NPR recently ran a two part series about the racial wealth gap – the economic divide between white families and Black and Hispanic families that stems from disparities in wealth (income and assets minus any debts). Both pieces illustrate how assets make the difference between financial stability and perpetual economic insecurity. Assets provide a cushion to fall back on during difficult times as well as a vehicle of economic mobility. Pew researchers show that the median wealth of white families is twenty times that of Black families and 18 times that of Hispanic families. In practical terms, this means that two people earning the exact same income have dramatically different opportunities for investment (in a home, small business, or a child’s education) based on their access to wealth.
The first part of NPR’s series focused on the stories of two women, one white and one Black, to illustrate the often subtle power that assets and the generational transfer of wealth have on economic disparities. Family inheritance was highlighted as an example of how wealth inequality persists across generations and leads to racial disparities in homeownership.
“White families are four times more likely than blacks to inherit. When they do, the median inheritance is 10 times greater.”
The second part delved into promising initiatives that are seeking to address these disparities, including a few projects that we’ve done a lot of thinking about in the past. San Francisco’s Kindergarten to College program is a college savings account program that will give children entering kindergarten an initial $50 deposit (children who qualify for free and reduced price lunch get $100, since they are the lowest income). While the total amount of money a family can save for a child’s college education in this program is quite modest (up to $2,500 every year), the program has the potential to elevate conversations about savings practices, financial literacy, and expectations around post-secondary education. Furthermore, the program is serving as a point of conversation at the city level about the importance of remedying decades of racial wealth inequality.
Racial wealth inequality is a persistent and worsening phenomenon that needs to be addressed by policymakers. In that vein, the NPR piece also touched on a few additional programs to address wealth disparity and encourage the development of assets and savings, such as through rental assistance savings programs, Individual Development Accounts, auto-enrollment in employer-based retirement accounts. We’ve written about workplace based savings opportunities before and how that model can work. These programs and others are discussed in greater depth in our 2011 Assets Agenda. Together these approaches to asset building add up to a complementary set of tools to address society-wide economic divides.