40 Acres and a Mule

Article excerpt

The Black-White Wealth Gap in America

In 1965, the last of a series of laws that capped the civil rights movement was passed in the United States. No one expected socioeconomic conditions for African Americans to improve straightaway as a result of "equal opportunity." However, a generation later, it might be more reasonable to expect substantial progress toward racial equity to have been made. Still today, blacks are half as likely to graduate from college as whites, twice as likely to be unemployed, and earn about 55 percent of what whites make. As bad as these statistics sound, they represent improvements since the 1960s; what is more, they obscure the real nature of racial inequality in the United States today: property and class.

In fact, if there were one statistic that captured the persistence of racial inequality in the post-civil rights United States, it would be net worth -- also known as wealth, equity, or assets. If you want to know your net worth, all you have to do is add up everything you own and subtract your total amount of outstanding debt. When we do this for white and minority households across America, incredible differences emerge: Overall, the typical white family enjoys a net worth that is around ten times that of its non-white counterpart. Latinos -- a very diverse group -- overall fare slightly better than African Americans but still fall far short of whites on this indicator. To make matters worse, this "equity inequity" has grown in the decades since the heralded civil rights triumphs of the 1960s.

The wealth gap cannot be explained by income differences alone. That is, even when we compare black and white families at the same income levels, asset gaps remain large. For instance, at the lower end of the economic spectrum (incomes less than $15,000 per year), the median African American family has a net worth of zero, while the equivalent white family holds $10,000 of equity. Likewise, among the often-heralded new black middle class, the situation is not much better. The typical white family that earns $40,000 per year enjoys a nest egg of around $80,000. Its African American counterpart has less than half that amount.

CONSEQUENCES OF ASSET INEQUITY

The consequences of this racial wealth gap are not benign; rather, wealth differences account for many of the racial differences in socioeconomic achievement that have persisted in this era since the Civil Rights Movement. Just comparing blacks and whites, blacks are less likely to graduate from college, earn less, and are more likely to rely on welfare. However, when we compare African Americans and whites who are coming from similar socioeconomic backgrounds in terms of income and wealth, we find that African American children are more likely to graduate from high school than whites are and are just as likely to complete college. Likewise, we find that the wage gap between blacks and whites disappears and that African Americans are just as likely as Anglos to be working full-time. Among the poor, it is a lack of assets that explains the higher propensities of blacks to rely on welfare. In short, the economic problems of African Americans rest in the realm of property relations, not in the labor market.

Stacey Jones, an African American woman with a graduate degree and a solidly middle-class job, typifies the bind in which many minority parents find themselves. "I find it hard to locate a decent school in Atlanta for my children without resorting to parochial education because I am, in effect, priced out of home-buying in good school districts." She explains, "This, in turn, makes it difficult for me to pay more for housing, since I am spending a good deal of my income on education for my children." This is the dilemma of the black middle class, a growing group that is often touted as a badge of racial progress. A lack of assets means living from paycheck to paycheck, being trapped in a job or a neighborhood that is less beneficial in the long run, or not being able to send one's children to the top colleges because one lacks the asset cushion to facilitate change. …