During the Assets Learning Conference special event, “Unfinished Business: Winning the Battle for Economic Opportunity,” Cy Richardson of the National Urban League declared that in the battle for economic opportunity, “We’re not winning. We’re losing.” As part of the event, ABPN hosted a discussion about closing the racial wealth gap and expanding economic opportunity.
The racial wealth gap has tripled in size since 1984. According to the U.S. Census Bureau, African American households earn just 67% of the national average, and CFED recently found that households of color have approximately one-tenth the median net worth of white households. While we know wealth has declined for many families since the Great Recession, parallels between race, ethnicity and inequality remain staggering, and households of color are struggling to regain an economic foothold. Evidence illustrates that the black-white economic gap hasn’t budged, and ABPN urged us to address an important question: why should people care?
Here are three reasons we should all be concerned about the racial wealth gap:
- Minorities are needed to grow and sustain the economy.
The minority population in the US is growing and, as Wade Henderson expressed during the event, we increasingly rely on these workers to support productivity and maintain our quality of living. We need to invest in communities of color through asset development (Bob Annibale mentioned various forms such as tax credits, tax reforms, credit building, citizenship and others) and sustainable employment in order to grow and support the economy.
- The student loan borrowing gap delays economic advancement and contribution to the economy.
Student loan debt has surpassed the trillion dollar mark nationally, but minorities are disproportionately impacted as there is a major gap in borrowing. According to a National Journal article, “half of all black graduates reported taking on at least $25,000 or more to complete their undergraduate degrees between 2000 and 2014, compared to 34% of white graduates.” Gaps in income and wealth mean black families have fewer resources to cover rising college costs. The debt burden not only disrupts college completion, but delays economic advancement. Students with large debt loads are more likely to forego large purchases, such as vehicles and homes, lessening their potential contributions to the economy.
- Mass incarceration, the school-to-prison pipeline and the racial wealth gap are self-reinforcing.
Evidence from Pew reveals that the incarceration rate of black men is more than six times higher than that of white men, and New America explains that time spent behind bars can reduce annual earnings by 40% and has permanent negative consequences for economic mobility that affects younger generations. Many minority children are not only impacted by parental incarceration rates, but are subject to the school-to-prison pipeline. The U.S. Department of Education Office for Civil Rights reports that black students represent merely 18% of preschool students, but make up over 40% of preschool student suspensions. Southern Poverty Law Centerreports that black students are almost three times more likely than white students to be suspended in middle school. Too often, students who endure multiple suspensions are driven out of the classroom and into the juvenile or criminal justice systems. Additionally, higher suspension rates may prevent high school completion resulting in reduced earning potential and decreased economic opportunity.
Although the racial wealth gap is ever present, speakers during the ABPN event posed innovative ideas for how to level the economic playing field. For example, we could provide a savings account for every child born in the US or a generational “baby bond” whereby the amount of the bond is based on household wealth (i.e., less wealth = larger bond) and is able to grow from birth through adulthood. Another suggestion is to replace the home mortgage interest tax deduction with a simple, flat, refundable homeowners’ tax credit, so that the U.S. tax code can truly support more people achieving the dream of homeownership. While no single solution will close the racial wealth gap, perhaps we have to start by acknowledging that we are not yet a post-racial society and then determine strategies that improve economic opportunity for all.