U.S. ECONOMY
https://www.bloomberg.com/view/artic...americans-poor
Why Black Americans Stay Poor
1038
FEB 13, 2017 6:00 AM EST
ByMark Whitehouse
Over the past few decades, black Americans have gained on whites in a lot of areas, including education, two-parent families and employment. Sadly, that doesn’t appear to have helped them erase what may be the most important disparity: wealth.
My Bloomberg colleague Peter Coy reported last week on a study exploring the idea that racial wealth inequality stems from life choices and personal achievement -- that is, that blacks would be as rich as whites if only they got good educations, formed stronger families, worked hard and saved money.
Using data from the Federal Reserve’s Survey of Consumer Finances, the researchers found that, as of 2013, none of that seemed to matter: Whether they were college-educated, married with kids, employed full-time or prudent savers, black families’ net worth was invariably many times lower than that of white families with the same characteristics.
The result was so striking that I decided to take another look: If a 2013 snapshot suggested that all those factors had no effect, would the same be true over time? That is, how had the education, family structure, employment and savings patterns of black families changed, and had that helped them close the wealth gap at all?
The chronological picture is depressingly similar. In many areas -- college education, two-parent families, employment -- black families made progress toward closing the gap with whites from 1989 to 2013 (the earliest and latest data available). But the wealth gap ended up larger than ever. Here’s how that looks:
Closing the Gap?
Ratio of black families to white families
Note: Straight ratio for net worth; for all others, share of black households divided by share of white households with the given characteristic. *Head of household. **Average, not median.
This fits with the explanations Coy offers in his piece. For one, whites start out with an advantage: They tend to get more and larger inheritances. Also, generations of discrimination -- including redlining, mass incarceration and predatory finance -- have prevented blacks from building up wealth. Note, for example, how the wealth gap widened following the subprime-mortgage crisis of 2007, a debacle that involved a lot of bad lending focused on black neighborhoods.
What to do? Beyond enforcing anti-discrimination laws and reforming the criminal justice system, a lot can be done to boost the returns to education and work. People should be able to live where opportunities are -- which meansbreaking down barriers such as zoning laws that discourage the construction of affordable housing in desirable neighborhoods and prevent people of color from moving there. Also, employers should pay more attention to racial disparities in wages and benefits -- which research has demonstrated to be significant, even for people with the same qualifications doing the same work.
Such issues don’t appear to be anywhere on President Donald Trump’s list of priorities. Maintaining barriers to prosperity for a large portion of the population, though, is no way to make America great.
https://www.bloomberg.com/news/artic...cks-in-america
The Big Reason Whites Are Richer Than Blacks in America
Inheritance matters a lot more than previously thought. Guess who’s getting the lion’s share.
by Peter Coy
The gap between blacks and whites in income is big, but nowhere near as big as the gap in wealth. According to the Federal Reserve’s Survey of Consumer Finances, as of 2013 the median white household had $13 in net wealth for every $1 in net wealth of the median black household. For whites vs. Latinos, the gap was only a bit smaller, $10 vs. $1.
A new study trashes most of the conventional explanations—and solutions—for the wealth gap. It’s called The Asset Value of Whiteness: Understanding the Racial Wealth Gap. It’s by researchers at Brandeis University and a public policy group called Demos. The table of contents says it all:
“In some ways this report is a myth-buster. It’s looking at popular assumptions and challenging them,” Amy Traub, the associate director for policy research at Demos and co-author of the study, said in an interview.
Take college attendance. Getting higher education helps African Americans earn more money and accumulate more wealth, of course. Even so, the median white adult who attended college has 7.2 times the wealth of the median black adult who attended college, according to the study. Likewise with working full-time and raising children in a two-parent household: whites who do those things have greater wealth than blacks who do those things.
It’s natural to assume that if blacks have less wealth it’s because they’re doing less saving—i.e., more of each dollar of income is going to consumption. The opposite is the case, according to a Duke University study published last year and cited by the authors. At every income level, blacks spend less than similarly situated whites, the Duke researchers found: “Retail desertification in racially segregated neighborhoods, restricted access to affordable credit for blacks, and consumer racial discrimination, we argue, result in lower overall spending for blacks at all income levels,” they said.
To some, the report is depressing. “Bottom line, for people of color, working ourselves to the bone and doing all the right things is getting us nowhere,” Fortune Senior Editor Ellen McGirt wrote in a commentary on f
So what does account for the racial gap in wealth? Traub admits that “we haven’t fully penetrated the mystery.” One powerful factor seems to be that whites are five times as likely as blacks to receive substantial gifts and inheritances, and the sums they get tend to be much larger. The money “can be used to jump-start further wealth accumulation, for example, by enabling white families to buy homes and begin acquiring equity earlier in their lives,” the study says.The result is that whites’ wealth advantage—and blacks’ disadvantage—gets passed down from generation to generation. Which means that forms of racial discrimination “that happened in the past, like redlining, continue to show up in bank accounts today,” says Traub.
Discrimination isn’t just a problem of the past, Traub says. She points to another studyshe co-wrote on racial steering in mortgages. In 2012, for example, Wells Fargo & Co. paid at least $175 million to settle allegations that it steered thousands of black and Latino borrowers into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans. Prosecutors called the steering a “racial surtax.” Wells Fargo admitted no wrongdoing.
https://www.bloomberg.com/view/artic...americans-poor
Why Black Americans Stay Poor
1038
FEB 13, 2017 6:00 AM EST
ByMark Whitehouse
Over the past few decades, black Americans have gained on whites in a lot of areas, including education, two-parent families and employment. Sadly, that doesn’t appear to have helped them erase what may be the most important disparity: wealth.
My Bloomberg colleague Peter Coy reported last week on a study exploring the idea that racial wealth inequality stems from life choices and personal achievement -- that is, that blacks would be as rich as whites if only they got good educations, formed stronger families, worked hard and saved money.
Using data from the Federal Reserve’s Survey of Consumer Finances, the researchers found that, as of 2013, none of that seemed to matter: Whether they were college-educated, married with kids, employed full-time or prudent savers, black families’ net worth was invariably many times lower than that of white families with the same characteristics.
The result was so striking that I decided to take another look: If a 2013 snapshot suggested that all those factors had no effect, would the same be true over time? That is, how had the education, family structure, employment and savings patterns of black families changed, and had that helped them close the wealth gap at all?
The chronological picture is depressingly similar. In many areas -- college education, two-parent families, employment -- black families made progress toward closing the gap with whites from 1989 to 2013 (the earliest and latest data available). But the wealth gap ended up larger than ever. Here’s how that looks:
Closing the Gap?
Ratio of black families to white families
Note: Straight ratio for net worth; for all others, share of black households divided by share of white households with the given characteristic. *Head of household. **Average, not median.
This fits with the explanations Coy offers in his piece. For one, whites start out with an advantage: They tend to get more and larger inheritances. Also, generations of discrimination -- including redlining, mass incarceration and predatory finance -- have prevented blacks from building up wealth. Note, for example, how the wealth gap widened following the subprime-mortgage crisis of 2007, a debacle that involved a lot of bad lending focused on black neighborhoods.
What to do? Beyond enforcing anti-discrimination laws and reforming the criminal justice system, a lot can be done to boost the returns to education and work. People should be able to live where opportunities are -- which meansbreaking down barriers such as zoning laws that discourage the construction of affordable housing in desirable neighborhoods and prevent people of color from moving there. Also, employers should pay more attention to racial disparities in wages and benefits -- which research has demonstrated to be significant, even for people with the same qualifications doing the same work.
Such issues don’t appear to be anywhere on President Donald Trump’s list of priorities. Maintaining barriers to prosperity for a large portion of the population, though, is no way to make America great.
https://www.bloomberg.com/news/artic...cks-in-america
The Big Reason Whites Are Richer Than Blacks in America
Inheritance matters a lot more than previously thought. Guess who’s getting the lion’s share.
by Peter Coy
The gap between blacks and whites in income is big, but nowhere near as big as the gap in wealth. According to the Federal Reserve’s Survey of Consumer Finances, as of 2013 the median white household had $13 in net wealth for every $1 in net wealth of the median black household. For whites vs. Latinos, the gap was only a bit smaller, $10 vs. $1.
A new study trashes most of the conventional explanations—and solutions—for the wealth gap. It’s called The Asset Value of Whiteness: Understanding the Racial Wealth Gap. It’s by researchers at Brandeis University and a public policy group called Demos. The table of contents says it all:
- Attending college does not close the racial wealth gap.
- Raising children in a two-parent household does not close the racial wealth gap.
- Working full time does not close the racial wealth gap.
- Spending less does not close the racial wealth gap.
“In some ways this report is a myth-buster. It’s looking at popular assumptions and challenging them,” Amy Traub, the associate director for policy research at Demos and co-author of the study, said in an interview.
Take college attendance. Getting higher education helps African Americans earn more money and accumulate more wealth, of course. Even so, the median white adult who attended college has 7.2 times the wealth of the median black adult who attended college, according to the study. Likewise with working full-time and raising children in a two-parent household: whites who do those things have greater wealth than blacks who do those things.
It’s natural to assume that if blacks have less wealth it’s because they’re doing less saving—i.e., more of each dollar of income is going to consumption. The opposite is the case, according to a Duke University study published last year and cited by the authors. At every income level, blacks spend less than similarly situated whites, the Duke researchers found: “Retail desertification in racially segregated neighborhoods, restricted access to affordable credit for blacks, and consumer racial discrimination, we argue, result in lower overall spending for blacks at all income levels,” they said.
To some, the report is depressing. “Bottom line, for people of color, working ourselves to the bone and doing all the right things is getting us nowhere,” Fortune Senior Editor Ellen McGirt wrote in a commentary on f
So what does account for the racial gap in wealth? Traub admits that “we haven’t fully penetrated the mystery.” One powerful factor seems to be that whites are five times as likely as blacks to receive substantial gifts and inheritances, and the sums they get tend to be much larger. The money “can be used to jump-start further wealth accumulation, for example, by enabling white families to buy homes and begin acquiring equity earlier in their lives,” the study says.The result is that whites’ wealth advantage—and blacks’ disadvantage—gets passed down from generation to generation. Which means that forms of racial discrimination “that happened in the past, like redlining, continue to show up in bank accounts today,” says Traub.
Discrimination isn’t just a problem of the past, Traub says. She points to another studyshe co-wrote on racial steering in mortgages. In 2012, for example, Wells Fargo & Co. paid at least $175 million to settle allegations that it steered thousands of black and Latino borrowers into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans. Prosecutors called the steering a “racial surtax.” Wells Fargo admitted no wrongdoing.
