The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide

Source: Thomas Shapiro, Tatjana Meschede, Sam Osoro, Institute on Assets and Social Policy (IASP) at Brandeis University, Research and Policy Brief, February 2013

From the press release:
New research shows the dramatic gap in household wealth that now exists along racial lines in the United States reflects policies and institutional practices that create different opportunities for whites and African-Americans, and that personal ambition and behavioral choices are but a small part of the equation.

So powerful are these government policies and institutional practices that for typical families, a $1 increase in average income over the 25-year study period generates just $0.69 in additional wealth for an African-American household compared with $5.19 for a white household, in part because black households have fewer opportunities to grow their savings beyond what’s needed for emergencies….

…The research is unique in that it has followed the same nearly 1,700 working-age households over what is now a 25-year period –from 1984 to 2009. Unlike standard statistical comparisons, this approach offers “a unique opportunity to understand what happens to the wealth gap over the course of a generation and the effect of policy and institutional decision-making on how average families accumulate wealth,” according to the authors.

In gross terms, there is no question that the difference in median wealth between America’s white and African-American households has grown stunningly large. The new study found the wealth gap almost tripled from 1984 to 2009, increasing from $85,000 to $236,500. The median net worth of white households in the study has grown to $265,000 over the 25-year period compared with just $28,500 for the black households….
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