Talking about Racial Wealth Disparities

This week, I was pleased to have two opportunities to talk about some new data that came out recently on the racial wealth gap from the Institute for Assets and Social Policy.

On Wednesday, I spoke with Tanya Free, the host of the show Tanya Free and Friends, which airs live weekly on Richmond, Virginia’s AM WCLM station. The guiding question for this week’s show was “How much does race still matter?” The two-hour segment covered a lot of important issues, including the rise of extremist groups, developing more black-owned businesses to support community wealth-building, and the role of consumer protection in the housing crisis and recovery. Listen to the racial wealth gap part of the conversation by pressing play and dragging the slider to the 23 minute mark. During the conversation, the show hosts and I agreed that racial wealth disparities in this country are complex in origin, but that we do have some promising strategies to address this inequality. For example, Tanya Free and her co-hosts pointed out a few ways individuals can begin to build up savings, including placing more emphasis at the family level on the importance of saving, starting the saving process as early as possible and not waiting until you think you’re wealthy to begin that process. They also recommended seeking help from a trusted and knowledgeable advisor when possible.

Today, New America released a Sidebar podcast in which I discussed the IASP study and origins of the racial wealth gap with Elizabeth Weingarten, New America’s assistant editor, and Reniqua Allen, a New America Fellow who studies the black middle class. We spoke about how racially discriminatory policies gave rise to many of the disparities we see in homeownership rates, employment segregation, and residential segregation. Reniqua Allen emphasized the importance of unions and public sector jobs in ensuring economic stability and mobility for all Americans but particularly Americans of color. We also fleshed out the important distinction between wealth and income.

While both are important to consider, wealth is particularly so because it has the power to facilitate longer-term financial stability for households. In the short-term, wealth can give families a cushion in the case of an unexpected event. As Reid Cramer has put it, “Even small amounts [of wealth] can prevent debilitating downward spirals that might be triggered by a job loss or income event.” In the long-term, wealth is powerful because families can use it to access opportunities like homeownership, starting a small business or to help their kids afford college. Thus, wealth is a lever for inter-generational economic mobility because it serves as both a safety net and a spring board to boost the next generation up. Notably, and as the IASP study shows, most Americans do not inherit any money from their parents. However, white Americans are five times more likely to inherit money from their families than black Americans. Among people who do receive an inheritance, white Americans received on average ten times more than black Americans. Over time, these patterns of inter-generational transfers perpetuate staggering levels of inequality.

These conversations were especially timely, because as Justin King blogged yesterday, lots of people are discussing a viral video that has been making the rounds and prompting conversations about wealth inequality. Justin King offers a few additional thoughts on how we can address wealth disparities. He boils it down to three key principles: first, do no harm. At a bare minimum, we need to address the key drivers of wealth inequality, many of which are embedded in the tax code. Second, discourage unhelpful behaviors, many of which are also propagated through the tax code. Finally, policy should broaden and expand opportunity for people at all income and wealth levels by increasing, not limiting, access to wealth-building opportunities. This could include such initiatives as universal workplace savings or making sure children have access to financial products from an early age.

Ultimately, the answer to Tanya Free’s question for the segment “How much does race still matter?” is “quite a lot,” especially when it comes to wealth in America. As I said on the show, research, policy and media alike all have a role in addressing the structural causes of racial wealth inequality. In both conversations, I relied on IASP’s findings to emphasize how homeownership has driven racial wealth inequality, but how policies could be structured differently to reduce rather than exacerbate that inequality.

Read the original IASP study and then have a listen to these podcasts: the Sidebar is available here and Tanya Free’s show here. Leave a comment here or tweet us your thoughts or questions @AssetsNAF.