Where We Went Wrong with the Racial Wealth Gap
By Anne Price, President
Originally published in Insight Center’s May 2017 Newsletter.
Before the Great Recession and the Occupy Wall Street movement, leading minds on economic issues came together from diverse communities of color to set an audacious goal: closing the racial wealth gap. It was a bold proclamation not just in its enormity, but also because an intentional focus on race and wealth inequality represented a significant departure from greater calls for class-not-race interventions at the time.
The call to close the racial wealth gap drew upon the pioneering work of numerous researchers and thought leaders. These pioneers got it right when they claimed that racial wealth inequality is not a natural occurrence or a law of nature, but a man-made choice.
From the Homestead Act to the G.I. Bill to Social Security, millions of people were locked out of opportunity due to a legacy of intentional and inadvertent policies that not only restricted communities of color from building wealth, but also facilitated the extraction of wealth from people of color to directly benefit Whites. The result has been ever-widening wealth differences between Whites and people of color that ultimately weaken democratic institutions, lower wages for all workers, undermine public health outcomes, and contribute to the disinvestment of entire communities.
Through the shared work of bringing to light this history of how policymakers and other power holders created racial wealth differences, the case for closing this gap seemed clear.
Collectively, academics and other thought leaders shaped our understanding of racial wealth inequality and within a few years, the racial wealth gap, once viewed as a fringe issue, garnered greater traction in the media and became part of the American discourse. Early coverage of the racial wealth gap was often discussed as a recent phenomenon mainly due to the housing crisis of 2008 and tended to leave out the history of institutionalized discrimination or policy prescriptions. In addition, a number of proposals like increasing the number of banked households, individual development accounts, child savings accounts, and others began to take root as viable solutions to help people build assets.
Somewhere along the way, asset building became increasingly conflated with ending the racial wealth gap. While bold measures for closing the gap were called for, individual approaches related to savings were put forward and systems change approaches were put on the back burner. As a result, the work to address racial wealth inequity has run off-course.
We must distinguish policies that provide important on-ramps to economic mobility and financial stability, and in the case of child savings accounts, serve as an aspirational goal for our children to plan for their futures, from those that address racial inequities. While many asset strategies help people keep more money in their pockets and get ahead, they fall woefully short of addressing the root causes of deep seated racial wealth inequities and put the onus on individuals rather than changing institutions.
In this context, working to close “a racial wealth gap” falls short of understanding the systematic, historical advantage Whites received from American economic policies over time. It sanitizes the argument, and in some cases gives us a false notion that transactional approaches without changing structural policies will lead us to the “Promised Land.”
If we are committed to tackling racial wealth inequities, we need to chip away at the root causes of the inequities in the first place. Ending mass incarceration and addressing crippling fines and fees which strip and prevent wealth accumulation; addressing labor laws and labor standards that dehumanize and extract resources from families and lock people into a system of exploitation and wage theft; and undertaking fair housing efforts to address government sponsorship of racial segregation — these are just a few examples of the work that is happening in the more immediate term.
It’s been over 70 years since our government invested heavily in a transformational policy that enabled millions of people to build wealth. It’s time to do that again.
For example, we have supported a federal job guarantee proposal led by economists Darrick Hamilton and William A Darity, Jr. A Federal Job Guarantee would restore dignity to the millions of jobless Americans who want to work but are being held back. It would also address the long-standing unjust and discriminatory barriers that keep large segments of communities of color and the formerly incarcerated out of the labor market.
We also see Universal Basic Income as a bold economic policy that, if shaped correctly, can help mitigate the impact of historical and ongoing injustices to immigrants, people of color, low-income communities, and the formerly incarcerated, giving them the opportunity to live meaningful lives and fulfill their potential.
Keep an eye out for our upcoming policy brief, Returning to the Promise of Full Employment: A Federal Job Guarantee in the United States, and stay tuned to learn more about our work on bringing a racial justice lens to the Universal Basic Income conversation.