Courtesy Marc Morial and Ben JealousSummary List Placement
If you want to get a heated debate going, start talking about the reasons for the wealth gap between Black and white Americans. Everybody has an opinion.
Numbers tell a story. According to the Brookings Institution, in 2016, at $171,000, the net worth of a typical white family was nearly 10 times greater than that of a Black family, $17,150.
This is not a new phenomenon. Median net worth for white households has far exceeded that of Black households through recessions and booms over the last 30 years. During the most recent economic downturn, median net worth declined by more for Black families (44.3% decline from 2007 to 2013) than for white families (26.1% decline). In fact, the ratio of white family wealth to Black family wealth is higher today than at the start of the century, according to Brookings.
The future is none too promising. Black wealth could drop to zero by 2053, according to a report from the nonprofit organization Prosperity Now.
When it comes to the wealth gap, there are truths and myths. Civil rights icons Marc Morial, president and CEO of the National Urban League, and Ben Jealous, former president and CEO of the NAACP and current president of People For the American Way, share their thoughts.Myths about the racial wealth gapRace-neutral policies are the answer
Morial says one of the most pervasive myths about the racial wealth gap is that it can be eliminated by race-neutral policies.
"We saw the failure of this most recently in the COVID-19 federal relief package, which failed to reach the Black communities that were hardest hit," he says. "For a historical example, we can look to the post-World War II GI Bill, which left out more than 1 million Black veterans and contributed to widening economic inequality."Individual behavior is to blame
Another myth, he says, is that "individual behavior, rather than systemic racism and lack of opportunity, is responsible for the gap. Research has shown that poverty is the cause, rather than the result, of certain behaviors that are traditionally associated with poverty. Simply putting more money in the hands of families has resulted in higher educational attainment, and a drop in crime."
Jealous adds, "We've all heard it argued that if Black and brown communities simply worked harder or took more personal responsibility, then inequality would go away. That's just false. It ignores the fact that the wealth gap is the product of centuries of inequality brought about by slavery, segregation, and government policies that locked generations of people of color out of economic opportunity."The truth about the racial wealth gapChanges in the economy disproportionately affect Black people
Both economic upswings and downturns have the effect of widening the gap, says Morial. Even when the economic landscape improves for Black Americans, it tends to improve even more for white Americans. For all we heard about the lowest Black unemployment rate in history, prior to the pandemic, it was still twice the rate for white Americans.
Economic downturns have an even worse effect. Since February, Black-owned businesses have shuttered at twice the rate of white-owned businesses, and businesses in Black neighborhoods were far less likely to be approved for PPP loans, according to a report from the New York Fed. The study also noted that Black-owned firms entered the crisis with "weaker cash positions, weaker bank relationships, and pre-existing funding gaps."Discriminatory housing policies set Black Americans back
A primary driver of the wealth gap in the modern era has been discriminatory housing policies, such as redlining, Morial says.
Home equity is the principal component of household wealth in the United States. Starting in the Great Depression, the federal government put in place a number of policies designed to encourage homeownership, but Black Americans had almost no access to these programs. In the years following the Fair Housing Act of 1968, the nation saw an upward trend in Black homeownership, but the gains were completely wiped out by the foreclosure crisis that began in 2007 — primarily because Black borrowers were aggressively targeted for subprime mortgages.Wage inequality is persistent
The racial wage gap has widened considerably over the last 20 years thanks in part to wage discrimination. A study by the Economic Policy Institute last year found that even Black workers with an advanced degree are paid less than their white counterparts. Controlling for age, gender, education, and region, Black workers are paid 14.9% less than white workers.Black-owned businesses receive less investment
Black-owned businesses, which are a significant employer of Black workers, also face significant challenges, particularly with access to capital. Only 1% of venture capital money goes to companies founded by Black entrepreneurs, according to the Harvard Business Review. A 2017 report from the Federal Reserve Banks of Atlanta and Cleveland found that 40% of Black-owned businesses received all the funding they applied for, compared with 68% for non-minority-owned businesses.
The way Jealous sees it, the nation is struggling with multiple wealth gaps at once. On the one hand, the racial wealth gap has roots in slavery and Native American genocide. On the other, there is a rapidly growing wealth divide where the American middle class is becoming an endangered species. "We must deal with the racial wealth gap and the destruction of the American middle class simultaneously and with urgency," he says.How these Civil Rights leaders think we can close the gap
"We need targeted policies to address the inequities in hiring, compensation, and lending," says Morial. The National Urban League's Main Street Marshall Plan offers a comprehensive blueprint for rebuilding and accelerating the growth of urban communities and their people.
Jealous says much depends on that four-letter word — love.
"We must truly love our neighbors as ourselves and end the racism and classism that have created this mess," he says. "We are a country with a profound history of antipathy towards people of darker hues and the poor of every hue. We must root out both. Genius is constant in every zip code and the only way for us to get stronger as a nation is to tap into all of it."
What else tops Jealous' wish list? "Eliminating exploitative and discriminatory practices in banking, and fixing our broken credit-scoring system."
Then, too, he says, there must be large-scale, bold government actions at least equal to those government actions that created these gaps.
Says Jealous, "The last time we had to go through violent labor strikes, the Great Depression, and a world war to ultimately strike a fair deal between capital and labor. I pray that this time we choose to learn from our history, and act in the interest of strengthening the nation we all love and its people."
This story is part of Business Insider's "Inside the racial wealth gap" series.
- Read more "Inside the racial wealth gap" stories:
- Racism has cost Black Americans $70 trillion since the start of slavery — here's how that cost breaks down
- Gentrification doesn't have to force minority residents out of their homes. Activists say there are 3 ways to protect communities.
- A toxic mix of redlining and discrimination means homes in Black neighborhoods are chronically undervalued to the tune of $156 billion
- For Black Americans, degrees aren't about catching up — they're a matter of survival