Written by: Michael Proeber, 17, Florida
In 2018, the net worth of U.S. households and non-profit organizations was just over $104 trillion. Divided evenly among 127 million households currently occupied, each household would have about $820,000. However, the median household net worth is about $85,000. As the economy continues to grow, this gap will grow larger due to the accumulation of wealth by the upper class. Â This is a problem that is constantly discussed among economists.
However, there is a deeper problem that has gone largely ignored: demographic disparity.
Across the board, housing is becoming increasingly expensive. This along with the 2007 mortgage crisis have exacerbated the racial wealth gap. Leading up to the collapse of the housing market, POC were disproportionately targeted by banks issuing lucrative subprime loans. In 2007, the median net worth of white, Latinx, and black households were $192,500, $23,600, and $19,200 respectively. By 2010 all three had declined by about 30%. Through 2013, net worth for POC continued to fall in excess of 20% while whites were already recovering, settling at $141,900, $13,700, and $11,000. Comparing 2007 and 2013 values demonstrates POC’s predisposition to the crisis; they experienced a greater percentage loss along with a ~10:1 existing disparity. By 2013 this disparity was worse even with greater percentage growth among POC than whites.
The recovery of the housing market has seen prices and rent soar, but little to no growth in wages. Because a large factor in wealth is generational and inherited, it is incredibly difficult for young POC to collect assets and accumulate wealth.
Additionally, homeownership is only one component of wealth, and a gap is still seen in those that do not own a home. For those families, white households own $3,775 and black households own $120. The ratio of this gap is even greater than that of homeowners – median net worth of white homeowners is $239,300 and black homeowners $99,840 – suggesting that POC experience more extreme poverty than whites.
The inequality that institutionalized racism has caused can also be seen regionally. From 1934 to 1962, 98% of home loans went to white households. Communities that were redlined (systematic denial of financial services such as mortgages or insurance) in the 20th century continue to be predominantly nonwhite and poorer today. Redlining is still evident today; equally qualified POC are denied services at a significantly higher rate in dozens of cities.
The only lasting way to remedy racial economic inequality is to enact drastic reform and reparation programs including overhaul of the tax code and welfare. These reforms include changing the mortgage interest deduction, expanding the federal estate tax, increasing marginal income taxes, and closing off-shore tax shelters. If economic inequality continues, an increasingly majority nonwhite population with a decreasing amount of wealth will prove dire to economic growth.
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