It's no secret that most Americans haven't kept up with the ballooning wealth of the 1 percent. Most of us have fallen behind over the last few decades, as wages have stagnated and housing, health care, and education costs have gone through the roof.
Underlying the yawning gap between the rich and the rest, however, is another divide: America's persistent racial wealth divide between whites and people of color.
As the U.S. diversifies, people of color make up an ever larger share of the population, even as they remain largely locked out of wealth-building opportunities. As a result, although median white wealth has increased somewhat over the years, America's overall median wealth is actually going down.
While wealth at the middle falters, it's skyrocketing at the top: In effect, the richest Americans are profiting off the racial wealth divide. That's bad for the entire economy, and it demands a robust policy response.
Importantly, this trend persists despite black and Latino unemployment rates reaching historic lows in 2018 — and even despite overall median income slowly inching up in the last year or two. That's because those modest gains in income are completely insufficient to close our enormous gaps in wealth.
In Dreams Deferred, a new study for the Institute for Policy Studies, we catalogued just how deep the racial wealth divide has become.
We found that with just $3,600 to their name, the median black family today owns only 2 percent of the $147,000 owned by the median white family. The typical Latino family does only a little better, with just 4 percent of the median white family's assets.
"Median wealth," by the way, refers to the exact middle — with half of households above and half below. That's a more useful measure than "average wealth," which skews dramatically toward the very wealthiest households. ( Average white wealth, for example, was $930,000 in 2016 — over six times the median, and nowhere near typical.)
In the decades since 1983, changes in median wealth tell a dramatic story about our economy. Since then, median household wealth has fallen by 3 percent for all U.S. households — and stunningly, we found, by over half for the median black family.
Over the same period, the number of households worth over $10 million ballooned by more than 850 percent.
If these trends continue, the gap between whites and Latinos will be virtually unchanged by mid-century. And it will grow even wider between whites and blacks, whose median wealth is actually decreasing — and, alarmingly, on track to reach zero in a few decades.
Unfortunately, rampant inequality in the larger economy has given a small segment of the population enough clout to thwart efforts to close these gaps. Outfits like the Koch brothers' political network, for example, have poured millions of dollars into efforts to cut their own taxes, which benefits the overwhelmingly white families at the top who are already extremely rich.
How can we combat that inequality? We maintain that creating a more equitable economic system for everyone requires bold policy ideas to close the racial wealth divide.
Such policies could include the expansion of first-time homeownership programs for those that have been historically excluded from building housing wealth by discrimination in mortgage programs. Homes are the single biggest source of wealth for ordinary families, but nlack families were left out of the postwar housing boom almost entirely. Down payment assistance and favorable tax treatment for first-time buyers could narrow this gap considerably.
Additional initiatives to reduce the $1.5 trillion in student debt—like loan forgiveness, interest rate adjustments, or more ambitious programs for debt-free university access—would assist young people to save, build wealth, and invest in homes and enterprises.
Another promising idea is to create a children's savings account program, which would seed an asset account for every newborn in the United States, ensuring that none of them start from $0. Senator Cory Booker has proposed just such a "baby bond" program in the United States Senate.
According to a study by the Annie E. Casey Foundation, if Congress had implemented a robust universal "baby bond" in 1979, the wealth gap between Latinos and Whites would have been entirely closed by now, and the wealth gap between blacks and whites would have shrunk 82 percent in young adult households.
Other remedies include familiar ideas like raising the minimum wage, expanding affordable health care, and — of course — taxing the 1 percent to fund education and infrastructure.
By taking these measures, we would do more than close the racial wealth gap. We create an economy that works for everyone — not just the super-rich.
Dedrick Asante-Muhammad and Chuck Collins are co-authors of the report, with Josh Hoxie and Sabrina Terry, " Dream Deferred: How Enriching the 1 Percent Widens the Racial Wealth Divide ," published by the Institute for Policy Studies.
The views expressed in this article are the authors' own.
Uncommon Knowledge
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