The Racial Wealth Divide in Trump’s America

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(Photo: Ellie / Flickr)

The majority of Black and Latino voters didn’t pull the lever for Donald Trump last November. He is, however, the president — and thus has the power to leave a lasting effect on the trajectory of their lives.

Trump has recently made headlines for making significant reversals in policy positions on issues ranging from immigration to the national debt ceiling. Perhaps, he could change his tune on how he addresses the growing racial wealth divide as well.

Will the already deep racial wealth divide grow wider under Trump, or can we begin to close it?

Recently released figures from the Census Bureau show that Black and Latino families saw a slight uptick in their household income last year. They still lagged far behind White families — with median households earning more than $ 10,000 less than their White counterparts. The racial income gap did get a bit smaller over the very short term.

Unfortunately, the long term trends go in the other direction.

A just released report I co-authored titled “The Road to Zero Wealth” looks at trends in household wealth, which includes the total sum of a families’ assets minus their debts. Wealth, not income, is the better measure of long-term financial stability.

The median Black family today has just $ 1,700 in wealth, with Latino families not far ahead at just $ 2,000. White families, meanwhile, own more than $ 100,000. That gap is staggering.

And it’s getting worse.

The report looks at racial wealth data over the past 30 years to project what we can expect in the future if current trends continue. By 2020, the end of Trump’s first term, median Black and Latino households stand to lose nearly 18 percent and 12 percent of the wealth they held in 2013, respectively.

Median White household wealth, on the other hand, looks set to increase 3 percent.

At that point, White households will own 85 times more wealth than black households, and 68 times more wealth than Latino households. That’s in just three years — let that sink in for a moment.

Looking a bit further into the future, Black families are projected to own no wealth at all by 2053. By that point, our country will be majority non-White, but Whites and non-Whites will be farther apart than ever.

That’s assuming nothing changes. If Trump moves forward with the policies he campaigned on, especially his tax “reform” plan, the gap surely grows.

Trump’s tax plan is heavily skewed toward providing massive tax breaks for the ultra-wealthy. Half of the proposed cuts will go to millionaires, according to the Institute on Taxation and Economic Policy. Less than 5 percent go to families with household incomes below $ 45,000.

Perhaps more insidious is Trump’s plan to eliminate the federal estate tax, also known as the inheritance tax. This levy applies exclusively to the wealthiest 0.2 percent of households and is intended to curtail the growing concentration of wealth in families like, say, the Trumps.

Fortunately, the president has other options. He could choose to expand, rather than abolish, the estate tax.

He could also address the deep disparities in homeownership — and particularly in the mortgage interest deduction in the tax code, which benefits the wealthy and those who already own a house. Thanks to generations of discrimination in housing and credit, black families trail whites in homeownership by a margin of over 30 percent.

Unfortunately, it’s unlikely Trump changes course. While the president is nothing if not mercurial, his commitment to protecting the wealth of the already wealthy has remained steadfast.

That the vast majority of the nation’s wealth is, and always has been, held in predominantly white hands at the expense of non-whites hasn’t concerned him. Perhaps, however, he’ll change his mind.

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Black and Latino Families Will Be Broke in a Few Decades if We Don’t Fix the Wealth Divide

Black women equal pay

(Image: Shutterstock)

Many people see progress on racial equity in the U.S. as a steady march forward, in which people of color become more equal with their White counterparts as the years go by.

Those are people who don’t pay attention to household wealth figures.

A new report I co-authored, “The Road to Zero Wealth,” looks at the past 30 years of wealth accumulation across racial lines, as well as what the future will bring if current trends continue. Our findings were bleak.

The divide between the wealth of a typical Black family and a typical White family today is vast. A median Black family has just $ 1,700 in wealth—total assets minus total debt. Thirty years ago, that same family had $ 6,800 in today’s dollars. Latino families at the median have similarly small assets, just $ 2,000, also seeing a decline over the past three decades.

White median household wealth, meanwhile, is significantly higher: $ 116,800, up from $ 102,000 over the same period.

So Black and Latino families at the middle have seen their wealth slip while white families in the middle saw their wealth rise. What does this look like projected into the future?

By 2053, just 10 years after the country is projected to become majority non-White, Black median families will own zero wealth if current trends continue. Twenty years later, Latino median families will follow suit. White median families will continue to own six figures.

Even those Black and Latino families who’ve achieved the traditional markers of middle class life—a good-paying job and a college degree—still lag far behind their White counterparts in terms of wealth. Black and Latino families with a member holding a four-year degree own just a fifth of the wealth of equivalent White families. In fact, they own less wealth than a White family whose head has just a high school diploma.

These numbers represent a troubling trend in which assets and economic opportunities are channeled away from families of color and toward White families.

The enduring legacy of slavery and the Jim Crow era contribute to this growing divide. For instance, just 2% of the heavily subsidized mortgages made available by the Federal Housing Administration in the 30 years following the Great Depression went to non-White households. Homes are the biggest asset most middle-class families own, so this sort of federally sanctioned discrimination created a huge, inter-generational disadvantage for the Black and Latino families left out.

Modern public policy decisions rooted in expanding inequality also play a significant role. One such policy is America’s complex system of tax expenditures—essentially discounts handed out to certain groups and individuals that together total more than a half a trillion dollars in public spending each year.
One example is the mortgage interest deduction, a tax break designed to promote homeownership. Unfortunately, the deduction is only available to those who itemize their tax returns, which skews the beneficiaries heavily toward the already wealthy—who are disproportionally White.

Changing our priorities around tax incentives, as well as investments in bold new programs like Children’s Savings Accounts (CSA) and a federal jobs guarantee, could reverse the decades-long rise in the racial wealth divide. Had Congress instituted a robust universal CSA program in 1979—seeding small savings and investment accounts for all children that could mature as they grew older—the white-Latino wealth gap would have disappeared by now and the white-black gap would have dropped by 82%.

Policy changes like these would require bold leadership from across the federal government, including Congress and the White House. In today’s political atmosphere, marked most often by scandal and regressive policy decrees as well as congressional gridlock, this does not appear forthcoming.

The good news, however, is that the policies needed to begin to turn the tide on our growing divide are readily at hand. We know what the problem is and how to fix it. Building the political will, and political power, to put such policies in play is the next step.

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It’s Not Too Late to Reverse the Road to Zero Wealth for Households of Color

What would U.S. society be like if a majority of families had no wealth – no savings, no home equity, no investments of any kind?

That is exactly where the country is headed if we continue on our current path toward economic dystopia for black and Latino families.

While we celebrate a modest reduction in poverty rates and an encouraging uptick in median income, as disclosed in this week’s Census report, the stagnation and decline of wealth remains a troubling indicator.

Between 1983 and 2013, median black household wealth decreased by 75%  to $ 1,700 and Latino household wealth fell 50% to $ 2,000. At the same time, median white household wealth rose 14% to $ 116,800.

If this trend continues, an African American born in 2013 will see her household wealth hit zero by the time she turns 40. Her Latino peers will suffer the same fate 20 years later.

This is happening as households of color make up a growing share of the population and are projected to reach majority status by 2043. If the accelerating racial wealth divide isn’t halted, a majority of U.S. households will no longer have enough wealth to stake a claim in the middle class. The consequences for the economy and society as a whole will be devastating as racial and political polarization deepens and intensifies.

A combination of bold societal and policy changes is the only way out of this crisis.

We have a choice to make. Do we want to become a country like Brazil where staggering wealth inequality is the norm? Or do we want to be more like Canada, where there is far less inequality and greater opportunities for all?

Read the full article on USA Today.

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Report: The Road to Zero Wealth

In this report, we look at the racial wealth divide at the median over the next four and eight years, as well as to 2043, when the country’s population is predicted to become majority non-white. We also look to wealth rather than income to reconsider what it means to be middle class. In finding an ever-accelerating gap, we consider what it means for the American middle class and we explore what policy interventions could reverse the trends we see today. We find that without a serious change in course, the country is heading towards a racial and economic apartheid state.

Key Findings:

  • While households of color are projected to reach majority status by 2043, if the racial wealth divide is left unaddressed, median Black household wealth is on a path to hit zero by 2053 and median Latino household wealth is projected to hit zero twenty years later. In sharp contrast, median White household wealth would climb to $ 137,000 by 2053.
  • If current trends continue, by 2020 median Black and Latino households stand to lose nearly 18% and 12% of the wealth they held in 2013, respectively, while median White household wealth increases 3%. At that point–just three years from now–White households are projected to own 85 times more wealth than Black households and 68 times more wealth than Latino households.
  • The declining wealth of households of color is already taking a significant toll on the broader economy. The nation’s overall median wealth decreased nearly 20% from 1983 to 2013 ($ 78,000 to $ 64,000—a period when Black and Latino median wealth went down and White wealth slowly went up.
  • Even earning a middle-class income does not guarantee a family middle-class economic security, according to the report. White households in the middle income quintile—those earning $ 37,201-61,328 annually—own nearly eight times as much wealth ($ 86,100) as Black middle-income earners ($ 11,000) and ten times that of their Latino counterparts ($ 8,600).
  • This disconnect in income and wealth is visible across every socioeconomic level. The report found that on average, only Black and Latino households with an advanced degree have middle-class wealth or higher, while White households, on average, need only a high school diploma to attain that same level of wealth.

The report calls on the Trump administration and Congress to consider a range of policy options to help close the racial wealth divide. They include:

  • Changing our tax code to stop subsidizing those who are already wealthy and start investing in opportunities for low-wealth families to build wealth. Specifically, the report recommends reforming the mortgage interest deduction and other tax expenditures, bolstering and expanding the federal estate tax, and creating a net-worth tax on multi-million-dollar fortunes.
  • Protecting low-wealth families from wealth-stripping practices by strengthening the Consumer Financial Protection Bureau and closing the offshore tax shelters currently enabling the ultra-wealthy to hide their assets.
  • Investing in bold new programs like Children’s Savings Accounts, automatic-enrollment retirement accounts, federal jobs guarantees, and a racial wealth divide audit of government policies.

Read the full report here [PDF].
Find sharable graphics here.

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How Wealth Managers Undermine Society and What We Can Do About It

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Honor Juneteenth by Closing the Racial Wealth Divide

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(Image: Khalil Bendib / OtherWords.org)

On June 19, 1865, Union soldiers arrived in Galveston, Texas. They carried some historic news: Slavery had finally and completely ended, they declared. All of America’s enslaved people were now free, some two and a half years after President Lincoln’s Emancipation Proclamation.

That day in June would soon become “Juneteenth,” a holiday still celebrated in communities across the United States.

African Americans have now been free from slavery for over 150 years. Over the course of those years, the United States has made some appreciable and even impressive progress. In 1964, passage of the Civil Rights Act toppled Jim Crow. A year later, the Voting Rights Act challenged discriminatory voting laws.

We’ve even seen the election — and re-election — of the nation’s first black president.

So why, amid all this progress, does the Juneteenth holiday still resonate so powerfully for so many Americans?

Because Juneteenth reminds us how far we have yet to go. Racial inequality remains one of the top issues of our time. Black households, research shows, continue to lag economically behind their white counterparts, in both income and wealth.

Last summer, the Institute for Policy Studies and the Corporation for Enterprise Development explored that inequality in a report called the The Ever-Growing Gap, which focused on the essential role wealth plays in achieving financial security and opportunity.

Over the past 30 years, the report found, the average wealth of white families grew at three times the rate of growth for black families. If those trends continue, black families would have to work another 228 years to amass the amount of wealth white families already hold today.

That’s almost as long as the 245 years that legal slavery stained colonial America.

Over the course of those years, slave labor built the backbone of America’s economy — and gave white families a 245-year head start on building household wealth and overcoming economic insecurity.

Juneteenth helps us remember this history — and we need to remember.

The conventional narrative around wealth building in America simply ignores slavery and its aftermath. Those with more than ample wealth, the narrative goes, fully merit what they have. And others merit less.

“Most people look at the story of inequality through the lens of deservedness: People get what they deserve,” writes my colleague Chuck Collins in his book Born on Third Base.

The standard narrative, he says, implies “that people are poor because they don’t try as hard, have made mistakes, or lack wit and wisdom.” And the rich, the same story goes, have worked “harder, smarter, or more creatively.”

This “deservedness” narrative never acknowledges the discrimination and other barriers that have blocked black economic progress, or the public policies that have kept these barriers intact — things like housing and employment discrimination, mass incarceration, and tax policies that favor the wealthy over poor people of all colors.

It’s time to take a close look at federal policies and the role they play in keeping the growth of black wealth stagnant. This Juneteenth, let’s rededicate ourselves to closing the racial wealth divide.

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To Billionaire Doomsday Preppers: Your Wealth Won’t Save You

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(Photo: Democracy Chronicles/ Flickr)

With Donald Trump’s election and the rising perils of war, climate upheaval, accelerating inequality, and civil unrest, some of the richest people in the United States are making escape plans.

In a recent New Yorker article, “Doomsday Prep for the Super Rich,” Evan Osnos writes that “even financiers who supported Trump for president … have been unnerved at the ways his insurgent campaign seems to have hastened a collapse of respect for established institutions.”

Osnos recently visited survivalist condos being built in former missile silos in Kansas and interviewed Silicon Valley billionaires and centimillionaires who are hedging against future social breakdown by investing in “bug out” escape homes in remote corners of the world.

This idea of privatized survival is extremely limited. In the face of growing inequalities and ecological crisis, the wealthy will not be able to build a wall high enough or a silo deep enough.

Why? Two simple, interconnected reasons, one ecological and the other economic:

1. There is no Planet B.

2. Your wealth won’t save you.

As a planet, we are experiencing an ecological crisis that will transform our daily lives. Climate change and ocean acidification—along with breaches of other planetary boundaries—will alter our food and energy systems and transform our way of life.

Read the full article on Yes! Magazine’s website. 

Chuck Collins directs the Program on Inequality and the Common Good at the Institute for Policy Studies.

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One Hundred CEOs Have as Much Retirement Wealth as 41 Percent of American Families

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As President Obama prepares to ride off into the sunset, among the perks he can look forward to is a presidential pension. Every month for the rest of his life, he’ll receive a retirement check for about $ 17,142 — not bad for a guy with at least a few black hairs remaining on his head.

And yet this sum is paltry compared to the retirement assets enjoyed by most big company CEOs, including some whose nest eggs were feathered by taxpayer dollars.

Take, for example, Michael Neidorff, the CEO of Centene, which manages health plans for Medicaid recipients and other poor Americans. Since Obamacare began expanding health coverage in 2010, Neidorff’s company retirement account has grown 658 percent, to nearly $ 140 million. That’s enough to generate a monthly check of $ 744,000—43 times as much as Obama’s.

If you think that’s a big gap, consider the retirement divide between top business leaders and working families. A new report I co-authored for the Institute for Policy Studies finds that in 2015, the 100 CEOs with the largest nest eggs had $ 4.7 billion in their combined company accounts. That’s as much as the entire retirement savings of the 41 percent of American families with the smallest nest eggs.

Compared to African Americans and Latinos, the gap is even wider. These 100 CEOs’ retirement savings are equal to those of 59 percent of African-American families and a whopping 75 percent of Latino families.

According to the Economic Policy Institute, 39 percent of workers nearing retirement age (56 to 61 years old) have no retirement account savings whatsoever. That means they’re likely to be entirely dependent on Social Security, which currently pays an average benefit of just $ 1,239 per month.

This grim picture will become even grimmer if Republicans manage to push through their new plan to overhaul Social Security. Introduced last week, the plan would cut benefits for all but the lowest earners by 17 percent to 43 percent by the year 2080, and hike the retirement age to 69 by 2030.

In the richest country in the world, why do so many millions of working people have to worry about paying their bills in their golden years?

One major factor is the demise of the traditional pension. While feathering their own nests, CEOs have stripped employees of plans that guarantee a monthly check. Instead, if ordinary workers get any retirement benefits at all, they tend to be the much less generous and riskier 401(k)-type plans. As of 2013, only about half of private sector workers had a 401(k) and the average account balance was just $ 18,433.

The drug wholesaler McKesson is one example of this trend. In 1997, it froze its employee pension fund, but continued to offer executives lavish benefits. CEO John Hammergren has amassed $ 147 million in his own company retirement funds over the past 20 years. General Electric CEO Jeff Immelt closed the employee pension in 2010 and replaced it with a 401(k) scheme. Meanwhile, his company retirement account has ballooned to $ 92 million.

CEOs actually have a powerful personal incentive for reducing worker retirement benefits. More than half of executive compensation is now tied to the company’s stock price, so boosting short-term profits through cost-cutting is a way to pad their own pockets.

Rather than pushing a reform that will only increase retirement inequality, policymakers should be focused on ensuring a dignified life for all seniors. And to achieve that, CEOs and other wealthy Americans will need to pay their fair share.

One way to generate some revenue to expand Social Security would be to ban the special tax-deferred retirement accounts most Fortune 500 companies set up for their top executives. While ordinary workers have strict limits on how much they can put in 401(k) plans every year ($ 24,000 max for older workers), CEOs are allowed to shelter unlimited amounts from the IRS in these accounts. Our report finds that Fortune 500 CEOs have nearly $ 3 billion stashed in such deferred plans.

Much larger sums could be raised by lifting the cap on Social Security payroll contributions, which is currently set at $ 118,500 per year. Almost all other American workers have to chip in a share of all of their earned income. Why should it be any different for CEOs?

We’ve heard a great deal this election year about rising economic anxiety in communities that have lost jobs which were once a source of decent pay and retirement benefits. Now it’s time to do something about it. Everyone should be able to enjoy their golden years—not just former CEOs and presidents.

The post One Hundred CEOs Have as Much Retirement Wealth as 41 Percent of American Families appeared first on Institute for Policy Studies.

Sarah Anderson directs the Global Economy project at the Institute for Policy Studies.

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Homes Are Getting Smaller While the Wealth Gap Gets Larger

housing-market-inequality

(Photo: Shutterstock)

Have you been keeping your own personal list of issues that should have received some attention in this year’s election campaigns but didn’t?

Here’s one issue you may have overlooked: America’s incredible housing squeeze.

We’re not talking just the household budget squeeze that comes from high monthly rents and mortgages. We’re talking squeezed people.

Today, in cities across the United States, more and more developers are betting they can make big bucks selling and renting outrageously tiny housing units.

How tiny? The smallest of the 144 units in The Harper, a new “micro” apartment building in Washington, D.C., take up all of 350 square feet. Over at the Moda 17, another D.C. address with micro housing, the smallest unit runs a mere 275 square feet.

In Seattle, the city where the modern micro-housing surge began in 2009, architects have seriously contemplated projects with units that average 175 square feet, about one-twelfth of the space in a typical American home.

This sort of tininess, some business leaders believe, will soon be sweeping America. Micro entrepreneurs like Jeff Wilson, the founder of the Austin-based start-up Kasita, are claiming that they stand “on the verge of disrupting the urban housing market in ways not seen in real estate and development in 150 years.”

The micro-housing industry, adds Frank Dubinsky, the developer behind the winning entry in a New York City tiny-space competition, “is just getting started.”

But many micro enthusiasts see tininess as more a movement than an industry. People today, as small-living commentator Graham Hill puts it, share a deeply felt desire for “less overwhelming lives, less space, less stuff.” Micro housing, they argue, speaks to that desire.

Other micro-housing advocates stress an environmental perspective. A 50 percent reduction in a home’s square footage, they have research to show, will cut carbon emissions 36 percent over that home’s lifetime.

Throw into the mix the wasteful financial expense of living large, activists in micro housing believe, and you have a powerful, life-affirming rationale for living small. A well-designed tiny space can liberate us from “unneeded rooms and unwelcome mortgages.”

Well, yes, tiny houses certainly do press a much smaller ecological footprint than normal-sized homes. But the romanticizing of tiny spaces can also distract us from directly confronting the intense concentration of income and wealth that poses a much more significant environmental threat.

Our contemporary rich — the beneficiaries of that concentration — live extraordinarily large. This past summer, realtors in Los Angeles were asking $ 149 million for a mega mansion with 50,000 square feet of living and entertaining space. Realtors in Florida at the same time were offering a 60,500-square-feet manse for $ 159 million and a 63,000-square-foot Miami estate for $ 195 million.

How many people would have to live cramped existences in tiny houses to offset the environmental footprint these huge estates stomp?

The wealthiest among us don’t just own one huge home. They own many.

Take Michael Bloomberg, the billionaire who as mayor of New York hosted the 2012 design competition that led to the city’s first legal micro-housing complex. Bloomberg currently owns an elegant five-story limestone townhouse in Manhattan, a $ 25 million townhome in London, and a plush getaway in the Hamptons, not to mention three additional getaways in Bermuda, Colorado, and Florida.

The world’s billionaires, on average, own four homes each. Most of these abodes sit vacant until their owners bop on by to visit via private jet, the world’s most environmentally inefficient mode of transportation. Every hour a private jet spends aloft burns as much fuel as an average automobile uses in a entire year.

Concentrated income and wealth doesn’t just speed the environmental degradation excessive housing spaces can bring. This concentration also distorts the housing market — to the financial disadvantage of average Americans.

The basic principle we need to keep in mind: Developers follow the money. Always. Back in the middle of the 20th century, a more egalitarian time in America, that meant focusing on America’s vibrant and growing middle class.

But in recent decades, with wealth cascading into America’s upper economic reaches, developers have shifted their attention to the vibrant and growing high-end market. In a deeply unequal America, they can now make much more catering to the rich than trying to meet the needs of average families.

This shift has left average families with fewer and fewer affordable housing options. And this shortage of affordable options has, in turn, triggered price hikes on the affordable places in short supply. Average-income people, particularly average young people, find themselves unable to afford the space that average-income people four and five decades ago could handily afford.

Average folks back then had the good fortune of living in a society of growing equality. Average folks today have the misfortune of living in a society where the rich get richer at the expense of everyone else.

This story does have a somewhat sunny side — but only for developers daring and devious enough to think really small. With so many renters desperate for affordable space, these developers can now bring to market ridiculously tiny housing units and charge ridiculously high square-foot rates for them.

Carmel Place, Manhattan’s first micro-unit apartment building, has 360-square-foot apartments that rent for $ 2,920 a month.

A tenant in one of these recently opened units will pay $ 35,040 a year for “the privilege of living,” notes one recent local press analysis, in a “prefabricated shoebox, where making your bed means shoving it in and out of a wall and over your apartment’s only coffee table.”

That tenant, the analysis adds, will actually be paying rent at a higher square-foot rate than occupants of “ritzy, white-glove” apartments on Manhattan’s Billionaire’s Row.

City officials in New York are still boosting micro-housing as a future solution to the city’s affordability crisis. But micro units — if they become the wave of the future — may only make that affordability crisis worse, argues Susan Saegert, the director of New York’s Housing Environments Research Group.

The sky-high per-square-foot rents that developers can get away with charging for micro units, Saegert explains, will over time become the per-square-foot rental rate of return developers expect on all their real estate investments.

But grassroots opposition may yet slow the micro tide. In New York, citizen groups are working to keep developers from building any new apartments that run less than 400 square feet.

“People shouldn’t live in a shoebox,” as writer Fran Lebowitz has argued. “It’s not good for human beings.”

In Seattle, the national micro pacesetter only a few years ago, many local activists see tiny housing spaces as “a way for developers to pack people into buildings like sardines and overcrowd neighborhoods with new residents who aren’t part of the community.”

This hostility has translated into new city housing regulations that — developers complain — “have made it nearly impossible to build what is considered a micro-unit.”

Pressure for micro-skeptical regulation figures to build. Researchers are linking life in small, crowded spaces to stress and poor health outcomes. They’re also detailing the links between rising economic inequality and rising rents for low-income families.

We don’t, in short, need tiny living spaces. We need our biggest fortunes to be tinier.

The post Homes Are Getting Smaller While the Wealth Gap Gets Larger appeared first on Institute for Policy Studies.

Sam Pizzigati is an associate fellow at the Institute for Policy Studies.

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America’s Staggering Racial Wealth Gap Is Getting Worse, Not Better

(Image: Flickr / Johnny Silvercloud)

(Image: Flickr / Johnny Silvercloud)

Two years ago this month, Michael Brown was shot by a white police officer in Ferguson, Missouri, sparking months of sustained protests and helping to ignite the Black Lives Matter movement. While police violence and inequities in our criminal justice system have dominated the discussion of our racial divide since then, there’s a lot more to the story.

Less covered — but just as startling — is the stark racial economic divide in this country.

In a new report called “The Ever-Growing Gap,” my co-authors and I examine 30 years’ worth of data on the wealth divide between white, black and Latino families. Even we were shocked at just how wide the chasm has become — and how much wider it’s going to get if we don’t do something about it.

Read the full article on Inside Sources’s website.

The post America’s Staggering Racial Wealth Gap Is Getting Worse, Not Better appeared first on Institute for Policy Studies.

Josh Hoxie directs the Project on Opportunity and Taxation at the Institute for Policy Studies.

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