The Racial Wealth Gap: How Might Americans Finally Acknowledge the Divide Between Blacks and Whites

Watch this video for an overview of the website and to learn why I decided to research…
The Racial Wealth Gap

To read my full essay about my personal interest of racial wealth gap click HERE

Too Little Too Late: The History of the Racial Wealth Gap in America

The racial wealth gap is a layered concept with an extremely complex history. The racial wealth gap has a strong connection to homeownership inequality and it reflects the systemic racial challenges that exist in the economic structure that is used to oppress the black citizens in America. 

During the Great Depression, Franklin D. Roosevelt created the New Deal which was “intended to fix the financial state of America, address the economic slump, and prevent future depressions”(Green). The New Deal incorporated a multitude of policies and practices that aimed to change America for the better but unfortunately, it resulted in little to no economic improvements for blacks and had an egregious effect on the racial wealth gap today. An important branch to the New Deal housing efforts was The People’s Work Administration. According to Richard Rothstein, author of Color of Law, the Public Work Administration was established in 1933 shortly after Roosevelt took office, and its goal was to address the national housing shortage while creating jobs in construction (Rothstein). This idea actually fostered systemic racist ideas: through their “neighborhood composition rule, federal housing projects should reflect an earlier racial composition of the neighborhood, specifically projecting whites in what areas that only white those in African-American areas only housing African-American”(Rothstein). This form of housing segregation went as far as to “remov[ing] the entire population’ from places that had been reserved for white occupancy”(Rothstein). This evidence demonstrates that there were extreme measures that whites went to just to separate themselves from black America. Moreover, it highlights the notion that systemic ideas about segregated communities are what caused the corrupt homeownership discrimination to thrive. These racist ideas became policies that increased the split and the continuing inequality between blacks and whites.

In addition, the New Deal also inaugurated the Federal Housing Administration in 1934. The Federal Housing Administration (FHA) provided mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. The Federal Housing Administration would deem what areas or properties seem fit and which seem too risky for insurance. The practice of denying a creditworthy applicant a loan for housing in a certain neighborhood even though the applicant may otherwise be eligible for the loan is called Redlining. Redlining ultimately started with the FHA in the 1930’s and was started by the government through their use of color coded maps to visually demonstrate which areas banks could give housing loans. On these maps, they would draw green over the white areas as a sign for yes this area is acceptable, and red over areas where blacks made up the majority of the population to signal no business should be in that area.

Redlining Map, Charlotte, North Carolina, 1935

The exclusion of blacks in this “redlining system” contributed heavily to the racial wealth gap because this policy was a way to prevent blacks from successful home ownership and because homeownership plays a predominant role in wealth accumulation. For example, while the FHA’s policies made it extremely challenging for blacks to own homes, the few who did own homes faced additional types of injustices. Properties owned by blacks were valued at about 25% less than white properties, and blacks faced higher interest rates and insurance premiums (“How Redlining Shaped Black America As We Know It”). Thus, these policies systematically caused blacks to lose through essentially depriving them of economic stability and longer term wealth.

 Efforts were made to address homeownership inequality. Congress enacted, The Fair Housing Act of 1968 making it “unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap, or familial status”(Federal Fair Lending Regulations and Statutes). However, these efforts did not see a long-term, impactful change on the pressing issue of home ownership and family wealth. 

Though a monumental piece of legislation, the Fair Housing Act of 1968 faced many challenges. In practice, housing remained segregated because the belief systems of racism, discrimination and hatred were deeply ingrained and white people simply did not want to live with or by black people. Blacks were not welcomed, and no legislation could change the nature of [most] white Americans (“Fair Housing Act”). Moreover, the overall lifestyle and the distribution of property was well established by the time legislation made a “stop” to the systems; it was simply too little too late. 

To read my full essay about the history of the racial wealth gap click HERE

 “Black families in America earn $57.30 for every $100 in income earned by white families, Moreover, For every $100 in white family wealth, black families hold $5.04”(Badger).

The Shocking Truth: The Racial Wealth Gap Today

 In truth a critical piece of why the divide is so great is because racial wealth inequality has been subconsciously integrated into American society. The racial wealth gap is defined as “the absolute difference in wealth holdings between the median household among populations grouped by race or ethnicity”(Traub, et al.). Unfortunately, this massive gap between both groups’ wealth has not declined over time, but many studies actually show incredible statistics about how the racial wealth gap has grown so much over time. In one study called the “Road to Zero Wealth” (Assante-Muhammad et al; 2017), researchers found that between 1983 and 2013, while white households in the United States saw their wealth increase by 14%, during the same time period black households wealth decreased by an astonishing 75%.

This image highlights the growth of the divide in wealth between black (the red line) and white (the white line) Americans from 1963 all the way to 2016
This is a snapshot from Netflix’s Television Series Explained from the episode “The Racial Wealth Gap”

While it is evident that today the racial wealth gap is larger than ever, one must note that the absence of wealth impacts success for black families, and there are many systemic reasons for why narrowing the divide in wealth between both races is so challenging. Lack of money for black households negatively impacts a variety of events in one’s life that are key for success. One clear example is demonstrated through blacks’ experiences with the American education system. In America, “[c]ompulsory education laws require children to attend a public or state-accredited private school for a certain period of time typically, [ranging from] the age of six and remain[ing] enrolled until they are at least 16.”(Compulsory Education Laws: Background). Education is accessible for all citizens through the public school system, where children can go to their local school for free. Because nearly half of the funding for public schools in the United States is provided through local taxes, large disparities in funding for education exist between wealthy and impoverished communities (National Center for Education Statistics, 2000a). Black households get hit harder because they make up a large population of the poorer urban neighborhoods. This idea of different schooling for black and white kids is a direct result of the amount of wealth each family has. Another study shares the “average score of black students on standardized tests is 2-3 years behind white students of the same age”(Amadeo). Researchers conclude that the absence of enough money, that black families face at a greater level than white families, causes multiple effects on their kids. In addition, a common misconception is that the racial wealth gap only impacts poor black families and if Americans were educated on this issue they would be fully aware that the racial wealth gap plays a role for all lack families. For example, black “families with a graduate or professional degree [still have] $200,000 less in wealth than similarly educated whites”(Amadeo). Even though blacks may have the same educational status as their white peers, they are not compensated financially the same nor do they receive the same level job despite having the knowledge and capacity to do the work. The racial wealth gap affects all black families regardless of their socioeconomic status and if you are a black person growing up in America, earning the money you deserve will always be fraught with obstacles, and unfortunately, systemic racism causes you to have to work twice as hard to get half as much.

Special Mentions

Below are two extraordinary organizations that are showing their advocacy for the end to racial wealth inequality are doing everything in their power to make change and spread awareness. 

The National Community Reinvestment Coalition: The National Community Reinvestment Coalition (NCRC) is an organization that strives to fix the racial wealth gap in any way shape or form. Founded in 1990, the NCRC was formed by national, regional and local organizations in order to “increase the flow of private capital into traditionally underserved communities”(NCRC). The NCRC specifically “work[s] with community leaders, policymakers and financial institutions to champion fairness and end discrimination in lending, housing and business”(NCRC). 

  • The NCRC has formed a union of more than 600 communities and are always open to more people joining the cause.
  • The NCRC has produced research on the long lasting and still noticeable effects on areas that were redlined in the 1930’s.
  • The NCRC trained 3,700 people online about housing laws and fair lending.
  • The NCRC created numerous connections with other activists and organizations and held large conferences to expand awareness and help the current state of the wealth divide.

Prosperity Now: Prosperity Now, founded by Bob Fruedman, was started in 1979. Describing itself as a “business of opening opportunity for those who would otherwise not be able to access it”, their mission is “to ensure everyone in our community has a clear path to financial stability, wealth and prosperity [through] opening the door to opportunity, helping people build wealth, and enabling meaningful mobility together”(Prosperity Now).

  • Prosperity Now had recently won “for Volunteer Income Tax Assistance (VITA) program permanence and funding which we secured by mobilizing our networks and allies”(Prosperity Now).
  • In the past they have “oversaw the creation of a city-wide, universal, Children’s Savings Account (CSA) pilot initiative in Los Angeles that aims to provide a seed of $50 to each of the 40,000 first graders in the city with additional matching funds throughout their schooling”(Prosperity Now).
  • Prosperity Now continues to invest in thousands of organizations that are fighting for a similar cause.

 It is important to note that these organizations are doing their best to make change, and while at times it feels problems such as the racial wealth gap feel too big to fix, there are people doing the work who care and are spending lots of time, thought, and effort into making a change so these problems will be solved and the world can be a better place.

For Now: The Steps Towards Change

Micro-Solution: There are actions individuals can take that will help the process of bringing an end to the racial wealth gap. This can be achieved with two components: learning and advocating. Learning and advocating is a perfect solution on a grassroots level as this plan will spread awareness quickly and will ultimately cause attention on the issue. The learning component includes reading books and articles about the racial wealth gap, watching documentaries and videos, and also engaging in conversations with others who are informed about this topic. After understanding the truth and the hurt behind this topic, be open to sharing what you know and what you did to learn because the more people who know about the racial wealth gap and its severity the more people who can put their minds together to come up with a solution and make America stronger. Be an advocate whether that is through posting about what is happening, telling friends and families, or even donating to organizations. We have the power to effectuate change and annihilate the racial wealth gap if we come together as an America of all people determined to create a country where everyone has equal opportunity to achieve the American dream.

Macro-Solution: For years, the talk about how America can mend the racial wealth gap has occurred, but unfortunately, our country has yet to find a realistic and reasonable solution as racial inequality is heavily rooted in society today. When searching for a way to decrease financial insecurity for black households in America, one must note that it will take a long time to fix a problem as big as this one. Therefore when I was brainstorming macro solutions for this disparity, I felt it would be most efficient to focus attention on healing some of the effects of the divide while others who dedicate their lives to this topic can continue to search for a long term solution. This approach would allow temporary and long term solutions to be in the process simultaneously and change can be seen at a greater rate. Because I specifically mentioned educational impacts from the racial wealth gap in my research, I pursued this idea and developed ways to address educational inequities. To repair those injustices that were mentioned in the previous sections of my essay, the government could distribute an equal amount of funds across communities for public education. Another idea focuses on eliminating the salary disparity among teachers. Local officials should be mandated to pay teachers the same salary regardless of whether they teach in low-income or more affluent neighborhoods and invest the same amount of resources in the schools in each district. This approach would clearly be a foundation to eliminate bias that arises due to the lack of resources. Addressing the educational systemic issues in this manner would begin to lead toward a path of positive change that could have an impact on the larger issue of the racial wealth gap. When tackling an issue of this magnitude, in this case the racial wealth gap, we must remember it will not be solved by one idea rather it will be changed through a collective commitment of all as long as everyone recognizes this is an injustice that must be annihilated. Effectuating change begins with individuals raising awareness of this systemic problem, holding local governments and the federal government accountable for the discrimination they have perpetuated, and demanding a new reality for generations to come. 

To read my full essay about the racial wealth gap today and possible solutions HERE

To see my full works cited for all my research click this HERE

Thoughts Comments Questions and More?

Thank you so much for reading through my website! Your interest and time means a-lot to me and I would love to hear your thoughts so please leave a comment down below.

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  1. April 24, 2020 by Mari McKenna

    Hi Madison! Your website looks great! I really enjoyed reading and learning more about your topic, as it is one that I’m not fully educated on. Well done I was wondering if you think that this issue should be brought up in schools for discussion and what that process would look like? Is this a solution that can help the issue of the racial wealth gap?

  2. April 25, 2020 by Cleo

    Wow! Your page was so well researched and informative. This page made me wonder how large the impact will be as a result of the COVID-19 outbreak. A lot of populations of color are getting hit the hardest by this pandemic and I am sure that it will sadly contribute to the already prevalent wage gap.

  3. April 25, 2020 by Mahika

    Hi Madison, I really enjoyed reading your post. I love how you have woven in history and present to show how deep this conflict’s roots are. Thank you for sharing organizations that are doing great work, because while we can agree this is a problem, it’s always great to know that people are doing something about this. I think a lot of socioeconomic issues are rooted in the social part, particularly a lack of empathy and mutual understanding. So, when people’s mindsets shift (through education, how they were raised, etc.) they are more likely to defend others, make decisions in a position of power that treat people equally, etc.

  4. April 26, 2020 by Carl Thiermann

    Madison–I read (and listened to) your project with great interest and I’m impressed you were willing to analyze the wealth gap by acknowledging the multitude of factors one needs to study and address. For me, the history of redlining (and the map from Charlotte) was particularly effective historical evidence—and I was interested to learn more about the New Deal and its impact on housing segregation. I appreciated that you started with the historical trends before transitioning to current factors, including your proposals on education, including teacher pay and school funding. On a separate note, I liked your personal introduction—and from a technical viewpoint—I thought the design of the room, backdrop, lighting was very welcoming. I felt personally invited to engage in the topic. Bravo.

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