[Opinion]: The Racial Wealth Gap Explained: A Sociopolitical Perspective

Category: Social Topics

The racial wealth gap is an important distinction as it is a compound disparity over and above breaches in income and wealth - something we refer to in social work as intersectionality.  All three idiosyncratic and divisive in their own right, yet, collaborative in creating the cohesive synergistic effect that is economic inequality.
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Intersectionality is a theoretical framework which asserts that people can and most often are disadvantaged by multiple sources of oppression (i.e. race, class, gender, religion, sexual orientation and other identity markers).

Synergistic effect suggests a change in the result as a consequence of an action or other cause which arises out of the interaction between two or more agents, entities, or factors and produces an effect (result or product) that is greater than the sum of their individual weight or forces.

Definition of the Racial Wealth Gap
When economists or political analysts and strategists refer to the racial wealth gap it can appear redundant because they tend to use the term interchangeably with income and wealth inequality.  Both, individually distinctive as well.

The income gap refers specifically to the exponential differences in remunerations (income and salaries) between wage-earners.

Examples of the income gap (Eitzen, 2010):

• In 2004, more income was earned by the 13,000 wealthiest families than the bottom 20 million families.
• In 1992, the combined wages of 287,400 retail clerks equaled the pay of the top 400 individuals.  In 2004, that number rose to 504,600 retail clerks.

​The wealth gap refers to the accumulative assets (net worth) including income, real and personal property, etc. which define the upper and lower classes.

Examples of the wealth gap (Eitzen, 2010):

• In 2006, Forbes magazine reported the total net worth of the 400 richest Americans at $1.25 trillion while 37.3 million Americans were living below the poverty line.
• In 2003, the top 1% of the population owned 38% of the nation’s wealth in stark contrast to the bottom 40% who owned only 1% making the richest 3 million Americans nearly 40 times richer than the 113 million at the bottom.  This massive expansion in economic inequality can be attributed to the $1.7 trillion in tax cuts by the Bush administration in 2001 and 2003 where the top 1% reaped 54% of the tax benefits.

The definition of the racial wealth gap is dynamic in that it is inclusive on all these related dimensions and sets forth inequities regarding social mobility denoting significant differences in the social, political, and economic functioning between ethnic groups in the form of opportunities, ownership, quality of life, and so on.
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The U.S. racial wealth gap has implications of enormous consequences as the pervasive trend endures beyond pushing people to the economic margins of society.  Social disparities continue to escalate including homelessness, hunger, family disruption, crime rates, civil unrest, deteriorating mental and physical health, drug abuse, and democracy itself.  According to D.S. Eitzen (2010), political author and Emeritus at Colorado State University, inequality erodes the social contract when the promise for a higher standard of living is limited to a few weakening the sense of community and common purpose essential to a democracy.

The Racial Wealth Gap by Design
Barriers to the adoption of more generous social welfare policies and equitable distribution of resources that would, in effect, close the racial wealth gap are two-fold: the first is political; and, secondly, America’s fundamental belief in competitive individualism.

Social policy is not an arbitrary activity but is deliberate in its intent and means to accomplish a goal.  Political conservatives in both federal and state legislatures seek to reduce various dimensions of the welfare state.  As such, social policies are crafted to accomplish that end within the context of historical events, budgetary constraints, and the like.

The goal of eliminating income safety net programs has strong implications for social spending:

• Obstruct spending for social programs by reducing the amount of funding available.  This is accomplished in two (2) ways:

1. The “trickle-down” strategy: increase tax breaks for the wealthiest 1% (generally, corporations) presumably to stimulate the economy through their reinvestments (i.e. corporate expansion and job creation).
2. Increase spending for defense.  When the government reduces its tax income while, simultaneously, raising its budget for defense – the shortfall is made up by defunding social programs.

The high value placed on competitive meritocracy has strong implications for economic inequality:

• Individualism is valued over collectivism.  Therefore, Americans typically do not want to pay taxes for the good of others, namely the underprivileged.
• Big government is fervently opposed.  In the minds of Americans, “big government” equates to government intrusion.  And, since, the fight to protect individual rights are vigorously protected, government invasion (as some would interpret) into personal lives, schools, and communities are not welcomed.
• Americans tend to resist preferential rights for disadvantaged groups (e.g. affirmative action policies based on race and gender).
• Americans tend to resist what is perceived as government handouts to those deemed underserving.
• Emphasis on competition and individualism suggests that individuals are advantaged or disadvantaged by their own hand through choices, skills, intelligence, efforts, and motivation, or lack thereof.  It’s the commonplace of victim blaming devoid of consideration for the structural forces that create and maintain poverty and inequality.  The result...the affluent are venerated…the poor, vilified.

Causes of the Racial Wealth Gap – Systemic Factors
Disparities in homeownership, a key factor in creating wealth, implicates housing discrimination dating back to the 1930s which either locked minorities out of legitimate loan eligibility and equity-building.  Furthermore, minority families are less likely to benefit from intergenerational transfers (family inheritance) due to the lack of ownership and depressed home values which persist to this day in predominately black or Hispanic neighborhoods.

While graduating from college lends to higher earnings in the future, wages for college drop-outs and those who never attend college have deeply declined over the years.  Studies show decreased college completion rates for blacks and Hispanics with only 30% of all working age adults (age 25 to 64) holding a bachelors degree or higher.

Student loan debt is another major factor in the racial wealth gap.  While whites are more likely to hold bachelor degrees, blacks are more likely to have student loan debt and at larger amounts, according to the Urban Institute.  College dropout rates and student loan debt translates into lower future earnings and net worth which disproportionately affects blacks and Hispanics contributing to the racial wealth gap.

Education was once said to be the single-most effective means of escaping poverty.  But that sentiment has become nothing more than an idiom when we look at another economic domain – employment, the purported path to self-sufficiency and financial security.  The reality is that black unemployment is two times the white unemployment rate at every level of education.  Therefore, education has failed to equalize economic outcomes as it relates to financial stability and building wealth.
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Income and Poverty statistics also show the median net worth of black households below white households with less than a high school education.  At last reporting in July 2017, the U.S. Census Bureau shows a $59,039 median household income in 2016 for all Americans (individuals and families).  More specifically, real median income for white households was $61,858 and $65,041 for whites (non-Hispanic).  The median household income was $39,490 for black households and $47,675 for Hispanic households.

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Housing Resources
http://www.canmichigan.com/housing.html
Redefining Social Welfare…Again
http://www.canmichigan.com/blog/redefining-social-welfare-again

​References:
Eitzen, D.S. (2010).  Solutions to Social Problems: Lessons from Other Societies (5th Edition), Allyn/Bacon, MA

Links:
Black families have 10 times less wealth than whites and the gap is widening—here's why
https://www.cnbc.com/2018/05/18/credit-inequality-contributes-to-the-racial-wealth-gap.html?__source=Facebook%7Cmain
America’s Yawning Racial Wealth Gap, Explained in 9 Charts
https://www.vox.com/2015/2/18/8051345/black-white-hispanic-wealth-gap
Income and Poverty Report 2016 (U.S. Census Bureau)
https://www.census.gov/content/dam/Census/library/publications/2017/demo/P60-259.pdf