Closing the Racial Wealth Gap
Throughout centuries of history - over and over again - the Black community has been stripped of wealth through policies, massacres, theft and destruction.
According to the 2016 Survey of Consumer Finances, the median white household has a net worth of $117,000 - 10 times the median Black household net worth of $17,100.
It would take 228 years for Black families to amass as much wealth as white families if our current policies stay in place.
Why does the racial wealth gap exist?
The racial wealth gap in the United States dates back to slavery, when this country built its economy (and wealth) with the free labor of kidnapped enslaved people. In 1865 when slavery was abolished, most Black families began with zero assets, while many white families were already building and passing on intergenerational wealth and financial knowledge.
This happened again and again throughout our history, and many of our history classes skipped over these important pieces of our country’s past. I know mine did. But, it’s important we learn the history behind the racial wealth gap in the United States.
According to “What We Get Wrong About the Racial Wealth Gap,” the greatest builder of wealth is not in our income but in the passing of wealth from generation to generation.
What needs to happen to close the racial wealth gap.
There are many myths around the racial wealth gap. This research paper walks through the ten most common myths (starting on pg 5). Some are widely spoken about and all are widely believed. Many of the myths come back to the idea that it’s up to the Black community to solve this gap by “changing” their “behavior.”
Think about much of the current rhetoric and shame in the personal finance space. Experts say to stop dining out and to stop shopping - and only then will you be able to start meaningfully saving. This places the blame and the onus on the oppressed to change their own situations. But, it would actually take a major shift in policy to redistribute wealth and then require systematic transformations to treat Black people equitably moving forward.
According to the same research paper, “there are no actions that black Americans can take unilaterally that will have much of an effect on reducing the racial wealth gap.
For the gap to be closed, America must undergo a vast social transformation produced by the adoption of bold national policies, policies that will forge a way forward by addressing, finally, the long-standing consequences of slavery, the Jim Crow years that followed, and ongoing racism and discrimination that exist in our society today.”
So what does that look like on a systemic level?
REPARATIONS
Reparations are federal payment to descendants of slaves. They can also include those affected by racist Jim Crow laws and housing policy. While this will in no way completely repair or make just what has happened and continues to happen, it can immediately close some of the wealth gap.
PROGESSIVE TAXATION
According to the Brookings Institute, “the 400 richest American billionaires have more total wealth than all 10 million Black American households combined.” Tax reform that increases taxation on the ultra-wealthy (who are almost exclusively white) redistributes wealth and closes the racial wealth gap. That effect is then multiplied if funds are used to further racial equity.
TAX REFORM
In addition, current tax policy disproportionately advantages upper-middle-class white people and further exacerbates discrimination in housing, hiring, education and health. For example, property assessments are typically biased against Black homeowners. Retirement plans, like 401(k)s, are privileges of workplaces that fewer Black folx have access to.
POLICY REFORM
Anne Price argues that if we focus only on the racial wealth gap without working to remedy the root causes, we won’t solve the problem. If the racist structures - our current financial and credit systems - remain as they are, they will continue to perpetuate and increase inequity in Black wealth.
What we as individuals can do to close the racial wealth gap.
Yes, we need sweeping changes from the top (aka systems and the government), but what can we, as individuals, especially as white individuals, do to help close the racial wealth gap? It’s up to those who have created and have been benefiting from racist systems to make the changes.
GET EDUCATED.
First and foremost, do the work to understand it. When we don’t understand the causes of the racial wealth gap, we can perpetuate misinformation and stereotypes. Mehrsa Baradaran, the author of the Color of Money, argues that “buying Black, banking Black” is not a solution to the racial wealth gap but reinforces the dream of “Black capitalism” as the solution rather than the need for changed policies.
It’s great to support Black-owned banks and Black-owned businesses, but touting that it’s the solution or that nothing else needs to be done, adds to the problem.
SHARE.
Share and educate your friends and family. Use your platform (big or small) to share what you’re learning along your anti-racism journey. You’ll help to dispel myths as well as promote an understanding of what can be done.
CALL BULLSHIT.
When you hear someone or a brand perpetuating a myth, call them out (or in). For example, financial literacy is not the solution to the racial wealth gap. White families do not have a net worth 10x that of Black families because they’ve made smarter money decisions. Financial literacy can help almost all of us to manage our finances, but let’s be real about how much it can help.
VOTE AND ACTIVATE YOUR REPRESENTATIVES.
The solutions to the racial wealth gap will come from changes in policy. That means we need to elect representatives who are proponents of reparations and tax reform. We also need to make sure our representatives know where we stand and how important these reforms are. Write letters, ask questions, and follow up.
RUN FOR OFFICE.
If you’re looking at your options and see there’s room for improvement, run. Even if you like your reps, run. Running for office (and there are many options to do so), empowers you to make a direct impact on policy. There are organizations like She Should Run that provide tools and resources to set you up for success in public leadership.