Report: Ever-Growing Gap

growing-gap-report-cover

The Ever-Growing Gap: Failing to Address the Status Quo Will Drive the Racial Wealth Divide for Centuries to Come

Racial and economic inequality are the most pressing social issues of our time. In the last decade, we have seen the catastrophic economic impact of the Great Recession and an ensuing recovery that has bypassed millions of Americans, especially households of color. This period of economic turmoil has been punctuated by civil unrest throughout the country in the wake of a series of high-profile African-American deaths at the hands of police. These senseless and violent events have not only given rise to the Black Lives Matter movement, they have also sharpened the nation’s focus on the inequities and structural barriers facing households of color.

However, even when these economic inequities do get attention, the focus is often on a single facet of the issue: income. The new report Ever-Growing Gap, published by the Institute for Policy Studies and the Corporation for Enterprise Development, focuses instead on a related but distinct facet of the issue: the essential role that wealth plays in achieving financial security and opportunity. It examines our country’s growing racial wealth divide and the trajectory of that divide.

This growing wealth divide is no accident. It is the result of public policy designed to widen the economic chasm between white households and households of color and between the wealthy and everyone else. In the absence of significant reforms, the racial wealth divide—and overall wealth inequality—are on track to become even wider in the future.

Find shareable graphics here.

Key Findings:

  • Over the past 30  years the average wealth of white families has grown by 84%—1.2 times the rate of growth for the Latino population and three times the rate of growth for the black population. If that continues, the next three decades would see the average wealth of white households increase by over $18,000 per year, while Latino and Black households would see their respective wealth increase by only $2,250 and $750 per year.
  • Over the past 30 years, the wealth of the Forbes 400 richest Americans has grown by an average of 736%—10 times the rate of growth for the Latino population and 27 times the rate of growth for the black population. Today, the wealthiest 100 members of the Forbes list alone own about as much wealth as the entire African American population combined, while the wealthiest 186 members of the Forbes 400 own as much wealth as the entire Latino population combined. If average Black households had enjoyed the same growth rate as the Forbes 400 over the past 30 years, they would have an extra $475,000 in wealth today. Latino households would have an extra $386,000.
  • By 2043—the year in which it is projected that people of color will make up a majority of the U.S. population— the wealth divide between white families and Latino and black families will have doubled, on average, from about $500,000 in 2013 to over $1 million.
  • If average black family wealth continues to grow at the same pace it has over the past three decades, it would take black families 228 years to amass the same amount of wealth white families have today. That’s just 17 years shorter than the 245-year span of slavery in this country. For the average Latino family, it would take 84 years to amass the same amount of wealth White families have today—that’s the year 2097.

Addressing this growing crisis:

  • Conduct an evidence-based, government-wide audit of federal policies to understand the role current policies play in perpetuating the racial wealth divide
  • Fix unfair, upside-down tax incentives to ensure households of color also receive support to build wealth
  • Address the distorting influence of concentrated wealth at the top through the expansion of existing progressive taxes and the exploration of a dedicated wealth tax

Read the full report here [PDF].

Find shareable graphics here.

Coverage for The Ever-Growing Gap:

The Wall Street Journal: It Would Take 228 Years for Black Families to Amass Wealth of White Families, Analysis Says

The Chicago Tribune: Jesse Jackson: Poverty, desperation in world-class city

The Nation: The Average Black Family Would Need 228 Years to Build the Wealth of a White Family Today

Marketplace: New report examines country’s racial wealth divide

Chuck Collins is the director of the Program on Inequality and the Common Good at the Institute for Policy Studies.

Dedrick Asante-Muhammed is the director of the Racial Wealth Divide Initiative at the Corporation for Enterprise Development.

Josh  Hoxie is the director of the Project on Opportunity and Taxation at the Institute for Policy Studies.

Emanuel Nieves is the Government Affairs Manager at the Corporation for Enterprise Development.

  • Madderton

    The average white household in the USA has $656,000?

    Something in this study isn’t right. Seems political.

    • Kevin Smith

      It’s a biased political junk “study”……

      • Joe Curmudgeon

        The study says the mean white household has $656,000. But the MEDIAN is $106,000. All this says is that wealth is really skewed to the upper end.

        But here’s another distortion – Black families, relative to white families, have much higher rates of single-parenthood. The white community has wealth (more generally) shared between two people whereas in the black community it’s wealth generated by one person. Of course, not in all cases, but the differences are enough to skew the numbers.

        The distortion due to family structure also impacts the measures of household income inequality.

    • Alan Duval

      Amazingly, the study has a methodology section:

      The figures presented in this report were calculated using Survey of Consumer Finance (SCF) net worth figures, as calculated using Edward Wolff’s framing in “Household Wealth Trends in the United States, 1962-2013: What Happened Over the Great Recession?” The main difference in this framing from the standard SCF definition of net worth is the exclusion of consumer durable goods (i.e., automobiles, electronics, furniture, etc.). This definition is rooted in the idea that wealth should be readily converted to cash (i.e., fungible), and durable goods are not.68

      Figures are in 2013 dollars except when specified as 2015 dollars. Forbes 400 figures come from the 2015 edition of that publication, as well as historical figures from “Discontinuities in the Distribution of Great Wealth: Sectoral Forces Old and New,” by Leonard Broom and William Shay. Projection figures were calculated using a simple compounding interest projection formula.

      And here’s Edward Wolff’s paper:
      http://www.marineconomicconsulting.com/w20733.pdf

      • Madderton

        Cool, still doesn’t add up that the average white household is stacked with $650k

  • Kevin Smith

    How interesting Asians were not included…. would they blow the lid off the idea that income differences are not solely race based and actually achievement based, regardless of race ? I mean asians are a minority and that fact does not seem to negatively affect their prosperity.

    • Alan Duval

      You are literally lumping Blacks in with Asians and suggesting that because both are minorities that minority status is not the problem.

      Different minorities are different. Do I even need to say that? Seriously?

      Let’s look at how the legal system negatively impacts blacks disproportionately, and the basis for that:

      Have you heard of the cross-race effect? This is where people find it easier to recognise people of their own race than they do people of other races (presumably a product of exposure at and from birth), to the point where they actually use completely different methods to recognise faces of different races. With their own race they use holistic recognition, which is quick and easy. With other races they use featural processing, which takes longer (and for some people longer processing times is actually discomforting).
      ‪http://perso.unifr.ch/roberto.caldara/pdfs/Michel_VC_06.pdf ‬‬

      And thus, people find it harder to detect an individual’s emotional state if that person is of a race that they are under-exposed to:
      http://ursulakhess.com/resources/BH06.pdf

      The above paper is about this situation as regards to the difference between white and Asian faces… of course, black faces are the most significantly different looking (due to lack of reflected light and all that), so you can anticipate that the effect will be stronger with black faces (hence the failure to accurately detect age, and thus responsibility of black boys in the following article).

      http://www.theatlantic.com/national/archive/2014/03/cops-tend-to-see-black-kids-as-less-innocent-than-white-kids/383247/

      …and that, along with centuries of white supremacist propaganda, is why Asians, as a minority, are different from Blacks.

  • Kevin Smith

    The same tax polices are available to anyone regardless of race. It’s the financial skills and dedication that are different. Why would anyone think evolution has been at the same rate for all races? Even dog breeds have different characteristics that are UNIVERSALLY acknowledged. Why would humans be any different ?

    • Alan Duval

      Bullshit. Financial skills and tax policies don’t mean shit if you have no money upon which to exercise those skills, and with which to manipulate tax policy.

      People with money are just buffered against their own mistakes. One need only look at bankruptcy laws to see this… and then there’s a legal system that makes it more expensive to pursue payment than it is to write off the loss, so wealthy people can get away with shit like this:
      http://www.usatoday.com/story/news/politics/elections/2016/06/09/donald-trump-unpaid-bills-republican-president-laswuits/85297274/

      Poor but not poverty stricken people have been shown to be better with money than wealthy people (mostly because they have skin in the game when they spend money, and can’t do so frivolously). But poverty-stricken people have been shown to lose, on average 13 IQ points, as a by-product of being poverty stricken:
      https://www.princeton.edu/main/news/archive/S37/75/69M50/index.xml?section=topstories

      That is not a racial issue, but as white wealth dynasties are the norm, and black wealth dynasties are not, and as black people are looked over for jobs for which they are qualified in favour of equally qualified (and sometimes less qualified) white people it’s clear why this happens.
      http://www.nber.org/digest/sep03/w9873.html

      • https://vimeo.com/user4975131 Alfredo Correa

        Alan Duval, you wrote: “People with money are just buffered against their own mistakes. One need only look at bankruptcy laws to see this… and then there’s a legal system that makes it more expensive to pursue payment than it is to write off the loss, so wealthy people can get away with shit like this:”

        http://www.usatoday.com/story/… with all the respects….you nailed it!!

  • Kevin Smith

    If you want income equality go to Cuba …. everyone makes the same $15.00 a month. But even there after 60 years of being “comrades”, the Latin people told us to be careful dealing with the Black people in Cuba. I wonder why they don’t trust Black people ?

    • Alan Duval

      The funny thing about trust is you have to give it in order to receive it.

      Maybe the Cubans’ lack of trust of Blacks is systemic, and projected.

  • BerkeleyBernie

    It would be informative to also see a comparison of the gap excluding the top 10% (which are, of course, overwhelmingly white and overwhelmingly favored by economic policy). That would give an indication of the difference of rates in accumulating wealth for those not already safely entrenched outside of any need to generate income through actually working.

  • Goldcoaster

    News Flash. This is not a white versus black versus Latino problem.
    It is a wealth CONCENTRATION problem. If you exclude the top 5%, everything else equals out pretty well.
    One interesting factoid. Why will Latinos equal white wealth 144 years faster than blacks?????????
    Unequal discrimination, eh? Me thinks not. More like work ethic.