Whereas the income gap between white and nonwhite people is substantial, the wealth gap between them is dramatically larger, and its structural origins in US history are quite clear. Our research team is currently piecing together the specific ways this legacy has played out in Tompkins County, both the history of racist policies and practices and the statistics that reflect the current situation. The national overview we include here is necessary but not sufficient for understanding our unique local situation.
Briefly defined, income refers to regular payments such as wages, alimony, child support or welfare, whereas wealth refers to all that people own that has monetary value (assets) minus the debts that they have.
The current extreme racial wealth gap, where white people have up to 13 times the median net worth of African Americans, is the result of decades of income, employment, housing, and educational discrimination growing out of slavery, the Jim Crow system, mass incarceration and other systemic patterns of oppression in U.S. society.
One of the most significant consequences of the wealth gap – other than the quality of life gap that it causes – is that African-American households have far fewer resources to borrow against. This reduces their ability to take out a loan for a child wanting to go to college, to deal with the effects of unexpected illness or other threats, or to come up with a down payment on a legitimate mortgage for purchasing a home.
Another consequence of the gap is the accumulated retirement benefits of a household or individual. According to a 2017 report by the Institute for Policy Studies, “more than half of all Black families in the United States today have no retirement wealth at all, meaning they will likely be entirely dependent on Social Security, which currently pays an average benefit of just $1,239 per month” (Bayard and Pitt).
Projecting their findings to the year 2043 – when it is estimated that people of color will make up a majority of the U.S. population – they estimate that the wealth divide will have doubled from today.
The gap is widening. A 2016 report on “the growing wealth divide” by the Institute for Policy Studies and CFED (Corporation for Enterprise Development) notes that the Great Recession of 2007-2010 saw average Black and Latino households losing 3 and 4 times as much wealth, respectively, as white households. Projecting their findings to the year 2043 – when it is estimated that people of color will make up a majority of the U.S. population – they estimate that the wealth divide will have doubled from today.
Blocking Black Wealth Creation – Redlining, Illness and Incarceration
Why is African-American household wealth so far below that of whites? For decades Federal housing loans helped white families buy homes that then increased in value providing wealth that could be passed on to future generations. For African Americans these loans were almost impossible to get because of government and bank “redlining,” which is the practice of using a red pen to mark the boundary of a neighborhood within which black families would be denied home loans. A 2018 report by the Center for Investigative Reporting uncovered evidence that African Americans and Latinos continue to be routinely denied conventional mortgage loans, even at rates far higher than their white counterparts, across the country. According to this report, the homeownership gap between whites and African Americans is now wider than it was during the Jim Crow era.
Research also indicates that at least two other structural factors are at work. First, a recent study has found that major disease events such as cancer or a heart attack can lead to a devastating loss of family wealth. Since African Americans suffer generally poorer health and health care compared to whites, they are more at risk for such an acute health shock (see the Health section). Second, the mass incarceration of millions of people of color over the past 30-40 years has had a dramatic negative effect on household wealth. Furthermore, since incarceration is associated with increased disease vulnerability, stress, and the creation of long-term health problems, it has a doubly negative impact on wealth. (Sykes and Moroto 2016, page 131 citing several studies).
Demystifying the Racial Wealth Gap
The Asset Value of Whiteness: Understanding the Racial Wealth Gap (Traub et al 2017) showed that none of the four most commonly suggested methods for closing the racial wealth gap: attending college; raising children in a two-parent household; working full time; and spending less (and presumably saving more) actually close the racial wealth gap. For example, the median white adult who attended college has 7.2 times the wealth of the median black adult and 3.9 times the wealth of the median Latino adult who attended college.
The median white adult who attended college has 7.2 times the wealth of the median black adult and 3.9 times the wealth of the median Latino adult who attended college.
This reinforces the conclusion that racial inequality in wealth is rooted in historic discrimination and perpetuated by policy, and individual behavior is not the driving force behind racial wealth disparities (Traub et al 2017, page 13).The title of their report is significant. In the United States whiteness itself is an asset in generating wealth. In other words, the racial wealth gap is a feature of structural racism and white supremacy in the United States.