The Racial Wealth Gap: Why Policy Matters

Source: Laura Sullivan, Tatjana Meschede, Lars Dietrich, & Thomas Shapiro, Amy Traub, Catherine Ruetschlin, Tamara Draut, Institute for Assets & Social Policy – Brandeis University & Dēmos, March 2015

From the summary:
As the United States rapidly becomes both a more diverse and unequal nation, policymakers face the urgent challenge of confronting growing wealth gaps by race and ethnicity. To create a more equitable and secure future, we must shift away from public policies that fuel and exacerbate racial disparities in wealth. But which policies can truly begin to reduce our country’s expanding racial divergences?
Until now there has been no systematic analysis of the types of public policies that offer the most potential for reducing the racial wealth gap. This paper pioneers a new tool, the Racial Wealth AuditTM, and uses it to evaluate the impact of housing, education, and labor markets on the wealth gap between white, Black, and Latino households and assesses how far policies that equalize outcomes in these areas could go toward reducing the gap. Drawing on data from the nationally representative Survey of Income and Program Participation (SIPP) collected in 2011, the analysis tests how current racial disparities in wealth would be projected to change if key contributing factors to the racial wealth gap were equalized.
Main Findings:
• The U.S. racial wealth gap is substantial and is driven by public policy decisions. ….
• Eliminating disparities in homeownership rates and returns would substantially reduce the racial wealth gap. …..
• Eliminating disparities in college graduation and the return on a college degree would have a modest direct impact on the racial wealth gap. …..
• Eliminating disparities in income—and even more so, the wealth return on income—would substantially reduce the racial wealth gap. …..