The Racial Wealth Gap: How Is It Structural And Not Behavioral?

What is the racial wealth gap? 

“The racial wealth gap in the United States is the disparity in median wealth between the different races. This gap is most pronounced between White households and racial minorities.”

Kimberly Amadeo, the balance, 2020

The racial wealth gap in the United States is a problem derived from years of economic oppression of Black people – dating back to the institutionalization of slavery.

 

 

Wealth is important because it allows for financial as well as emotional security. The difference between income and wealth is that income is the amount of money a person is earning (minus money paid in taxes), and wealth is the assets people own, like valuables, as well as other saved and invested money. If a parent were to be laid off and were no longer able to rely on income, a family would use acquired wealth to pay for groceries, schooling, rent, etc. Perhaps the most important aspect of wealth is that it can be invested to accumulate more wealth.

Today, white families hold almost 13x more wealth than Black families (PEW Research). This is not an issue stemming simply from inequitable income, but from a drastic difference in the household wealth of Black and white people achieved from a history of economic oppression of Black people in this country.

Where did this start?

 

This racial wealth divide began when Black people were first brought to the United States as slaves; they were not counted as citizens, they were unable to own land or property, and they were not making money, or accruing any wealth. After the Emancipation Proclamation was signed, Black people were legally allowed to begin accumulating wealth, but were now decades behind their white societal counterparts, and were still facing intense segregation that was then legalized with the rise of Jim Crow laws. This racism manifested as redlining, separate but equal laws (as well as de facto segregation when separate but equal was illegalized in the 1960s), employment and labor market discrimination, mortgage market discrimination, and many more examples of racism that are still prevalent today.

This racial discrimination on top of an intergenerational disadvantage caused the wealth gap to continue to grow. The term for this economic and social oppression is structural/systemic racism. It refers to the way that racism is deep-seated in society that there are many added barriers for Black Americans (and this spurs the concept of white privilege). Examples of this are police brutality, the school-to-prison pipeline system, and, of course, the racial wage gap among many others.

 

Structural vs. behavioral

Black people themselves are often blamed for the racial wealth gap. This is the ‘behavioral explanation’ that some attribute to the gap. The idea is that Black people tend to make poorer or more irresponsible financial decisions in comparison to white people, and for not taking ‘personal responsibility’ over their finances. This narrative serves only to perpetuate the racist concept that the deficiency lies in Black people and not in the system itself. 

A common ‘solution’ provided to close the wealth gap is to initiate better courses in financial literacy in school. Once again, this theory plants blame within Black people, inferring that if they were better versed in financial literacy they could navigate economics better and make better decisions. This line of thinking is wrong for multiple reasons; first, the wealth gap, as stated before, is mostly an issue of wealth, not income (as simply a higher income can’t erase the years of racism that limited asset attainment for Black Americans), so simply earning and investing more money will not significantly help to close the gap. However, the main issue is that, as mentioned, it fails to look at society as a whole and see the barriers that have been built that bar Black Americans from achieving financial equality. 

 

Housing

Housing in particular is an investment that is important in relation to the wealth of a family. When buying a house, you’re putting an investment into it, and through the years that investment should grow as the value of the house increases. However, oftentimes, when Black Americans are trying to sell their house, the cost will be devalued, simply because the house was owned by Black people. An analysis by Brookings Institution found “Homes of similar quality in neighborhoods with similar amenities are worth 23 percent less ($48,000 per home on average, amounting to $156 billion in cumulative losses) in majority Black neighborhoods, compared to those with very few or no Black residents”.  Here is a study that dives deeper into the issue of racial devaluation: https://www.brookings.edu/research/devaluation-of-assets-in-black-neighborhoods/

This devaluation in both households and neighborhoods contributes to many of the issues we now face with structural racism today – and is an example of structural racism in itself -, like de facto segregation and the racial wealth gap. It is racist and offensive too, as Black Americans are blamed for their ‘poor decision making’ when, in reality, discrimination is deeply embedded in the housing market. This structural racism plays a large part in how our society operates at large, and one of its biggest impacts is the result it has on the racial wealth gap.

Above is a redlining map from Seattle, Washington

‘For now’ solutions

This gap is not an issue that can be changed overnight, as it is so rooted in deep structural racism that society as a whole must be amended in order to fix this problem. As of 2016, the 400 richest billionaires in America have a greater total wealth than 10 million Black households combined (Brookings). As for what solutions are being suggested so far, many include providing reparations to Americans who are descendants of slaves. Others include the government providing money to pay off a portion of student debt (with a lack of wealth and with incomes going towards household necessities, it can be hard to save money for colleges, resulting in large amounts of student debt). Baby bonds (a saving fund targeted towards children in lower-income families) are another solution that is designed to lower the racial wealth gap through a more intergenerational plan.

 

“THE VERY HEARTBEAT OF RACISM IS DENIAL”

– Ibram X. Kendi

As for a ‘for now’ solution that can be implemented on a more personal level, I would start by recommending researching, reading, and learning. I personally have learned so much during the process of creating this project, and it has allowed me to really examine and think more deeply about my own privileges as a white person. I came into this project knowing little about the topic, and I thought I would be writing about how teaching financial literacy could help to close the racial wealth gap. Through my research, I found that this is untrue and is a sentiment rooted in racist stereotypes, and this helped me to reflect on the messages that are ingrained in society that hurt Black people, as well as other minorities. I would urge others to do the same, and try to recognize the normalized racism in your daily life that negatively impacts people of color.

Thank you for checking out my project! I would love to hear your feedback in the comments. If you have additional feedback, you can fill you the survey below:

Click here to read my whole essay

The racial wealth gap in the United States is a problem derived from years of economic oppression of Black people – dating back to the institutionalization of slavery. Wealth is important because it allows for financial as well as emotional security. The difference between income and wealth is that income is the amount of money a person is earning (minus money paid in taxes), and wealth is the assets people own, like valuables, shareholdings, money in the bank, and housing. If a parent were to be laid off, and were no longer able to rely on income, a family would use acquired wealth to pay for groceries, schooling, rent, etc. In addition, you can invest wealth to help accumulate more wealth. Today, white families hold almost 13x more wealth than Black families (PEW Research). This is not an issue stemming simply from inequitable income, but from a drastic difference in the household wealth of Black and white people achieved from a history of economic oppression of Black people in this country. 

This racial wealth divide began when Black people were first brought to the United States as slaves; they were not counted as citizens, they were unable to own land or property, and they were not making money, or accruing any wealth. After the Emancipation Proclamation was signed, Black people were legally allowed to begin accumulating wealth, but were now decades behind their white societal counterparts, and were still facing intense segregation that was then legalized with the rise of Jim Crow laws. This racism manifested as redlining, separate but equal laws (as well as de facto segregation when separate but equal was illegalized in the 1960s), employment and labor market discrimination, mortgage market discrimination, and many more examples of racism that are still prevalent today. This racial discrimination on top of an intergenerational disadvantage caused the wealth gap to continue to grow. The term for this economic and social oppression is structural or systemic racism. It refers to the way that racism is deep-seated in society that there are many added barriers for Black Americans (and this spurs the concept of white privilege). Examples of this are police brutality, the school-to-prison pipeline system, and, of course, the racial wage gap among many others. 

Yet, Black people themselves are often blamed for the racial wealth gap. This is the ‘behavioral explanation’ that some attribute to the gap. The idea is that Black people tend to make poorer or more irresponsible financial decisions in comparison to white people, and for not taking ‘personal responsibility’ over their finances. This narrative serves only to perpetuate the racist concept that the deficiency lies in Black people and not in the system itself. A 2015 study by Boshara et. al concluded that “The larger wealth gap could be due to Hispanics’ and Blacks’ investing in low-return assets like housing, as well as to borrowing at high interest rates.” Once again, this conclusion attributes the wealth gap to the actions of Black (and Hispanic) people and fails to take into account the structural obstacles built into society and economics. Also, Boshara’s essay is titled: The Demographics of Wealth; How Age, Education and Race Separate Thrivers from Strugglers in Today’s Economy. This essay labels Black people as “strugglers” in economic society and then goes on to blame them for this title, instead of the racism embedded in society. This is just one of the many examples of Black Americans being blamed for their own economic oppression. Another example; a common ‘solution’ provided to close the wealth gap is to initiate better courses in financial literacy in school. Once again, this theory plants blame within Black people, inferring that if they were better versed in financial literacy they could navigate economics better and make better decisions. This line of thinking is wrong for multiple reasons; first, the wealth gap, as stated before, is mostly an issue of wealth, not income (as simply a higher income can’t erase the years of racism that limited asset attainment for Black Americans), so simply earning and investing more money will not significantly help to close the gap. However, the main issue is that, as mentioned, it fails to look at society as a whole and see the barriers that have been built that bar Black Americans from achieving financial equality. 

Housing in particular is an investment that is important in relation to the wealth of a family. When buying a house, you’re putting an investment into it, and through the years that investment should grow as the value of the house increases. However, oftentimes, when Black Americans are trying to sell their house, the cost will be significantly devalued, simply because the house was owned by Black people. An analysis by Brookings Institution found “Homes of similar quality in neighborhoods with similar amenities are worth 23 percent less ($48,000 per home on average, amounting to $156 billion in cumulative losses) in majority Black neighborhoods, compared to those with very few or no Black residents”. This devaluation in both households and neighborhoods contributes to many of the issues we now face with structural racism today – and is an example of structural racism in itself -, like de facto segregation and the racial wealth gap. It is racist and offensive too, as Black Americans are blamed for their ‘poor decision making’ when, in reality, discrimination is deeply embedded in the housing market. This structural racism plays a large part in how our society operates at large, and one of its biggest impacts is the result it has on the racial wealth gap.    

This gap is not an issue that can be changed overnight, as it is so rooted in deep structural racism that society as a whole must be amended in order to fix this problem. As of 2016, the 400 richest billionaires in America have a greater total wealth than 10 million Black households combined (Brookings). As for what solutions are being suggested so far, many include providing reparations to Americans who are descendants of slaves. Others include the government providing money to pay off a portion of student debt (with a lack of wealth and with incomes going towards household necessities, it can be hard to save money for colleges, resulting in large amounts of student debt). Baby bonds (a saving fund targeted towards children in lower-income families) are another solution that is designed to lower the racial wealth gap through a more intergenerational plan.

As for a ‘for now’ solution that can be implemented on a more personal level, I would start by recommending researching, reading, and learning. I personally have learned so much during the process of creating this project, and it has allowed me to really examine and think more deeply about my own privileges as a white person. I came into this project knowing little about the topic, and I thought I would be writing about how teaching financial literacy could help to close the racial wealth gap. Through my research, I found that this is untrue and is a sentiment rooted in racist stereotypes, and this helped me to reflect on the messages that are ingrained in society that hurt Black people, as well as other minorities. I would urge others to do the same, and try to recognize the normalized racism in your daily life that negatively impacts people of color.

Sources

De Souza Briggs, X. (n.d.). The racial WEALTH gap: A stark reflection of Structural inequality: Lessons learned from two decades of work. Retrieved March 23, 2021, from https://www.fordfoundation.org/work/learning/learning-reflections/the-racial-wealth-gap-a-stark-reflection-of-structural-inequality-lessons-learned-from-two-decades-of-work/

Brooks, R. (2021, March 11). ACLU news & Commentary. Retrieved March 23, 2021, from https://www.aclu.org/news/racial-justice/the-racial-wealth-gap-is-a-civil-liberties-issue/?initms_aff=nat&initms_chan=soc&utm_medium=soc&initms=210312_systemicequality_blog_fb&utm_source=fb&utm_campaign=systemicequality&utm_content=210312_racialjustice_blog&ms_aff=nat&ms_chan=soc&ms=210312_systemicequality_blog_fb

Darrick Hamilton, W. (n.d.). Can ‘baby Bonds’ eliminate the racial wealth gap In Putative Post-racial America? – Darrick Hamilton, william darity, 2010. Retrieved March 23, 2021, from https://journals.sagepub.com/doi/abs/10.1007/s12114-010-9063-1

Angela Hanks, D. (2018, February 21). Systematic inequality. Retrieved March 23, 2021, fromhttps://www.americanprogress.org/issues/race/reports/2018/02/21/447051/systematic-inequality/

Demographic trends and economic well-being. (2016, August 27). Retrieved March 23, 2021, from https://www.pewresearch.org/social-trends/2016/06/27/1-demographic-trends-and-economic-well-being/

McIntosh, K., Moss, E., Nunn, R., & Shambaugh, J. (2020, February 27). Examining the black-white wealth gap. Retrieved March 23, 2021, from https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/

Williamson, V. (2021, March 15). Closing the racial wealth gap requires heavy, progressive taxation of wealth. Retrieved March 23, 2021, from https://www.brookings.edu/research/closing-the-racial-wealth-gap-requires-heavy-progressive-taxation-of-wealth/

Hamilton, Derrick, Darity, Jr., William A. The Political Economy of Education, Financial Literacy, and the Racial Wealth Gap, Federal Reserve Bank of St. Louis REVIEW, 2017. St. Louis Fed, https://files.stlouisfed.org/files/htdocs/publications/review/2017-02-15/the-political-economy-of-education-financial-literacy-and-the-racial-wealth-gap.pdf, PDF download. 

Bashora, Ray, Emmons, William R., Noeth, Bryan J. The Demographics of Wealth; How Age, Education and Race Separate Thrivers from Strugglers in Today’s Economy, Federal Reserve Bank of St. Louis, 2015. https://www.stlouisfed.org/~/media/Files/PDFs/HFS/essays/HFS-Essay-1-2015-Race-Ethnicity-and-Wealth.pdf, PDF download. 

School-to-prison pipeline. (n.d.). Retrieved March 26, 2021, from https://www.aclu.org/issues/juvenile-justice/school-prison-pipeline

School-to-prison pipeline [infographic]. (n.d.). Retrieved March 26, 2021, from https://www.aclu.org/issues/juvenile-justice/school-prison-pipeline/school-prison-pipeline-infographic

Perry, A., Rothwell, J., & Harshbarger, D. (2021, February 17). The devaluation of assets in black neighborhoods. Retrieved March 26, 2021, from https://www.brookings.edu/research/devaluation-of-assets-in-black-neighborhoods/Keeley, Brian (2015), “What are income and wealth?”, in Income Inequality: The Gap between Rich and Poor, OECD Publishing, Paris. https://www.oecd-ilibrary.org/docserver/9789264246010-3-en.pdf?expires=1616812072&id=id&accname=guest&checksum=D407B3C25158E6D7B1795A80244C4C66#:~:text=Income%20is%20the%20flow%20of,some%20ways%2C%20income%20matters%20more. PDF download.

D’Asaro, M. (2020, November 18). [Digital image]. Retrieved from https://www.newscientist.com/article/mg24833093-900-systemic-racism-what-research-reveals-about-the-extent-of-its-impact/

Amadeo, K. (2020, November 23). How to close the racial wealth gap in the United States. Retrieved April 13, 2021, from https://www.thebalance.com/racial-wealth-gap-in-united-states-4169678#:~:text=The%20racial%20wealth%20gap%20in,White%20households%20and%20racial%20minorities

McIntosh, K., Moss, E., Nunn, R., & Shambaugh, J. (2020, February 27). Examining the black-white wealth gap. Retrieved April 13, 2021, from https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/

Revolttv (Director). (2020, July 13). Understanding the racial wealth gap [Video file]. Retrieved April 13, 2021, from https://www.youtube.com/watch?v=LLP1lnfMXoA

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Ibram X. kendi: ‘the Very heartbeat of racism IS denial’. (2021, March 22). Retrieved April 13, 2021, from https://www.rochester.edu/newscenter/ibram-x-kendi-the-very-heartbeat-of-racism-is-denial-470332

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2 comments

  1. Avatar

    Hi There, I love your project and you detailed analysis on how racism was caused in the first place and its current situation. I was wondering, when I was reading, is the only way to solve the issue government intervention? It seems like the “action plan” includes a complete reform of society or just parts like baby bonds and students debts, so would there be anything that you would suggest us do to change the situation?

  2. Zoë

    Hi Tommy, thank you so much for checking out my project! From my research, I think that what individuals can do to help is to educate themselves on the topic. The issue of the wealth gap and systemic racism is so deeply rooted within the country, so I think that education is one of the best things that one can do to help unlearn these sentiments. In addition, those who can vote can support candidates who are passionate about changing this situation, and who can make a difference on a government level. Thank you for your comment!

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