Closing The Racial Wealth Gap Helps The Economy

2:25 p.m.
August 25, 2019

                                 Closing The Racial Wealth Gap Helps The Economy

 Closing the racial wealth gap would add $1 trillion to $1.5 trillion to the U.S. economy by 2028—or 4% to 6% of estimated GDP, according to a new study by McKinsey.
“Addressing this gap and focusing on black citizens as participants in the economy helps everybody,” says Jason Wright, a study co-author and a McKinsey partner.
In 2016, the median wealth of white families was 10 times that of the median wealth of the black families. Looking at wealth gains longitudinally, the gap between median wealth of black and that of white families grew from about $100,000 in 1992 to $154,000 in 2016, largely because median black wealth did not grow in real terms over that period while the median wealth for white families grew by $54,000.
The intergenerational transfer of homeownership also sustains and exacerbates the existing racial wealth gap. About 40% of black families own homes, compared with 73% of white families, a rate that is significantly lower than the national homeownership rate, which sits at 64.3% But even when black families do own homes, they are typically located in lower-income neighborhoods and are less likely to appreciate in value.

“Housing is still the main pathway to wealth,” says Rashawn Ray, an associate professor of sociology at the University of Maryland, College Park. “Often, when white families receive inheritance, that inheritance is initially rooted in homeownership and passed down from generation to generation, so their wealth accumulates.”

This advantage early on provides lasting momentum for white families. On the flip side, black families have been exposed to housing-related obstacles over the years that significantly constrain lifetime earnings, such as predatory lending, a higher mortgage denial rate and the continued effects of redlining. Across the education spectrum, the lifetime earnings of blacks are 23% lower than those of whites, yet black families are 1.3 times more likely to have student debt, and their balances that are 1.7 times higher than those of their white counterparts. And because education is an “intangible asset,” black families facing financial difficulties are often unable to service their student loans, meaning that black borrowers are 2.3 times more likely than white borrowers to default, according to the McKinsey report.

While the widening racial wealth gap disadvantages black families and limits their financial prospects, says Ray, it also weakens the overall economy, thereby affecting everyone. “Less black dollars to invest in the economy means less of an ability to create jobs, increase wages and the value of homes. It also means less money put into the stock market and your retirement account.”

The flow of black dollars, Wright adds, goes back into the broader economy and into the pockets of every “race, creed and color, and businesses of all types.”
The push for reparations for black America can no longer take the back burner. The creed of America has overwhelmed our community since day one. 2020 the push has to continue before it is to late. 

Closing The Racial Wealth Gap Helps The Economy Closing The Racial Wealth Gap Helps The Economy Reviewed by Anson Moore on August 25, 2019 Rating: 5

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