A new report finds that, focusing on education alone will do little to reduce the racial wealth gap and that public policies which also address disparities in homeownership rates and returns to income offer the most potential for removing the structural barriers to wealth.
Entitled The Racial Wealth Gap: Why Policy Matters, researchers from Demos and the Institute for Assets and Social Policy (IASP) at Brandeis University’s Heller School for Social Policy and Management designed a new tool – the Racial Wealth Audit – to evaluate the impact of housing, education, and labor markets on the wealth gap between White, Black and Latino households and to assess how far policies that equalize outcomes in these areas could go toward reducing the gap.
The study results show that if the racial wealth gap is to be truly addressed, then polices must be implemented to remove the structural barriers to wealth, such as ongoing residential segregation and the proliferation of low-wage jobs that come without benefits.
Key findings of the study include:
- The U.S. racial wealth gap is substantial and is driven by public policy decisions. According to analysis of the Survey of Income and Program Participation (SIPP) data, in 2011 the median white household had $111,146 in wealth holdings, compared to just $7,113 for the median Black household and $8,348 for the median Latino household. From the continuing impact of redlining on American homeownership to the retreat from desegregation in public education, public policy has shaped these disparities, leaving them impossible to overcome without racially-aware policy change.
- Eliminating disparities in homeownership rates and returns would substantially reduce the racial wealth gap. While 73 percent of white households owned their own homes in 2011, only 47 percent of Latinos and 45 percent of Blacks were homeowners. In addition, Black and Latino homeowners saw less return in wealth on their investment in homeownership: for every $1 in wealth that accrues to median Black households as a result of homeownership, median white households accrue $1.34; meanwhile for every $1 in wealth that accrues to median Latino households as a result of homeownership, median white households accrue $1.54.
- Eliminating disparities in college graduation and the return on a college degree would have a modest direct impact on the racial wealth gap. In 2011, 34 percent of whites had completed four-year college degrees compared to just 20 percent of Blacks and 13 percent of Latinos. In addition, Black and Latino college graduates saw a lower return on their degrees than white graduates: for every $1 in wealth that accrues to median Black households associated with a college degree, median white households accrue $11.49. Meanwhile for every $1 in wealth that accrues to median Latino households associated with a college degree, median white households accrue $13.33.
- Eliminating disparities in income—and even more so, the wealth return on income—would substantially reduce the racial wealth gap. Yet in 2011, the median white household had an income of $50,400 a year compared to just $32,028 for Blacks and $36,840 for Latinos. Black and Latino households also see less of a return than white households on the income they earn: for every $1 in wealth that accrues to median Black households associated with a higher income, median white households accrue $4.06. Meanwhile, for every $1 in wealth that accrues to median Latino households associated with higher income, median white households accrue $5.37.
See the full report HERE.
