way you did for the Jigsaw Readings (Activity 4) since those groups will already have some experience discussing the issues with each other.

Give students up to a week to develop their proposals. Ask them to present their specific policy recommendations to the class in the form of a 10-15 minute Presidential Briefing. Distribute and read the following directions to the students:

Presidential Briefing Instructions At the end of the film, sociologist Beverly Daniel Tatum (now president of Spelman University) says: "I think we all have to think about what can I influence. I don't influence everything, but of the things I do influence, I can think about: how am I making this a more equitable environment? Who's had opportunities in my environment and who hasn't? What can I do about that?" Here's your chance to make a difference. The President has invited you to the White House to make a 10-15 minute presentation recommending specific policies to narrow the racial wealth gap. This is a unique opportunity to influence national policy. Research and brainstorm specific policy ideas that you believe can make a difference. Some examples are: Tax-free Individual Wealth Accounts provided by the government to everyone at birth, analogous to the Individual Retirement Accounts (IRAs) now available to adults Regional school district and taxing authorities that can equalize spending across rich and poor communities Government-paid reparations to African Americans in the form of investment in depressed communities Living Wage laws mandating wages of $8 to $12 an hour or more, rather than the current federal minimum wage of $5.15 / hour Sweat Equity programs, allowing public housing tenants to gain equity in their apartments Community Development Banks that will make low-cost home loans available to low-income people and for local small businesses Scatter public housing throughout the region, especially in the suburbs where new jobs are being created, rather than concentrated in the inner city Government subsidies to developers for the construction of low-cost homes in depressed communities Others? The Briefing should describe the problem and provide background as to what led to the racial wealth gap, including a brief history and supporting statistics. Next, present two or three policy recommendations for addressing the problem. Discuss their strengths and weaknesses. Be sure to estimate the cost of the program, how it will be financed, and a cost/benefit analysis. This analysis should include the costs to the country if the reform is NOT undertaken. Each policy group will present their Briefing to the class. The presentation should include charts and graphs and other documentary evidence and take between 10-15 minutes.

EXTENSIONS

1. Invite local real estate agents/brokers into class for a discussion of past blockbusting and redlining in your community and surrounding areas. What guidelines and laws must they observe to prevent these activities today? Are they effective?
2. Review college financial aid applications for references to assets and income. Do an Internet search to find out how much weight colleges usually give to assets, including homes, versus income when calculating aid packages. Who benefits the most?
3. Research the short and long-term impact of the Civil Rights Act of 1964.
4. Find out more details on Levittown and its developer, Arthur Levitt.
5. Research two or three programs aimed at eliminating concentrated poverty. What is their approach? Have they been successful? Why or why not?

RESOURCES

For other relevant online sources visit the Web sites below. Or search the series companion Web site using the key words "origins of race," "net worth," "housing," "accumulated wealth," and "institutional racism."

For more on economic inequality, visit www.ufenet.org.

Conley, Dalton. "The Wealth Factor" in NEA Today: Inside Scoop, September 2000 at www.nea.org/neatoday/0009/scoop.html

Conley, Dalton. Being Black, Living in the Red, University of California Press, 1999.

Gonzales, John Moreno. "Hispanic Color Divide" New York Newsday, July 15, 2003 at www.pbs.org/race in Background Readings/Society.

National Council on Economic Education, www.ncee.net/ea/program.php?pid=19 - 26k

Oliver, Melvin and Shapiro, Thomas. Black Wealth/White Wealth, Routledge, 1997.

Clark, Charles M.A. "Wealth and poverty: On the social creation of scarcity." Journal of Economic Issues 36.2 (2002): 415+. Questia. 24 Aug. 2003 .

Muhammad, Dedrick et al. "The State of the Dream: Enduring Disparities in Black and White." United for a Fair Economy at www.ufenet.org/press/2004/StateoftheDream2004_pr.html

Plato, The Republic.

powell, john. "What we need to do About the 'Burbs" Colorlines, Fall 1999 at www1.umn.edu/irp/announce/Colorlinesfall99.html

Smith, Adam. An inquiry into the nature and causes of the wealth of nations. Glasgow: 1776.

RELEVANT STANDARDS:

National Council on Economic Education: National Standards at http://www.ncee.net/ea/standards/

Standard 2: Marginal Cost/Benefit Effective decision-making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something: few choices are "all or nothing" decisions

Standard 3: Allocation of Goods and Services Different methods can be used to allocate goods and services. People acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services

Standard 7: Markets - Price and Quantity Determination Markets exist when buyers and sellers interact. This interaction determines market prices and thereby allocates scarce goods and services.

Standard 8: Role of Price in Market System Prices send signals and provides incentives to buyers and sellers. When supply or demand changes, market prices adjust, affecting incentives.

Standard 10: Role of Economic Institutions Institutions evolve in market economies to help individuals and groups accomplish their goals. Banks, labor unions, corporations, legal systems, and not-for-profit organizations are examples of important institutions. A different kind of institution, clearly defined and enforced property rights, is essential to a market economy.

Standard 15: Growth Investment in factories, machinery, new technology, and in the health, education, and training of people can raise future standards of living.

Standard 16: Role of Government There is an economic role for government in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also redistribute income.

Standard 17: Using Cost/Benefit Analysis to Evaluate Government Programs Costs of government policies sometimes exceed benefits. This may occur because of incentives facing voters, government officials, and government employees, because of actions by special interest groups that can impose costs on the general public, or because social goals other than economic efficiency are being pursued.

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