A few weeks ago I had the opportunity to attend a conference hosted by the Ford Foundation and Howard University’s Center on Race and Wealth. The three-day meeting was the first annual gathering of a diverse group of representatives supported by grants from the Ford Foundation’s Building Economic Security Over a Lifetime initiative. The initiative promotes programs that help low-income families achieve and maintain economic stability throughout their lives. The conference focused on a particular and troubling aspect of economic achievement in the United States: the racial wealth gap.
Few ideas are more evocative of the American dream than wealth and economic security, yet opportunities to accumulate wealth and secure income have never been equally distributed. In virtually every measure of wealth, non-white households are falling behind. For example, homeownership, the primary vehicle for building wealth for most Americans, is more attainable for white households than their minority counterparts. According to the U.S. Census, in 2008 only 47.5% of African-Americans and 48.9% of Hispanics owned their own homes, compared with 74.9% of whites. White households continue to accumulate more savings, more assets (vehicles, houses, businesses), and more wealth, consistently maintaining larger net worths than minority households. While some of this gap is attributable to higher incomes and educational attainment, it takes a longer view of history to understand and explain its persistence. Historically, some of the largest expansions of American wealth were achieved through sacrifices disproportionately shouldered by the poor, the disenfranchised, and communities of color.
Early American history is replete with examples of the expropriation of assets based on race and ethnicity. As Europeans settled the United States, Native lands were transferred and native populations relocated, Mexican landowners ceded vast portions of territory, and African Americans were stripped of possessions and forcibly brought to the Americas to work as slaves in households, businesses, and plantations. The racial/ethnic wealth gap is rooted in these centuries-old transfers of assets and perpetuated by government policies throughout the 20th century that protected and encouraged white asset accumulation. According to a report by the Joint Center for Political and Economic Studies:
During the years following the Great Depression, several key social programs and policies were instituted– e.g., Social Security, Unemployment Insurance, and the minimum wage law. These programs and policies did not cover domestic and agricultural work, two of the most significant occupations for blacks and other people of color…[W]hites are more likely to have benefited from the land grants of the Homestead Act, to have received loans to avoid foreclosure during the Depression, to have been beneficiaries of tax-funded support for higher education, and to have been recipients of Social Security benefits.
The cumulative effect of these historical trajectories is persistent asset inequality between whites and non-whites. What is meant exactly by ‘asset’ inequality? Assets, discussed in detail in an OK Policy issue brief here, are ‘stickier’ forms of wealth than a simple stream of income earned through work. Assets are land, houses, cars, estates, savings, stocks, etc. In short, anything of value that a family can use, lease, or sell to generate more value. Wealth and assets improve a family’s quality of life, provide material comfort and security during transitions and economic distress, and enable parents to provide their children with financial support for and during their education and early adulthood.
How do we explain asset inequality? Obviously, individual choices affect wealth accumulation. From the kind of work you do and where you live to personal patterns of spending and saving, individuals and families across the United States make choices that can increase their prosperity – or put it in jeopardy. What individual and family-level variables cannot explain is the persistence of the racial wealth gap. Communities of color navigate an economic and financial landscape that differs noticeably from their white counterparts and continue to encounter obstacles to building wealth that transcend individual behavior. These structural disparities include lower levels of inheritance, less income and earnings, higher unemployment, less profitable savings portfolios, lower rates of home-ownership, lower housing values and higher foreclosure rates.
How does Oklahoma compare to the United States in terms of wealth and assets? Since 1984 Oklahoma has had consistently higher rates of homeownership (69.6 percent) than the national average (67.4 percent). Unfortunately, we are also slightly higher than the national average in terms of the racial homeownership gap. The white homeownership rate in Oklahoma according to the 2000 Census was 9.1 percentage points higher than American Indians, 26.8 points higher than Hispanics and Latinos, and 29.5 points higher than the Black homeownership rate. While home-ownership is only one facet by which to assess the wealth gap, it is an important and substantive piece of the puzzle.
A simple bank account is the most prevalent American asset, and without one, households are often left dependent on high-interest “fringe” financial sector products. Analysis from the Federal Reserve finds that racial disparity between the banked and the unbanked is wide. Only 5.3 percent of white households are unbanked, but Latino (25 percent) and African American (24.2 percent) households are unbanked at more than quadruple the rate for whites. In response to these stark disparities, an increasingly active network of national organizations, philanthropic initiatives and statewide coalitions are leading the way in identifying policies that promote economic security, narrow the racial wealth gap, and reinforce responsible financial behaviors. In Oklahoma, a statewide coalition has emerged to identify and strengthen programs and policies that help Oklahomans achieve economic security. Oklahoma Assets has focused on opportunities for low and moderate income families and communities, including a recently released issue brief on policy options to promote savings in the state.
In just over 30 years from now, Census projections expect the population of the United States to be majority minority. Left unaddressed, the gap between white and non-white wealth will seriously erode the economic prosperity that Americans expect for themselves and their children. Pervasive financial insecurity among communities of color, besides being a drag on future economic growth, sends a dangerous symbolic message to a generation of minority youth. Wealth inequality discourages the best and the brightest from believing in the attainability of a fundamental American ideal – the unfettered opportunity for betterment.