RACIAL WEALTH GAP

America's Wealth Gap: Racial discrimination between Blacks and Whites

In January 2018, Donald Trump commented on the decreased rates of unemployment of black people, which feeds the narrative that the economic conditions of blacks are improving. However, the wealth gap between blacks and whites tells a different story.

The racial disparity between whites and blacks is wide and persistent. Following are the statistics that help us make sense of this difference:

•      The New York Times revealed that black families hold just $5.04 for every $100 that the white family holds

•      According to the Economic Policy Institute, less than one in ten white families are without wealth as compared to black households where more than one in four have zero or negative net worth.

•      The Institute of Policy Studies report highlighted that between 1983 and 2013, the wealth of the median black household decreased by 75%. While at the same time, the wealth for the median white household increased by 14%.

What has contributed to this wealth gap?

Institutional racism.

The seed of the white and black wealth gap was sewn eons ago and is still growing today. Blacks were prevented from economic gains by being subjected to slavery. Laws and policies- such as the Jim Crow Laws, The Chinese Exclusion Act, The Social Security Act, and The Homestead Act -- were enforced by the government to exclude blacks and other people of color.

Redlining

In the 1930’s, the Government designed color-coded maps. Red indicated ‘bad’ neighborhoods while green showed ‘good’ neighborhoods. Unfortunately, the government allotted these neighborhoods in such a manner that the red areas were where blacks and other people of color lived and the green area was where whites lived. 

Redlining by the government had many consequences. The Federal Housing Administration (FHA), which had created loan programs, in the 1930’s, to help make housing accessible, gave 98% of the loans to neighborhoods in the ‘good’ areas. This allowed whites to purchase homes and accumulate wealth and also gave an incentive to businesses to set up in these districts because of increased property values. Such an act gave an opportunity for developers to openly discriminate against people of color, as they were ‘bad’.

Add to such laws the prejudiced criminal justice system and tax codes, which favor the rich, and you get a full system that works in favor of whites. 

Even though the redlining policy has been abolished by the government, the actions of that time continue to play a role today. The wealth gained by whites, at that time, allows them to keep climbing the ladder while blacks cannot make it even half the way.

The discriminatory policies of the West continue to shape the lives of blacks and research has shown that even if blacks earn a college degree and work full-time they are still likely to have a lower net worth, than their White counterparts. In fact, it is estimated that by 2020, blacks will lose even more wealth.