A recent study by Prosperity Now and the Institute for Policy Studies (IPS) reports that if trends of the last 30 years continue, it would take African-American families 228 years to match the wealth white families currently experience today. Similarly, Latinx families do not fare much better as it will take 84 years to match the wealth white families currently experience today if current trends were to continue. By looking at the Federal Reserve’s Survey of Consumer Finances, Prosperity Now and IPS studied 30 years of data to determine the average increase of wealth for African-American, Latinx, and white families. Through this method, the authors of the study found that on average African-American families grew their wealth by around $750 a year, Latinx families by $2,250 a year, and white by $18,000 a year.
Admittedly, the authors do confess that using average wealth figures rather than median household wealth figures may allow the very wealthy and very poor households to exaggerate the numbers up or down. However the authors justify their decision by stating the use of average wealth figures provides a more conservative estimate of the financial wealth gap experienced by minorities in America. This is explained by the fact that using median household values shows that African-American and Latinx families are actually losing wealth and will therefore never matching the level of wealth which white families currently experience today.
Prosperity Now and IPS primarily lays the blame of the growing racial wealth gap on policies which disproportionally assist predominantly white wealthy households instead of the poor who are predominantly comprised of people of color. For instance in the last twenty years our government has spent over $8 trillion dollars towards helping families grow their long term wealth by saving through retirement, purchasing a home, start a business, or access higher education. Although not inherently bad, these tax benefits unfortunately ignore the poor who are struggling with their immediate financial situation and are therefore unable to utilize any tax benefits which assist those saving for the future.
The growing racial wealth gap is exacerbated by the high levels of growth among communities of color whose households are expected to surpass white households in 2043. Under the assumption that current trends continue, the wealth gap between white households and households of color in 2043 will exceed over $1 million dollars. Not only does this lead to the possibility of increased racial tensions domestically, but the growing number of households in financial distress will have an overall negative affect on economic growth in America.
Our rapid demographic shift from a white majority to a minority-majority must be met with an equally rapid reform on how we as a nation assist the poor in building wealth. The time is now for a major upheaval in our domestic policies which includes a more progressive tax system, increased consumer protections from predatory financial products such as pay day lending, and increased accessibility towards safe financial products for low and moderate income individuals.