New Report Finds Racial Wealth Inequality A Growing National Emergency
Last year, Prosperity Now and the Institute for Policy Studies (IPS) published research which found that it would take the average Black family 228 years to amass the amount of wealth enjoyed by the average White family today. As mind-boggling as this statistic is, new evidence documenting actual wealth disparities between Black and Latino families and their White counterparts forces us to consider this multi-century wait as a best-case scenario. The Road to Zero Wealth, published this week, shows not only that the racial wealth divide will never close if the trends of the past 30 years continue, but also that the continued growth in racial wealth inequality will hollow out the American middle class.
Whereas our 2016 report, The Ever-Growing Gap, examined average wealth rather than median wealth to tell the story of the country’s growing racial wealth inequality, the use of averages distorted the scope of the problem by including the wealthiest households in our calculations. The Road to Zero Wealth instead zeroes in on the challenges facing a typical family by examining median instead of average wealth. The result is an even more disturbing account of racial wealth inequality.
For starters, when we exclude consumer durable goods—things like televisions that can’t easily be converted to cash when emergencies arise—we find that median Black and Latino households own just $1,700 and $2,000 in wealth, respectively, compared to the $116,800 owned by White households. Compared to what these communities owned just a little more than a generation ago, these figures respectively represent just 25% and 50% of the wealth held by each group in 1983. In other words, the wealth owned by households of color has been declining. In stark contrast, median White household wealth has risen by 14% over the same period (from $102,200 to $116,800).
While it’s obvious to many that the accelerating decline in wealth for Black and Latino families has serious implications for the economic well-being of these communities, what isn’t so obvious to most is the impact this problem will have for the rest of us. The Road to Zero Wealth finds that just as median Black and Latino wealth has gone down and White wealth has gone up, overall household wealth has decreased by 20%--from $78,000 in 1983 to $64,000 in 2013.
Unfortunately, if this problem isn’t addressed immediately, the wealth problems facing communities of color—and the residual impacts of these problems on all of us—are only going to get worse. Our projections find that by 2020, Black and Latino households will lose another 10-20% of their current wealth, and that by 2024, Black and Latino household wealth is on track to decrease by a total of 20-30%. Perhaps most alarming is that median Black and Latino wealth are on track to hit zero within our lifetime: the trends of the past 30 years clearly tell us that about 10 years after 2043 (when communities of color are projected to comprise the majority of the U.S. population), median wealth for Black families is projected to hit zero. Latino families can expect to see their median wealth hit zero just 20 years later, in 2073.
Of course, all of these findings assume that the racial wealth divide isn’t exacerbated further over the course of the next few years. In essence, what we project in The Road to Zero Wealth is reflective of current policy. This is critical to keep in mind because public policy, not individual choices, is the major driver behind the racial wealth divide. In the context of the Trump Administration, this is a chilling observation. Already in the first nine months of the current administration’s term in office, we have seen several policies that would exponentially increase the rate of growth in the racial wealth divide. Proposed policies in the areas of health care, housing and immigration make this moment even more urgent: doing nothing is simply no longer an option.
Given that bad policies got us here in the first place, The Road to Zero Wealth identifies a range of policy interventions that could pull the American middle class back from the brink of extinction. Among others, the report recommends that the President and Congress put forward a tax reform proposal that is fair and equitable. Instead of passing tax cuts that help the wealthy become wealthier, we should rebuild and reinvest in the middle class which, as we highlight in the report, currently only includes Black and Latino earners at the top of the income spectrum and those with advanced degrees. Instead of allowing predatory financial actors to strip what little wealth households of color still have, we need to do more to protect families’ hard-earned wealth so they can build long-term financial well-being.
It’s hard to say if the current administration, Congress and others will heed the warning signs we lay out in The Road to Zero Wealth, but our shifting demographics tell us that our economic well-being as a nation is now in more danger than ever before, and the problem is only going to become worse. If we truly care about rebuilding our country and ensuring that everyone can prosper, then addressing the racial wealth divide must be our top priority.