By Freddie Allen
NNPA Washington Correspondent
ASHVILLLE, N.C. (NNPA) – Before the end of the Great Recession, researchers at United for a Fair Economy, a group that advocates for economic justice, estimated that it would take 594 years to close the wealth gap between Blacks and Whites. And that was optimistic.
“Now that we’ve had this crisis, it’s much worse than that,” said Terry Keleher, program director for the Racial Justice Leadership Action Network at Applied Research Center, a national racial equality advocacy group.
Keleher addressed many of the underlying issues that affect the racial wealth gap here at the recent America Healing Initiative conference, a summit of community activists, civil rights leaders and like-minded stakeholders fighting to eradicate structural racism and racial inequality.
“Many people still believe in the myth of the level playing field and meritocracy,” said Keleher. “We have to challenge these myths.”
Keleher said that widespread racial discrimination exists in the key areas where wealth is built.
“Those areas are employment, education and housing. People of color are three times more likely than Whites to have subprime loans,” he added. “There’s a lot that’s not level and not fair about what’s going on.”
The Institute on Assets and Social Policy (IASP), an organization that promotes economic equality, published a report that challenged the notion that the lack of personal responsibility and lifestyle choices are largely to blame for the low levels of wealth development in the Black community.
“Our analysis found little evidence to support common perceptions about what underlies the ability to build wealth, including the notion that personal attributes and behavioral choices are key pieces of the equation,” stated the Institute on Assets and Social Policy brief.
Instead the brief points to obstacles in schools, on the job and in neighborhoods that expose deep racial wounds. The Institute tracked 1,700 families over 25 years for their study. It found that the length of homeownership, household income, unemployment, college education and inheritance were prime factors in understanding the depth of the wealth gap between Blacks and Whites.
“Together these fundamental factors account for nearly two-thirds (66 percent) of the proportional increase in the wealth gap,” said the report.
Practices such as redlining and residential segregation made it much harder for Blacks to reap financial benefits from homeownership than it is for Whites. The Institute’s report also found that Whites were more able to use family inheritances to make down payments on their homes, allowing them to start building home equity almost a decade earlier (eight years) than Blacks.
All of these factors contributed to a Black homeownership rate that is almost 30 percent lower (-28.4 percent) than the homeownership rate for Whites. Even those Black home owners are suffering.
“Overall half the collective wealth of African-American families was stripped away during the Great Recession due to the dominant role of home equity in their wealth portfolios and the prevalence of predatory high-risk loans in communities of color,” stated the brief. “The paradox is that even as homeownership has been the main avenue to building wealth for African-Americans, it has also increased the wealth disparity between Whites and Blacks.”
The Black unemployment rate has been double the rate of Whites for the past four decades. According to the latest jobs report released by the Labor Department, the jobless rate for Blacks was 13.2 percent in April compared to the 6.7 percent for Whites.
“Due to discriminatory factors, Black workers predominate in fields that are least likely to have employer-based retirement plans and other benefits such as administration and support and food services,” stated the report. “As a result, wealth in Black families tends to be close to what is needed to cover emergency savings while wealth in White families is well beyond the emergency threshold and can be saved or invested more readily.”
The ability to leave behind family wealth for future generations also contributed to the wealth divide. According to the Institute’s report, “Whites were five times more likely to inherit than African-Americans.”
And when Whites left money to family members it was 10 times the amount that Blacks left. Blacks also spent what little left was left behind on immediate needs, ultimately draining their ability to grow that wealth or invest in education, starting businesses or buying homes.
Keleher used walking escalators, often seen in large airports, as a metaphor for the generational Black-White wealth gap.
“Imagine White people coasting along on this hidden machine as people of color have to walk against the grain on the other side,” said Keleher. “It looks like a level playing field, it looks like the starting point is the same, but there’s this hidden machinery or system underneath that’s carrying some forward and holding others back.”
The Institute’s brief recommended that lawmakers address the racial wealth divide by making sure that homeownership policies guarantee fair mortgage lending practices, raising the minimum wage, investing in early childhood education programs and limiting the preferential tax treatment of the wealthiest families, treatment “that costs taxpayers and provides huge benefits to less than 1 percent of the population while diverting resources from schools, housing, infrastructure and jobs.”
Keleher said, “We have to get very concrete and specific about the policies that are truly going to have an impact that bring us towards equity, inclusion and unity. We’re going to have to look at inheritance taxes, we’re going to have to look at a lot of the free giveaways that are given to corporations and wealthy people and White people and we’re going to have to look at how we’re going to make things more fair.”