The wealth gap between blacks and whites has nearly tripled over the past 25 years, due largely to inequality in home ownership, income, education and inheritances, according to a new study by Brandeis University.
That type of inequality can be a drag on economic growth for everyone, said Thomas Shapiro, director of the university’s Institute on Assets and Social Policy, which conducted the research.
The difference in wealth between typical households in each racial group ballooned to $236,500 in 2009, up from $85,000 in 1984, according to the study, released Wednesday. By 2009, the median net worth of white families was $265,000, while blacks had only $28,500.
Brandeis researchers looked at the same set of 1,700 families over the 25-year period to see how their actual work and school experiences affected their wealth accumulation.
What they found is that home ownership is driving the growing gap. Price appreciation is more limited in non-white neighborhoods, making it harder for blacks to build equity. Also, because whites are more likely to have family financial assistance for down payments, they are able to buy homes an average of eight years earlier than black families and to put down larger upfront payments that lower interest rates and mortgage costs.
If home-ownership is the greatest driver of white wealth, doesn’t that mean the collapse of the housing market fell disproportionately on people of pallor? Doesn’t the end point of this study—2009—miss the crash almost entirely? In fact, wasn’t it the whole push into subprime mortgages and other outreaches to minority home ownership that helped inflate the housing bubble? Only to see those homes almost immediately lose a great deal of their value?
Don’t you think most of those poor people are saying “[bleep] equity, I want my money back”?
There’s no evidence of insidious motives here. It boils down to the long-established truth that you need money to make money. The authors of the study picked a period of time (1984-2009) when housing prices grew dramatically. It’s no wonder they came to their conclusions. But as the last four years have proven, past performance is no guarantee of future returns.
The same holds true here:
When it comes to education, black graduates are often more saddled with college loans, making it harder for them to start socking away savings than their white peers. Four in five black students graduate with debt, compared to 64% of whites.
As with a home title, a college degree is no longer worth the paper it’s written on. Also not exactly a secret.
“Our economy cannot sustain its growth in the face of this type of extreme wealth inequality,” he said.
His own study disproves that assertion. The economy has been doing just fine over the past 25 years. Without do-gooding interventions in the housing market—and without Obama’s punitive economic policies—it might still be.
The best thing for minority families is the best thing for all families. Save money, limit debt, work hard, take advantage without taking undo risk.
“The racial wealth gap is the civil rights agenda for the 21st century.”
Oh stop. It is not. Who says there needs to be a “civil rights agenda” at all? The civil rights laws were passed almost 50 years ago. Let’s celebrate them, not reenact them.