The Low Income & Urban Housing Blog
It’s called “the racial gap” and it seems to be taking a very long time for black Americans to close it. The gap refers to the huge difference in wealth that exists between white and black Americans. A recent study shows that, unless something drastic occurs, it will take 228 years for blacks to accumulate as much wealth as whites.
Basically, wealth is the accumulation of resources, like stocks, bonds, real estate, and money. A new study of the racial wealth gap by the Institute for Policy Studies (IPS) and the Corporation For Economic Development (CFED), which studied trends in wealth from 1983 to 2013, released its findings, and it wasn’t pretty. It showed that, indeed, the rich get richer, and the poor get poorer.
During the 30-year-study, the rich — members of the Forbes 400 list — experienced a 736 percent increase in their wealth. While the average white household experienced a 84 percent gain in wealth during that time period, this increase was 3 times greater than what blacks experienced.
The problem grows
Starting with one factor, income, it’s clear to see how the gap grew. Income was 50 percent higher in 2011 for whites than it was for blacks and Latinos, but the median household wealth for white households was around 16 times greater. How can that be? More earnings equates to more savings, and greater opportunities to build wealth. In addition, disasters like the real estate crash have a much greater affect on blacks than on whites.
What about government programs?
The study shined a not-so-flattering light on government programs that are supposed to help build wealth. Here are some of the highlights:
- Government spending on wealth-building has more than tripled since 1994 but mostly helps people who already have wealth
- 77 percent of the home mortgage tax deduction benefits households with annual incomes between $75,000 and $500,000
- Two-thirds of all public subsidies for retirement savings go to people whose incomes are in the top 20 percent
Unless things change, the study predicts that in the next 30 years, the average white family’s net worth will grow by $18,000 per year, but growth for black and Hispanic households will be only $750 and $2,250 per year.