African Americans will have a spending power of $1.5 trillion by 2021, but the median Black household wealth will hit zero by 2053, according to a new study.
The wealth gap between Black and white is growing and unlike what many had hoped, higher education is not the great equalizer. Blacks are becoming more and more educated, but the gap is still there and growing. White Americans with a college degree are on average three times as wealthy as Black Americans with the same credential, and in families whose head of the household is employed, white families have 10 times the wealth of Black ones. One estimate on the conservative end suggested that this wealth gap could take two centuries to close,” The Atlantic reported.
What is sustaining the gap? White inheritance? Black families, according to the report, have not amassed wealth to pass down to the next generation — and this makes a major difference.
For every $100 in white family wealth, Black families have only $5.04, according to the New York Times. And the stats get worse. According to the Economic Policy Institute, more than one in four Black households have zero or negative net worth, compared to less than one in 10 white families without wealth.
There is truth to the saying “The rich get richer while the poor get poorer.” Tatjana Meschede, a researcher at the Institute on Assets and Social Policy at Brandeis University, says that wealth is “sticky” as it usually stays within a family.
Meschede decided to dig deeper into the issue.
“A forthcoming study from Meschede and Joanna Taylor, also a researcher at Brandeis, in the American Journal of Economics and Sociology, makes the point clearly. Building on a 2017 study of theirs that examined wealth accumulation among college graduates—as well as ‘intergenerational financial transfers,’ like when a parent helps a recent college grad out with rent or, say, gives her $1,000 a month to spend on whatever she pleases—the two looked specifically at how family inheritances, which are usually larger and tend to come all at once, factor into building and maintaining wealth,” The Atlantic reported.
The study’s findings break down the problem.
“Among college-educated black families, about 13 percent get an inheritance of more than $10,000, as opposed to about 41 percent of white, college-educated families,” Taylor said in a statement. White families who receive such an inheritance get more than $150,000 on average from the previous generation. For Black families, the amount is less than $40,000.
This money not only helps in the short-term. It is a life change for generations.
So why have Blacks been able to attain generational wealth? Experts point as far back as slavery as a culture. Following that, segregation made it difficult for Black to become wealthy as a whole There were also policies in place that worked against Blacks from amassing wealth. Even homeownership was difficult, from redlining to unfair loan deals.
“Even after these policies were eliminated, the lack of wealth still prevented minorities from moving up to the green neighborhoods and kept the communities separated by race,” Forbes reported.
There is a solution, researchers say. The Atlantic reported: “There have been proposals, including systems of reparations such as baby bonds for black families that are scaled to family wealth, to get kids started on an equal level. Those ideas seem to be on the right track—a college degree alone certainly can’t make up the difference.”
Morning Reminder: Wealth Ain’t Income. “Whites with college degrees are on average 3x as wealthy as Blacks w/ same degrees. White families have ~10x the wealth of Black ones.” One estimate, suggests this wealth gap cld take 200 yrs to close. #BlackHistory https://t.co/dyQdvZSbEh
— P. Gabrielle Foreman (@profgabrielle) July 21, 2018
https://twitter.com/omgdadno/status/1021247750254596096
