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The Widening Racial Wealth Divide

June 7, 2010

On May 17th, the Institute on Assets and Social Policy (IASP) at Brandeis University released a shocking study that found that the wealth gap between White and Black households in America nearly quadrupled between 1984 and 2007.  In 1984 the average White household had $22,000 in assets and the average Black household just $2,000.  By 2007 the disparity rose sharply with the assets of the average White household at $100,000 and that of average Black households at $5,000.

Public policies during the period, including tax cuts on investments and inheritances which benefit the wealthiest Americans, significantly contributed to this profoundly disturbing longterm economic trend. 

But more fundamentally, the study found that racial discrimination bars Black Americans from equal access to economic opportunity.  According to According to IASP Director Tom Shapiro, “even when African-Americans do everything right – get an education and work hard at well paying jobs – they cannot achieve the wealth of their white counterparts.”   He attributes this to persistent discrimination in employment, credit and housing.  Simply put, Blacks are more likely to be paid less, denied loans or charged higher interest rates and barred from housing in areas close to where there are better jobs and schools.

And this was the situation before the onset of the current recession.

According to data released by the Bureau of Labor Statistics on May 7th, the national unemployment rate in April was 9.9 percent.  For Whites, it was 9 percent, while for Blacks it was 16.5 percent.  In states such as Illinois, Ohio, Alabama and South Carolina, the unemployment rate is estimated to be above 20 percent.  In Michigan the figure is 27 percent, and in Detroit a staggering 50 percent.  And these are the official rates that do not include so-called “discouraged workers” who have stopped looking for employment.

The impact is devastating for Black Americans already blocked from building a strong economic foundation for themselves and their families.  One statistic stands out: a report released by Economic Policy Institute in January of this year revealed that the poverty rate for Black children, already at an unacceptably high rate of 34 percent in 2008, will rise to 50 percent by the end of 2010.  What is a troubling recession for the majority is a disastrous depression for the average Black family barred from accumulating the wealth that would have protected them from being forced into poverty. 

For example, in a May 30th article in the New York Times, staff writer Michael Powell detailed the effects of this economic inequity in Memphis, Tennessee: “Black middle-class neighborhoods are hollowed out, with prices plummeting and homes standing vacant in places like Orange Mound, White Haven and Cordova. As job losses mount – Black unemployment here, mirroring national trends, has risen to 16.9 percent from 9 percent two years ago; it stands at 5.3 percent for Whites – many Blacks speak of draining savings and retirement accounts in an effort to hold onto their homes. The overall local foreclosure rate is roughly twice the national average”.

The Lawyers’ Committee continues to attack discrimination in education, employment, housing and lending that are at the root of this tragedy.  For example, on behalf of historically Black colleges and universities (HBCUs) in Maryland we have filed suit against the Maryland Education Commission seeking to end decades-long unequal application of public resources HBCUs and traditionally white institutions.  Through our Access Campaign we are working to correct employer abuses of credit and criminal background checks.  And our Loan Modification Scam Prevention Network protects home ownership in Black and Latino communities by combating those who seek to defraud distressed homeowners and often target minorities.

Racial discrimination, historic and ongoing, has greatly exacerbated the current economic crisis for Black Americans.  We must recognize this and make the dismantling of racial barriers a central feature of a true recovery in America.

Barbara Arnwine

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