The gap in wealth between black and white Americans is growing.
A new report from Brandeis University’s Institute on Assets and Social Policy reveals that the wealth gap between black and white Americans increased fourfold between 1984 and 2007, from $20,000 to $95,000.
To put it in terms of purchase power, the difference used to buy about three years of college; now, it’s large enough to pay full tuition for two kids, plus medical school, the report says.
Wealth is not the same as income. Wealth here refers to everything a person owns, minus debt. As the report shows, even when comparing households with similar incomes, there is still a gap in accumulated wealth.
The study attributes the growing disparity to policies that are more beneficial to wealthy and high-income people, such as tax cuts on investment income and inheritance, and tax deductions on retirement accounts and college savings.
Another factor is discrimination in housing and credit markets that has plagued African-Americans and Latinos for years. Black Americans have more of their wealth tied up in housing, at 63 percent of their net worth, compared with only 38.5 percent for white households. Discriminatory lending combined with the centrality of home ownership as an asset has meant that black Americans were hit particularly hard by the recent subprime mortgage crisis, which could result in up to $213 billion in total minority losses, according to a 2008 study by United for a Fair Economy. This could contribute to a continued widening of the gap.
Surprisingly, the wealth gap has been growing at the same time as the black middle class, which saw historical increases in college attendees, graduates and home ownership.
“Even when blacks have similar educations and incomes, they lag far behind their white counterparts in their quest to accumulate assets,” Thomas Shapiro, one of the study’s authors, wrote in an op-ed last year. “Without sufficient assets, it is difficult to lay claim to economic security or true opportunity in American society.”