INTERESTING ARTICLE
Over nearly thirty years, American policies and institutional practices have created different opportunities for African Americans and whites, contributing to dramatic racial disparities in household wealth, a report from the Institute on Assets and Social Policy at Brandeis University finds. Based on an analysis of the same 1,700 working households from 1984 to 2009, the study, The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide (8 pages, PDF), found that for a typical family, a $1 increase in average income generated $5.19 in wealth for a white household but only $0.69 in additional wealth for an African-American household. The report also found that over the 25-year period, the median net worth of white households rose to $265,000, compared with just $28,500 for African-American households, resulting in the dramatic expansion of the wealth gap from $85,000 in 1984 to $236,500 in 2009. As part of the study, researchers validated five “fundamental factors” that accounted for two-thirds of the increase in the wealth gap between white and African-American households. They include number of years of home ownership; family income; employment stability; education level; and family financial support and inheritance. Marriage also was a factor, but not a significant one, the study found. For each factor, the study highlighted specific reasons that whites and African Americans have accumulated wealth at different rates. For instance, home equity rose faster for whites because white families bought homes and started building equity eight years earlier, on average, than African-American families. The ability to make larger down payments also lowered interest rates for many white homeowners, while residential segregation placed an artificial ceiling on home appreciation in many non-white neighborhoods. Based on these and other factors, the study found that the home ownership rate was 28 percent higher for whites than for African Americans. “The report shows in stark terms that it’s not just the last recession and implosion of the housing market that contributed to widening racial wealth disparities,” said Anne Price, director of the Closing the Racial Wealth Gap Initiative at the Insight Center for Community Economic Development. “Past policies of exclusion, such as discriminatory mortgage lending, which continues today, ensure that certain groups reap a greater share of all America has to offer while others are left out.”
“Public Policy, Institutional Barriers Are Pushing Racial Wealth Gap.” Institute on Assets and Social Policy at Brandeis University Press Release 2/27/13.
Primary Subject: Civil and Human Rights
Secondary Subject(s): Minorities, African Americans/Blacks
Location(s): National
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That is why it amazes me how some Blacks tend to think there is no discrimination against Blacks when it comes to employment, salary, bank loans, credit and housing. Some even have the nerve to think that because there was or is no discrimination against them, there is no discrimination. I have heard two black prominent women (who are on TV at least once a week) say that there is no discrimination. Wow! I wonder what world do they live in or who has paid them to make that statement. I know . . .it is because they have white friends. I have white friends too, but I still think there is discrimination, and part of it, is the reason that the gap is so big.
In responding to this post I think it is necessary to define the word discrimination. According to Webster, discrimination is defined as treatment or consideration of, or making a distinction in favor of or against, a person or thing based on the group, class, or category to which that person or thing belongs rather than on individual merit. The cited study is extremely misleading if not flawed and not a single distinction in the circumstances of blacks versus white is evidence of discrimination.
Let’s take a look at the very first statistic cited there. “A $1 increase in average income generated $5.19 in wealth for a white household but only $0.69 in additional wealth for an African-American household”. Do you think this is because the additional dollars accrued by blacks somehow have less intrinsic value than whites or perhaps it is due to the significant lower rate of savings and less frequent investing? Show me the discrimination here.
Here’s a flawed premise in the study, “home equity rose faster for whites because white families bought homes and started building equity eight years earlier, on average, than African-American families”. There were no institutional discriminatory practices in existence that permitted whites to have an eight year head start on purchasing homes. Further, the duration of home ownership has absolutely no correlation to the rate of appreciation; it could have an effect on cumulative value of appreciation.
“The ability to make a larger down payment enabled whites to secure lower interest rate mortgages”. This is how lending markets work. The larger the down payment, the greater the vested interest of the purchaser (more skin in the game) the less likely they will default on the loan. By the way, the larger down payment is likely, in many cases to be the result of the higher rate of savings of whites. I can’t see the discrimination here.
The residential segregation mentioned there is the result of homeowners’ choice. The “artificial ceiling” on rates of appreciation mentioned is not artificial at all. The lower rate of appreciation is merely a function of reduced demand for properties in segregated communities. A property that is listed for sale in a black neighborhood will, for the most part, appeal mostly to black prospective purchasers. Blacks comprise roughly 12% of the population so therefore 88% of prospective buyers have no interest thus lowering demand. It’s actually lower when you factor in the blacks themselves who don’t want to live in a segregated community. Thus, these properties typically command lower prices. That’s not discrimination; it’s good economic decision making.
It truly saddens me that these types of specious studies are so eagerly embraced by so many blacks to explain away our own financial failures that resulted from our own bad economic choices and decisions. The conspicuous consumption that many of us practice, having to have expensive brand name clothing, expensive jewelry, expensive cars and the like; all of which evaporate our wealth because none of those are appreciating assets. I can’t see it but maybe discrimination somehow causes us to make these sorts of choices.
Sorry. Somebody needs to say it.