How America Built the Racial Wealth Gap

Straight Up: Will leaders ever step up to fix the mess that social policy and our checkered past created?

Comstock Images/Getty Images
Comstock Images/Getty Images

(The Root) — The cynic might say that except for a small number of exceptional figures like Barack Obama, Oprah Winfrey or Michael Jordan, America is not much interested in truly full inclusion for African Americans. Any fair assessment must concede that the black road to full citizenship in America has been marked by a lot of rough patches and more than a few major detours, and in some important respects remains an incomplete journey.

To begin with, one need only think about the most recent era in this journey. Black communities and leadership are deeply preoccupied, even today, with trying to find a path out of unacceptably high rates of poverty and unemployment, as well as unacceptably high rates of school dropouts and poor achievement. The civil rights and black activist communities must, tragically, also remain mobilized to defend an effective right to vote in many places, including before an apparently skeptical U.S. Supreme Court. And, of course, the scourges of racial profiling, arbitrary stop-and-frisk policies, mass incarceration and an utterly failed drug war could be added to this list of major detours and bad stretches still remaining on the path to full black citizenship.

None of these, however, would be the top exhibit in the cynic’s case for bemoaning the persistently marginalized status of blacks in America. No. As a number of recent reports have underscored, the ultimate marker of the hard road that blacks have traveled in America is the wealth gap. When pioneering sociologists Melvin Oliver and Thomas Shapiro first reshaped the academic and policymaking landscape with their book Black Wealth/White Wealth: A New Perspective on Racial Inequality in 1995, they identified a white-to-black wealth gap, a ratio of roughly 11-to-1. For every dollar of wealth in white hands, blacks had a mere 10 cents.

Two recent reports make it clear that the gap has significantly worsened, not improved, since that time. In the wake of the Great Recession, a Pew Research Center report showed that the white-to-black wealth gap rose from a dispiriting figure of 11-to-1 in 2004 to 20-to-1 in 2009. In concrete dollars the report showed that blacks lost 53 percent of their wealth as a result of the Great Recession, falling from a median net worth of $12,124 in 2005 to only $5,677 in 2009. For whites, the comparable figures are $134,992 to $113,149.

The greater proportionate wealth decline for blacks is largely attributable to the fact that a much greater share of black wealth involves homes, many of which lost considerable value in the recession. A more recent report (pdf) out of Brandeis University, based on a representative sample of families who have been followed for 25 years, shows that the 1984 black-white wealth gap of $85,070 tripled to a whopping $236,500!

Why does it matter? Social scientists agree that wealth is a key factor in the ability of individuals or families to maintain a particular standard of living and to accomplish important goals in life. Wealth is a material cushion in case of job loss or serious illness in a household. It can provide a foundation for sending children to college, launching a business or making other forward-looking investments (e.g., saving for retirement).

In an economy in which fewer and fewer people have traditional pensions, in which we are all likely to undergo more job changes and therefore potential spates of unemployment and in which higher education and training are essential to job-market competitiveness, having the financial wherewithal to support these adaptations is increasingly essential. A far higher fraction of whites than blacks possess the resources needed to navigate these challenges.

Now, here’s the rub: Both discriminatory social policy and everyday racial discrimination played the major roles in creating today’s gargantuan wealth disparities between blacks and whites. And I’m not even mainly referring to slavery here, though it, too, is part of the story. Savings rates, family structure, even educational attainment amount to small elements of the story. The real issue here is that at numerous points, social policy in the U.S. either openly acted against or short-changed African Americans while privileging whites.