Everyone knows that wealth is unequally distributed. The work of Thomas Piketty has made this a mainstream concern. But the magnitude of the gap between white and black Americans is on a different scale. According to a recent report from two progressive think tanks, CFED and the Institute for Policy Studies, white households own, on average, seven times as much wealth as African-American households (and six times as much as Latino ones). The Forbes 100 billionaires are collectively as rich as all black Americans combined. At current growth rates, it would take black Americans two hundred and twenty-eight years to have as much wealth as white Americans have today.
Some of the reasons are clear: the unemployment rate among black Americans is roughly twice that of whites, and black people earn, on average, between twelve and twenty-two per cent less than white people with similar education and experience. But the wealth gap between black and white Americans is much bigger than the income gap, thanks to a toxic combination of institutionalized discrimination, persistent racism, and policies that amplify inequality. As Thomas Shapiro, a sociologist at Brandeis and the co-author of the seminal book “Black Wealth/White Wealth,” told me, “History and legacy created the racial gap. Policies have maintained it.” Together, they contribute to what he’s called “the hidden cost of being African-American.”
The effects of this history are still with us, because wealth, unlike income, accumulates and can be passed down from generation to generation. If you have less wealth to start with, you’ll likely spend any added income on bills or paying down debt rather than saving or investing it. A 2013 study co-authored by Shapiro found that for white families every dollar increase in income yields an increase of $5.19 in wealth; for black households the figure is just sixty-nine cents.
More important, discrimination, though no longer legal, is still pervasive. It holds down black incomes and has a huge impact on homeownership—which Shapiro identifies as “the largest driver of the racial wealth gap.” Only forty-one per cent of black Americans own their homes, compared with seventy-one per cent of whites, and black homeowners earn a much smaller return on their property. Because they are less likely to inherit money or get family help buying a home, they make smaller down payments and, on average, buy houses eight years later in life, leaving less time for the investment to appreciate. House prices in majority-black neighborhoods have also risen less than those in comparable majority-white ones. As Asante-Muhammad told me, “White people still do not generally want to live in a neighborhood that’s more than twenty to twenty-five per cent black.” That means fewer buyers, which holds house prices down. Shapiro has found that housing segregation costs black families tens of thousands of dollars in home equity.
THE WIDENING RACIAL WEALTH DIVIDE