How the Racial Wealth Divide is Weakening the American Middle Class

Thanks to the groundbreaking work of colleagues like Dr. Kilolo Kijakazi and Dr. Mariko Chang, there is growing recognition of the ongoing challenge of a deep and too often growing racial wealth divide. As I often state: the foundation of racial inequality is racial economic inequality, and the foundation of racial economic inequality is racial wealth inequality.  

As the country’s demographics continue to change, the racial wealth divide is no longer primarily a challenge of disenfranchised minorities but rather a threat to the American middle class. As the report “Dreams Deferred” notes, since the early 1980s, median wealth among Black and Latino families has been stuck at less than $10,000 while White household median wealth grew from about $105,000 to $140,000. In spite of the growth of White wealth, the national median wealth has slightly declined from about $84,000 to $82,000, showing how the racial wealth divide is weakening the American middle class as a whole.   

Similar to the racial wealth divide, there has been ongoing racial inequality for the two largest assets in Americans’ wealth portfolio: business ownership and homeownership. For the last 40 years, Black and Latino homeownership rates have stayed below 50% while White homeownership has remained at about 70%. In the 2nd quarter of 2019, Whites had a homeownership rate of 73%, with Latino homeownership at almost 47% and Black homeownership near 41%. In regards to business ownership, although 13% of the U.S. population is Black, only 10% of African Americans are business owners, and only 2% of businesses with employees are Black-owned. Hispanics are 17% of the population but only own 6% of small businesses with employees. [ White businesses are 81.6% of the total, even though the total population is  only 62.8% White.] 

As was done to jump-start the White American middle class, significant investment capital must be invested to build African American, Latino and Native American wealth. The report, “Ten Solutions to Bridge the Racial Wealth Divide,” reviews bold proposals to bridge racial economic inequality as a whole and the racial wealth divide in particular. This report was a collaboration between the National Community Reinvestment Coalition (NCRC), the Kirwan Institute for the Study of Race and Ethnicity of Ohio State University and the Inequality Project of the Institute for Policy Studies. 

The proposals included baby bonds, similar to those in Senator Cory Booker’s 2018 bill, the American Opportunity Accounts Act. A significant investment into affordable housing and homeownership exemplified in Senator Elizabeth Warren’s American Housing and Economic Mobility Act and Senator Bernie Sanders’ Housing for All plan is also proposed. The paper also promotes the passage of H.R. 40 to establish the Commission to Study and Develop Reparation Proposals for African-Americans. Finally, improving data collection on race and wealth is another proposed solution.

NCRC has been strongly advocating for improving data collection in regards to the racial wealth divide, such as the full implementation of Section 1071 of the Dodd-Frank Act. Section 1071 would require the Consumer Financial Protection Bureau to collect and disclose better data on loans made to minority, women-owned and small businesses. Similarly, NCRC advocates for the provisions of the previously mentioned American Housing and Economic Mobility Act that requires banks be examined where they are making significant amounts of retail loans outside the geographical areas of bank branches and leveling the playing field for financial institutions by requiring non-banks be examined under the Community Reinvestment Act. The formerly mentioned provisions would strengthen the monitoring of capital which is so important in wealth building.    

Stronger data, better monitoring and bold policy proposals are needed to address the national crisis of racial wealth inequality. 2020 must be the year the nation starts to turn back the ongoing racial wealth divide.

Dedrick Asante-Muhammad is the chief of Race, Wealth and Community at NCRC.

Photo by Zackary Drucker with The Gender Spectrum Collection

Print Friendly, PDF & Email

Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

Complete the form to download the full report: