Spotlight Exclusives

Confronting the Racial Wealth Gap is Critical to Addressing Economic Mobility

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The income gap between blacks and whites is significant: the median income for blacks is about 60 percent that of whites. But that racial income gap is small potatoes compared with the yawning gap in wealth. A new Institute on Assets and Social Policy (IASP) study quantified the conundrum and demonstrated that earnings translate to wealth very differently by race. For each dollar increase in income about 5 dollars of wealth is gained by white families (at the median) but only about 70 cents for African Americans. Looking at average income among a set of families over a 25-year study period, the IASP researchers found that gap increased seven fold. 


These and other findings around wealth were explored at the New America Foundation۪s recent Assets@ 21conference. The conference celebrated the birth of the assets movement 21 years ago with the publication of Michael Sherradan۪s seminal work, Assets and the Poor: A New American Welfare Policy, which proposed the notion of fostering savings among those with low incomes through matched savings in Individual Development Accounts.   


Assets contribute to wealth. Savings in the bank or owning a home are illustrations of assets which taken together with income add up to a person۪s wealth. The federal government has a number of asset-building programs and the New America Foundation offers a set of policies to improve their impact. There is bipartisan interest in assets as noted in several commentaries written for Spotlight, including one co-authored by Democratic and Republican members of the Washington State legislature who described bipartisan legislation enacted in 2011.


Assets have a profound effect on family well-being. Having assets can help families weather tough times; an accumulation of assets can facilitate large payments such as college tuition, purchasing a car or starting a business; and assets can be passed on from one generation to the next, fueling family economic mobility for decades to come.


Mobility in America could be a policy driver on both sides of the aisle. In a new Spotlight webcast, Washington Post columnist and Spotlight Advisory Council member Michael Gerson, noted that both liberals and conservatives share plenty of common ground on the mobility issue: “It has something to do with family structure, it has something to do with educational success, it has something to do with skills and job training.I۪d love to hear a virtuous competition between the Republican and Democratic candidates in this race about how you move people up the ladder of mobility in American life. That could be a healing, unifying debate.”


If the American Dream is to be shared by Americans of all races then the policies that enable wealth need attention across the political aisles.

Watch Michael Gerson’s interview on Mobility in the 2012 Campaign

Posted by Jodie

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