The Racial Wealth Gap: Why Policy Matters

Executive Summary

As the United States rapidly becomes both a more diverse and unequal nation, policymakers face the urgent challenge of confronting growing wealth gaps by race and ethnicity. To create a more equitable and secure future, we must shift away from public policies that fuel and exacerbate racial disparities in wealth. But which policies can truly begin to reduce our country’s expanding racial divergences?

Until now there has been no systematic analysis of the types of public policies that offer the most potential for reducing the racial wealth gap. This paper pioneers a new tool, the Racial Wealth AuditTM, and uses it to evaluate the impact of housing, education, and labor markets on the wealth gap between White, Black, and Latino households and assesses how far policies that equalize outcomes in these areas could go toward reducing the gap. Drawing on data from the nationally representative Survey of Income and Program Participation (SIPP) collected in 2011, the analysis tests how current racial disparities in wealth would be projected to change if key contributing factors to the racial wealth gap were equalized.

Main Findings:

  • The U.S. racial wealth gap is substantial and is driven by public policy decisions. According to our analysis of the SIPP data, in 2011 the median White household had $111,146 in wealth holdings, compared to just $7,113 for the median Black household and $8,348 for the median Latino household. From the continuing impact of redlining on American homeownership to the retreat from desegregation in public education, public policy has shaped these disparities, leaving them impossible to overcome without racially-aware policy change.
  • Eliminating disparities in homeownership rates and returns would substantially reduce the racial wealth gap. While 73 percent of White households owned their own homes in 2011, only 47 percent of Latinos and 45 percent of Blacks were homeowners. In addition, Black and Latino homeowners saw less return in wealth on their investment in homeownership: for every $1 in wealth that accrues to median Black households as a result of homeownership, median White households accrue $1.34; meanwhile for every $1 in wealth that accrues to median Latino households as a result of homeownership, median White households accrue $1.54.
    • If public policy successfully eliminated racial disparities in homeownership rates, so that Blacks and Latinos were as likely as White households to own their homes, median Black wealth would grow $32,113 and the wealth gap between Black and White households would shrink 31 percent. Median Latino wealth would grow $29,213 and the wealth gap with White households would shrink 28 percent.
    • If public policy successfully equalized the return on homeownership, so that Blacks and Latinos saw the same financial gains as Whites as a result of being homeowners, median Black wealth would grow $17,113 and the wealth gap between Black and White households would shrink 16 percent. Median Latino wealth would grow $41,652 and the wealth gap with White households would shrink 41 percent.
  • Eliminating disparities in college graduation and the return on a college degree would have a modest direct impact on the racial wealth gap. In 2011, 34 percent of Whites had completed four-year college degrees compared to just 20 percent of Blacks and 13 percent of Latinos. In addition, Black and Latino college graduates saw a lower return on their degrees than White graduates: for every $1 in wealth that accrues to median Black households associated with a college degree, median White households accrue $11.49. Meanwhile for every $1 in wealth that accrues to median Latino households associated with a college degree, median White households accrue $13.33
    • If public policy successfully eliminated racial disparities in college graduation rates,median Black wealth would grow $1,313 and the wealth gap between Black and White households would shrink 1 percent. Median Latino wealth would grow $3,528 and the wealth gap with White households would shrink 3 percent.
    • If public policy successfully equalized the return to college graduation, median Black wealth would grow $10,786 and the wealth gap between Black and White households would shrink 10 percent. Median Latino wealth would grow $5,878 and the wealth gap with White households would shrink 6 percent.
  • Eliminating disparities in income — and even more so, the wealth return on income — would substantially reduce the racial wealth gap. Yet in 2011, the median White household had an income of $50,400 a year compared to just $32,028 for Blacks and $36,840 for Latinos. Black and Latino households also see less of a return than White households on the income they earn: for every $1 in wealth that accrues to median Black households associated with a higher income, median White households accrue $4.06. Meanwhile, for every $1 in wealth that accrues to median Latino households associated with higher income, median White households accrue $5.37
    • If public policy successfully eliminated racial disparities in income, median Black wealth would grow $11,488 and the wealth gap between Black and White households would shrink 11 percent. Median Latino wealth would grow $8,765 and the wealth gap with White households would shrink 9 percent.
    • If public policy successfully equalized the return to income, so that each additional dollar of income going to Black and Latino households was converted to wealth at the same rate as White households, median Black wealth would grow $44,963 and median Latino wealth would grow $51,552. This would shrink the wealth gap with White households by 43 and 50 percent respectively.

To effectively address the increasing inequality that is undermining Americans’economic security, we must first identify the key factors contributing to the problem and evaluate policy proposals that could affect current trends. The Racial Wealth AuditTM is designed to fill the void in our understanding of the factors contributing to the racial wealth gap and clarify our ability to reduce the gap through policy. This paper, which presents the first analyses using this new tool, will be followed by a series of policy briefs using the Racial Wealth AuditTMTM to analyze specific public policies and policy proposals
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Less Debt, More Equity: Lowering Student Debt while Closing the Black-White Wealth Gap

Summary and Key Findings

The dramatic increase in wealth inequality over the past several decades now forms the backdrop for many of today’s most pressing public policy debates. Currently, the top 1 percent of U.S. households controls 42 percent of the nation’s wealth, and nearly half of the wealth accumulated over the past 30 years has gone to the top 0.1 percent. Simultaneously, the wealth held by the bottom 90 percent of U.S. households continues to shrink, just as people of color are a growing percentage of the U.S. population. These trends have converged to produce a wealth divide that is apparent not just by class, but by race as well. The average white family owns $13 for every $1 owned by a typical black family, and $10 for every $1 owned by the typical Latino family.

Racial wealth inequality has its roots in historic injustices and the exclusion of communities of color from traditional avenues of building wealth — from housing, to banking, to education. Traditionally, we have viewed higher education as an antidote to inequality, but our higher education system, like so many of our institutions, is rife with racial and class disparities, from enrollment to completion. For black students in particular, attending college almost certainly means taking on debt in order to attain a postsecondary degree, while white households borrow less often, and in lower amounts for their undergraduate degrees. As borrowing for college has become the norm, the racial bias in terms of who must borrow to attend college and how those trends amplify already deep inequities in wealth accumulation is cause for concern.

This analysis uses the Racial Wealth Audit, a framework developed by the Institute on Assets and Social Policy (IASP) to assess the impact of public policy on the wealth gap between white and black households. We use the framework to model the impact of various student debt relief policies to identify the approaches most likely to reduce inequities in wealth by race, as opposed to exacerbating existing inequities. We focus specifically on the black-white wealth gap both because of the historic roots of inequality described above, and because student debt (in the form of borrowing rates and levels) seems to be contributing to wealth disparities between black and white young adults, in particular.

Main Findings:

  • Young, black households (ages 25-40) are far more likely to have student debt than their white peers. Over half (54%) of young black households have student debt, compared to 39% of all young white households. Despite the higher earnings that often come with a degree, over a third (35.9%) of young black households making $50,000 a year or below have student debt, compared to fewer than one-in-six (15.5%) young white households. Among those making $25,000 a year or below — around the expected earnings for those who have not completed high school — nearly 16 percent of young black households have student debt, compared to fewer than 6 percent of white households.
  • The racial wealth gap is substantial even among young households. Among typical households age 25-40, whites have 10 times the wealth of blacks. The net worth of low-wealth black households (those at the 25th percentile) is actually negative, while similarly positioned low-wealth white households still have a modest financial cushion.
  • At the median, forgiving student debt only for low- and middle-income households reduces the racial wealth gap for black households. Eliminating student debt for households making $50,000 or below would reduce the racial wealth gap between black and white families by over $2,000, or nearly 7%. Eliminating student debt for households making $25,000 or below would reduce the racial wealth gap at the median between black and white families by over $1,000, or around 4%.
  • A progressive student debt reduction policy would dramatically reduce the racial wealth gap among low-wealth households. While the effects of loan reduction on the racial wealth gap are modest but noticeable at the median, we see far greater effects among low-wealth households (those at the 25th percentile of wealth). Eliminating student debt among those making $50,000 or below reduces the black-white wealth disparity by nearly 37% among low-wealth households, and a policy that eliminates debt among those making $25,000 or less reduces the black-white wealth gap by over 50%.
  • Eliminating student debt for all households would increase the racial wealth gap. While eliminating student debt for all households regardless of income increases median net worth for young white and black households, white families see a greater benefit likely due to higher likelihood of completing college and graduate degree programs. Policies which eliminate all student debt for young households would expand the divide between median black and white wealth by an additional 9%.

These findings clearly show that policy design matters for reducing the racial wealth gap. In constructing ways to reduce or eliminate student debt, policymakers should take into account that universal elimination of student debt, while benefiting all who hold debt, might have the effect of increasing our already-expanding racial wealth divide. On the contrary, a debt-elimination policy that targets low-income households might dramatically reduce the wealth divide, among both median as well as low-wealth households. Policymakers should take note that the same policy may impact white, black, and other households of color differently, and adjust policies accordingly.

Introduction

Despite powerful national narratives about equality, diversity, and upward mobility, the U.S. is becoming more unequal as it has continued to become a more racially diverse nation. Wealth inequality — both the difference in wealth held by the top segment of households compared to the rest of the population, and the difference in wealth held between racial and ethnic groups — has formed the backdrop for many of today’s most pressing public policy debates. By now, the numbers are familiar: currently, the top 1 percent of U.S. households controls 42 percent of the nation’s wealth, and nearly half of the wealth accumulated over the past 30 years has gone to the top 0.1 percent of households. Meanwhile, the portion of wealth held by the bottom 90 percent of Americans continues to shrink. Given the historical legacy of overt racism coupled with ongoing discrimination in our social and financial institutions, the growing wealth divide is sharply apparent not just by class, but by race. In fact, the average white family owns $13 for every $1 owned by a typical black family, and $10 for every $1 owned by the average Latino family.

Racial wealth inequality has its roots in historic injustices and the exclusion of communities of color from traditional avenues of building wealth — from housing, to banking, to education. Traditionally in the United States, we have thought of higher education as an antidote to inequality, or a potential Great Equalizer in expanding opportunities for secure, well-paying jobs that lead to financial stability and the American Dream. After all, income and wealth for college graduates far exceeds that of high school graduates and those with a college education are far more likely to be employed compared to those who do not have a higher degree. In fact, the link between education and wealth has never been stronger, according to a recent analysis from the Federal Reserve Bank of St. Louis.

Expanding educational opportunity, therefore, has been a central priority in U.S. public policy, but many disparities remain stark. Racial disparities permeate the educational system from pre-kindergarten through completion of post-baccalaureate programs, and inequalities at each level reflect earlier disparities and contribute to those that follow. Education, in a sense, can create a “wealth feedback loop,” as the educational level of parents significantly predicts the level of education completed by their children.

With rising college attendance but persistent and growing wealth inequalities, many have become concerned about the sharp and unrelenting rise in student debt over the past 20 years, and the impact of that debt on the ability of low and moderate resource families to accumulate wealth and financial stability in the years after college. Demos has previously analyzed the wealth of young households with student debt, finding that at every level of education, households without education debt have substantially greater wealth in both retirement and liquid savings, and are more likely to own a home. Given the higher levels of wealth among those who do not have to borrow for college and the greater need to borrow by black students, there is reason to be concerned about the impact of student debt on household wealth and our growing racial wealth divide.

This analysis uses the Racial Wealth Audit, an analytical framework developed by the Institute on Assets and Social Policy (IASP) to assess the impact of public policy on the racial wealth gap. We use the framework to model the impact of various student debt relief policies to identify the approaches most likely to reduce inequalities in wealth between white and black households, as opposed to amplifying existing inequities. We focus specifically on the black-white wealth gap both because of the historic roots of inequality described above, and because student debt (in the form of borrowing rates and levels) seems to be contributing to wealth disparities for young black adults, in particular. While we present some analyses for Latino households later in an appendix, the patterns of student debt burdens differ between blacks and Latinos making distinct analyses for each group more appropriate.

How Student Debt Exacerbates Racial Wealth Inequality

Despite its reputation as a Great Equalizer, our current system of higher education in the U.S. has served to reinforce many of the racial disparities that we see in other areas of social and economic policy. While high school graduation and college enrollment have increased among students of all racial and ethnic groups, and the differences have narrowed slightly, the gap in college completion between white students and their black counterparts is far more substantial and has actually risen over time.

As Table 1 below shows, the differences in educational attainment between white and black populations widen across the educational spectrum. While the vast majority of blacks graduate high school and over half at least start college, fewer than a quarter eventually get a four-year degree. As Demos has previously shown, black student borrowers are more likely to drop out with debt. This reality has ramifications for the life course economic stability and asset-building opportunities of young, black college-goers by limiting their ability to attain the labor market stability and subsequent wealth that a college degree confers.

Yet, despite lower rates of college completion, young black households (ages 25-40) are far more likely to have student debt. Over half (54.4%) of all young black households have student debt, compared to 39 percent of young white households even with the higher likelihood that white households completed college. And while modest amounts of student debt are correlated with completing college, debt amounts beyond $10,000 have a negative correlation with completing college. The rise in average debt among all students, particularly black students, may create additional barriers to complete and receive an economic boost from a degree. With black students already facing barriers to college completion and higher financial need for student loans in the first place, growing levels of student loans are increasingly a financial burden for young black households.

These results also cut across income levels. Over a third (35.9%) of young black households making $50,000 a year or below have student debt, compared to fewer than one-in-six (15.5%) young white households. Among those making $25,000 a year or below — around the expected earnings for those who have not completed high school — nearly 16 percent of young black households have student debt, compared to fewer than 6 percent of white households.

Research from IASP has shown that the wealth gap increases with age as white families accumulate substantial wealth over the life course and black households typically experience more hurdles, including discriminatory policies and practices, to asset-building. However, while the racial wealth gap is larger later in life, the gap starts early among young adults with white families getting a head start in their bank accounts as well as in their extended family networks. The existence of student debt — in addition to discrimination faced by households of color in labor, housing, and financial markets — contributes to large racial disparities in wealth that show up among young households early in the life course. Even for households just getting started saving for the future, the typical young white household has nearly $10 for every $1 in black wealth creating a head start for whites that has lifelong impacts.

But looking at the typical household does not tell the whole story; differences are far starker among low-wealth households (see Figure 3, below). The net worth of low-wealth black households (those at the 25th percentile) is actually negative, while low-wealth white households still have a modest financial cushion. These data demonstrate that, while among lower-wealth white households a common financial shock such as an unexpected car repair could likely be afforded with wealth reserves, such expenses would likely put a similarly situated young black household in dire economic straits or further into debt.

Universal Student Debt Relief and Its Impact on Racial Equity

Given the higher likelihood that black households are more financially burdened by student loans relative to whites, we utilized the Racial Wealth Audit framework to examine the impact of reducing student debt on household wealth and its subsequent impact on the racial wealth gap. We narrowed our focus to young adult households (ages 25-40), since young households are more likely to have student loans — due in part to the rising costs of college, the increasing number of young people attending college, and the shorter amount of time young people have had to pay off their debts.

Existing inequities in borrowing rates and debt levels provide a clear case for debt relief that is directed at those who are more likely to see student debt weigh heavily on their ability to build wealth. To analyze the impact of reducing student debt on the racial wealth gap, our model tested the impact on household wealth, if policy supported a one-time reduction of student loan debt among young households (25-40), at four levels: 25 percent, 50 percent, 75 percent, and 100 percent of the total student loan balance. In other words, we tested the impact on household wealth if policies were implemented to reduce student loan balances of young adult, student loan borrowers by a quarter, half, three-quarters, or entirely.

This modeling exercise allows us to understand how existing racial inequalities in wealth would change if educational policy had reduced or eliminated the need for student loans among today’s young adults, or alternatively how household wealth might be different if we did not require borrowing for higher education. Thus, by understanding how wealth disparities would change with an elimination or reduction in existing student loans, we can better understand the role that these loans play in current wealth gaps.

Our analysis found that, while eliminating student debt for all households regardless of income increases the median net worth for white and black young adults alike, it also has the effect of increasing the racial wealth gap. Essentially, the typical white family would see a greater total benefit than the typical black family (See Table 3 and Figure 4). For example, eliminating 100% of student debt would expand the divide between median black and white wealth by an additional 9%, or nearly $3,000.

Since (as mentioned above) white households attend college — and also seek out advanced degrees — in greater numbers (see Table 1 above), they may stand to benefit more from a loan reduction policy that does not take income or financial circumstances into account. Thus, reducing student loans for all households regardless of income may actually be counterproductive in reducing racial wealth disparities, indicating that targeted relief and scholarship programs may be preferable. This finding reveals that universal debt relief may go to students with less need and more capacity to pay back loans, especially advanced degree holders who tend to have the highest incomes. Though any debt reduction policy would serve to lower the total burden of student debt on young families, new policy initiatives should support both debt reduction and equity in reducing the racial wealth gap. Eliminating all student debt for all young adult households does not meet both of these criteria; thus, as we consider policy solutions for lowering the financial toll of student debt on young people today and decide how to direct public resources, it is important to understand that this approach does not promote equity.

However, given the finding that many black households of modest incomes still have student debt (see Table 2 above), it stands to reason that a means-tested loan forgiveness policy may yield different results. Thus, we also tested the effects on the racial wealth gap of reducing student debt only for young households at or below median income. We tested the same loan reduction percentages for households making $50,000 (approximately the median U.S. income) and below, as well as the impact if eligibility were limited to those making half of median, or $25,000 or less annually.

Indeed, limiting eligibility for loan forgiveness to low- and middle-income households reduces the racial wealth gap between black and white households. The greatest reduction in the wealth gap between white and black families occurs when families earning $50,000 or below see their loans completely forgiven. A policy of total loan forgiveness for these families would reduce the racial wealth gap between black and white families by 7%, or $2,201.

Further limiting the eligibility criteria to those making $25,000 or below also reduces black-white wealth disparities by 4%, or $1,111. While these estimates may seem modest, given the numerous factors contributing to the black-white wealth gap, a reduction of more than $1,000 in the racial wealth gap from a policy squarely targeted at those with very low incomes is quite a substantial impact.

It is also notable that we see this change in the black-white racial wealth gap, despite the fact that a relatively small percentage of households would be eligible for such a policy. That is, fewer African Americans have incomes below $25,000, while also holding student loans compared to those with incomes of $50,000 or less, or across all levels. This makes sense; student debtors tend to have higher incomes than non-debtors in absolute terms, due to the fact that college-goers earn more on average than those who never attend college. Yet, as mentioned above (see Table 2) black families face a particularly high burden of student loans in each income category studied. By targeting loan alleviation programs on the lowest income student debt holders, there is an opportunity to reduce the racial wealth gap and target assistance to those with the greatest financial need.

The Impact of Student Debt Reduction on Low-Wealth Households

Given the finding that many black families have substantial negative net worth — their debts exceed their savings and assets — we also examined the impact of loan reduction policies on the racial wealth gap among those farther down the wealth distribution — those at the 25th percentile of net worth.

Testing the same loan reduction policies with the same eligibility criteria as seen above, we find that, while the impact on the racial wealth gap at the median was somewhat modest, yet still notable, there seems to be an even larger potential effect of loan reduction policies on the racial wealth gap at this point in the wealth distribution. For example, reducing 100% of student debt with no income eligibility criteria would reduce the wealth gap between black and white families at the 25th percentile by 24 percent, or $2,740. While a universal approach moves us in the right direction for those at the 25th percentile in terms of reducing racial wealth disparities, once more, we see that a more targeted approach focusing loan reduction efforts on lower-income households does even more to reduce the racial wealth gap among lower-wealth young households. Again, we tested the effects on the racial wealth gap of reducing student debt only for young households making $50,000 or below, and $25,000 or below, but this time examined its impact on those at the 25th percentile.

Similar to what we found at median net worth, a more progressive approach to loan reduction policy is more successful at reducing the racial wealth gap. For example, forgiving all student debt for families making $50,000 or below yields a 37%, or $4,180, reduction in the wealth gap between low-wealth black and white families. Lowering the eligibility for loan forgiveness even further to those making $25,000 or less produces an even greater reduction of the black-white wealth disparity among low-wealth households. Such a policy yields a 51%, or $5,840, reduction in the wealth gap between black and white families. These results are particularly dramatic. The fact that the racial wealth gap at the 25th percentile for whites and blacks is reduced by one third to one half with a progressive elimination of student loans highlights how large a role student debt plays in racial disparities in wealth between young adults today. These results suggest that for the most vulnerable student loan debtors by income, we can reduce substantially the racial wealth gap at the 25th percentile for black young households by developing policies which eliminate and reduce the need for low-income households to take on student loans.

Student Loan Policy Matters for Reducing the Racial Wealth Gap

These results speak to the importance of careful public policy design. If policymakers are concerned about the growing racial wealth gap as well as the growing level of educational debt among today’s young people, they should design interventions that not only reduce the overall burden of student debt, but do so in ways that do not expand existing racial wealth divides. As these analyses show, the greatest reductions in the racial wealth gap, both at the median and at the 25th percentile of the wealth distribution, come from targeted forgiveness for low- and middle-income households. Targeted grant aid, lower tuition and debt relief for those with tighter household budgets appeal to our sense of fairness about access to higher education, while also contributing to reductions in the racial wealth gap. By contrast, lowering debt levels and expanding assistance for all households could actually exacerbate wealth gaps by providing aid to households that have greater capacity to pay off their debts.

We know that disparities in higher education attainment and student loan burdens only account for a portion of the racial wealth gap, and policymakers should look beyond student debt to help households build wealth in the labor and housing markets in ways that reduce divides by race. However, given the substantial impact of targeted reductions in student debt on the racial wealth gap, particularly among those with lower income and wealth levels, a number of policies could be enacted that may make a sizeable difference. These include:

  • disproportionately borne by low-income students and students of color. Similarly, black students are more likely to take on loans but not complete college, which results in higher rates of delinquency and default, even with relatively low loan balances. Providing a guarantee of debt-free public higher education in a way that targets subsidies toward those who are most likely to face unmet financial need for college could increase both college attendance and completion rates, while having the effect of eliminating borrowing for most students of color.
  • Institutional accountability and debt forgiveness for students attending low-quality institutions. Many students face trouble repaying student loans due to attending a college that required borrowing but provided specious value in the labor market. Students at these institutions, many of which reside in the for-profit college sector, often have very little recourse to have debt forgiven, even in instances of fraud and abuse. A mechanism of loan forgiveness for these students would target those who need forgiveness the most &mdash frequently low-income and students of color. Tighter oversight of colleges and degree programs, including the strengthening of Gainful Employment regulations, would also ensure that these institutions’ access to federal financial aid and loan dollars are restricted, and that students enter a fairer higher education marketplace.
  • Incremental debt forgiveness for students in public, low-wage professions. Currently, the federal government provides loan forgiveness for those who work in public service professions for 10 years, and have made 10 years of payments on their student loans. This benefit, Public Service Loan Forgiveness, aligns debt reduction with those whose incomes are low enough as to be unable to pay off their loans in that timeframe. That said, the program does not have an income eligibility criterion and is scheduled to provide a substantial portion of forgiveness to graduate degree holders, many of whom have above-average incomes. Low-wage public service workers with undergraduate debt are less likely to see the same type of benefit, in many cases because their loan balances are far smaller. Ensuring that those who work in low-wage public service professions, including social workers, teachers, educators, and first responders, also receive forgiveness, perhaps by providing a reduction incrementally rather than at one time after 10 years, has the potential to reduce the racial wealth gap by targeting those with lower incomes.
  • Allow student loans to be discharged in bankruptcy. Unlike other forms of consumer debt, student loans are extremely difficult to be discharged in bankruptcy. Those seeking to discharge student loans must satisfy an onerous and ill-defined “undue hardship” standard, in some cases effectively making it impossible to discharge loans even in the most hopeless of financial circumstances. The barrier is so high that 99.9% of individuals with student loan debt who file bankruptcy do not even bother to allege an “undue hardship.” Reforming our bankruptcy code’s treatment of student debt would, by definition, provide loan forgiveness and reduce debt to those who face the greatest financial hardship, and thus, has the potential to reduce the racial wealth gap .

Appendix A: Latino Student Loan Debt and the Racial Wealth Gap

While this analysis focuses primarily on differences in black-white wealth, we also examined the impact of student debt reduction on young Latino households. Our findings confirm that the patterns of student loan debt and barriers to educational access differ black and Latino students making distinct discussions of the key student debt concerns appropriate. According to data from the Survey of Consumer Finances, Latino households attend and graduate from college at lower rates than both black and white households. Our analyses also point to the much lower household wealth levels among Latinos relative to white families. Likely due to lower rates of college attendance and attainment, the percentage of Latino households with student debt (21%) is lower than that of both blacks and whites. Thus, the dynamic of student loans is different for Latinos than that seen among black households, who despite lower college attendance and completion rates than whites, are far more likely to hold debt.

Evidence also suggests that Latino students may be more adverse to taking on student loans even when they face substantial financial need for school, and Demos has found that while Latino students tend to borrow less than black and white students at public institutions, they borrow at comparable — or even higher — amounts at private for-profit institutions, where they also drop out with debt at high rates.

Our model suggests that loan reduction policies may play out differently for the Latino-white wealth gap (see Appendix Table 2, below), perhaps due to differences in educational attainment. Universal debt reduction policies would benefit Latinos modestly but would expand the racial wealth gap among both typical and low-wealth households, even when the policy is targeted squarely at borrowers making $50,000 and below. Again, this is not because loan reduction would reduce Latino wealth per se, but rather that white families see a larger benefit than Latino families in this scenario. However, a loan reduction policy targeted at those making $25,000 or below would reduce the racial wealth gap at both the median and among low-wealth households, though the reduction is less than that seen for black-white wealth differences. We posit that these results stem in large part from the fact that the lowest wealth Latino households face numerous barriers to higher education making them less likely to begin college and take out loans.

Appendix B: Modeling Student Loan Reduction Policies on the Racial Wealth Gap

End Notes

  1. IASP analysis of the 2013 Survey of Consumer Finances
  2. Mark Huelsman, The Debt Divide: The Racial and Class Bias Behind the New Normal of Student Borrowing, http://www.demos.org/publication/debt-divide-racial-and-class-bias-behind-new-normal-student-borrowing (2015)
  3. National Center for Education Statistics (2015). The Condition of Education 2015: Annual Earnings of Young Adults, Figure 2.
  4. Emmanuel Saez, and Gabriel Zucman, “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data,” NBER Working Paper No. 20625 (2014).
  5. Saez and Zucman, “Wealth Inequality in the United States since 1913” (2014).
  6. IASP analysis of the 2013 Survey of Consumer Finances
  7. Ray Boshara, William Emmons, and Bryan Noeth, “The Demographics of Wealth: How Age, Education, and Race Separate Thrivers from Strugglers in Today’s Economy,” (2015), https://www.stlouisfed.org/household-financial-stability/the-demographics-of-wealth/essay-2-the-role-of-education
  8. Michael Greenstone et al, Thirteen Economic Facts about Social Mobility and the Role of Education, The Hamilton Project (2013) http://www.brookings.edu/research/reports/2013/06/13-facts-higher-education; The Pell Institute, Indicators of Higher Education Equity in the United States: 45 Year Trend Report (2015) http://www.pellinstitute.org/downloads/publications-Indicators_of_Higher_Education_Equity_in_the_US_45_Year_Trend_Report.pdf
  9. Huelsman, The Debt Divide (2015)
  10. Throughout this report, the terms “typical” and “median” are used interchangeably.
  11. U.S. Department of Education, Digest of Education Statistics. Table 302.20: Percentage of recent high school completers enrolled in 2- and 4-year colleges, by race/ethnicity: 1960 through 2013; U.S. Department of Education, Digest of Education Statistics. Table 376. Percentage of first-time full-time bachelor’s degree-seeking students at 4-year institutions who completed a bachelor’s degree, by race/ethnicity, time to completion, sex, and control of institution: Selected cohort entry years, 1996 through 2005.
  12. Huelsman, The Debt Divide (2015)
  13. Rachel Dwyer, Student Loans and Graduation from American Universities, Third Way, 2015. http://www.thirdway.org/report/student-loans-and-graduation-from-american-universities
  14. National Center for Education Statistics (2015). The Condition of Education 2015: Annual Earnings of Young Adults, Figure 2.
  15. Shapiro, Meschede, Sullivan. Racial Wealth Gap Increases Fourfold. https://iasp.brandeis.edu/pdfs/2010/RWG_FourFold.pdf.
  16. This is not to say that student debt is only a burden for young households. Approximately 1/3 of all student debt is held by borrowers 40 and older (see: Federal Reserve Bank of New York, Student Loan Debt by Age Group [2013]). In 2013, the federal government garnished nearly $150 million in social security benefits from U.S. households in default on their education debt. (See GAO, Older Americans Inability to Repay Student Loans May Affect Financial Security of a Small Percentage of Retirees, [2014])
  17. Huelsman, The Debt Divide (2015)
  18. For a description of the Obama Administration’s Gainful Employment regulations, see U.S. Department of Education, Fact Sheet: Obama Administration Increases Accountability for Low-Performing For-Profit Institutions, (July 1, 2015), http://www.ed.gov/news/press-releases/fact-sheet-obama-administration-increases-accountability-low-performing-profit-institutions
  19. Charles Booker, The Undue Hardship of Education, 39 J.L. & Educ. 273, 275 (2010).
  20. Jason Iuliano, An Empirical Assessment of Student Loan Discharges and the Bankruptcy Undue Hardship Standard, 86 Am. Bankr. L.J. at 499.
  21. Alissa Cunningham and Debra Santiago, “Student Aversion to Borrowing,” Institute for Higher Education Policy and Excelencia in Education, 2008, http://www.ihep.org/research/publications/student-aversion-borrowing-who-borrows-and-who-doesnt
  22. Huelsman, The Debt Divide (2015)

The Asset Value of Whiteness: Understanding the Racial Wealth Gap

Introduction

Issues of racial inequity are increasingly at the forefront of America’s public debate. In addition to urgent concerns about racial bias in law enforcement and the criminal justice system, activists highlight deeply connected issues of economic exclusion and inequality. No metric more powerfully captures the persistence and growth of economic inequality along racial and ethnic lines than the racial wealth gap. According to data from the Survey of Consumer Finances, the median white household possessed $13 in net wealth for every dollar held by the median black household in 2013. That same year, median white households possessed $10 for each dollar held by the median Latino/a household.

Research probing the causes of the racial wealth gap has traced its origins to historic injustices, from slavery to segregation to redlining. The great expansion of wealth in the years after World War II was fueled by public policies such as the GI Bill, which mostly helped white veterans attend college and purchase homes with guaranteed mortgages, building the foundations of an American middle class that largely excluded people of color. The outcomes of past injustice are carried forward as wealth is handed down across generations and are reinforced by ostensibly “color-blind” practices and policies in effect today. Yet many popular explanations for racial economic inequality overlook these deep roots, asserting that wealth disparities must be solely the result of individual life choices and personal achievements. The misconception that personal responsibility accounts for the racial wealth gap is an obstacle to the policies that could effectively address racial disparities.

This paper explores a number of popular explanations for the racial wealth gap, looking at individual differences in education, family structure, full- or part-time employment, and consumption habits. In each case, we find that individual choices are not sufficient to erase a century of accumulated wealth: structural racism trumps personal responsibility. Drawing on data from the 2013 Survey of Consumer Finances, we find that white adults who don’t graduate high school, don’t get married before having children, and don’t work full time still have much greater wealth at the median than comparable black and Latino adults—and often have more wealth than black and Latino households that have married, completed more education, or work longer hours. Differences in consumption habits also cannot explain the wealth gap; we look at academic research finding that white households spend more than black households of comparable incomes, yet still have more wealth.

The racial wealth gap matters because of the central role wealth plays in enabling families to both handle current financial challenges and make investments in their future. Families that have accumulated some wealth are better equipped to manage unanticipated expenses like an emergency medical bill, or disruptions in household income such as a layoff, without falling into debt or poverty. Over the longer term, wealth can expand the prospects of the next generation, helping to pay for college, provide a down payment for a first home, or capitalize a new business. As long as a substantial racial wealth gap persists, white households will continue to enjoy greater advantages than their black and Latino neighbors in meeting the financial challenges of everyday life and will be able to make greater investments in their children, passing economic advantages on. We can only create a more equitable future by confronting the racial wealth gap and the public policies that continue to fuel and exacerbate it.

Terminology

This report analyzes data on white, black, and Latino households. The terms black and white are used to refer to the representative respondents of a household who identified as non-Latino black or white in the Survey of Consumer Finances (SCF). Latinos include everyone who identified as Hispanic or Latino and may be of any race.

Throughout this report, we use the term “racial wealth gap” to refer to the absolute differences in wealth (assets minus debt) between the median black and white households as well as between the median Latino and white households. All dollar figures are in 2013 dollars.

Attending college does not close the racial wealth gap.

Higher education is associated with greater household wealth for Americans of every race and ethnicity, yet going to college isn’t enough to overcome racial disparities in wealth. Among households under age 55, the median white high school dropout has similar wealth to the median black adult who graduated high school and attended at least some college, according to data from the Survey of Consumer Finances. Similarly, the median Latino adult who attended college has similar wealth to the median white high school dropout.

The median white adult who attended college has 7.2 times more wealth than the median black adult who attended college and 3.9 times more wealth than the median Latino adult who attended college.

As Figure 1 shows, black adults with at least some college—a group that includes any amount of college education, from students who attended college but attained no degree, to those with associate’s or bachelor’s degrees—had $11,100 in wealth at the median, while Latino adults with at least some college had $20,500 in wealth at the median. These figures are dwarfed by the $79,600 in median wealth held by whites who attended at least some college.

In effect, to gain wealth comparable to white high school dropouts, black and Latino students must not only complete high school, but also attend college. Higher education is valuable—but when it comes to wealth, white privilege is equally, if not more valuable.

Attending college is associated with wealth in a number of ways. A college education has long been heralded as a ladder of social mobility: graduates who earn a bachelor’s degree or other college certification are more likely to be employed and generally have higher earning power than high school graduates or dropouts; they can use their higher incomes to build savings and wealth. Indeed, research consistently finds that college graduates of every race and ethnicity have greater income and wealth than their counterparts who did not graduate college. Yet wealth also plays a role in determining who attends college in the first place, and how much debt students must take on to get a degree. In effect, education can generate a “wealth feedback loop,” as parents’ level of education and wealth significantly predicts the level of education their children will complete. Thus, the educational and wealth-building opportunities directly denied to people of color in past generations continue to reverberate in the lives of their children, even those whose educational achievements open up opportunities for well-paid employment opportunities.

Having left high school without a diploma and never pursued further education, white dropouts do not gain the wealth-building opportunities offered by a college education. Yet, advantages such as greater access to gifts and inheritances offer white households more opportunities to gain and build wealth, even when they have completed less education. Because white families accumulated more wealth over a history in which black and Latino families were excluded from many wealth-building opportunities through discriminatory policies in housing, banking, education and other areas, white families today have, in general, greater resources to pass on to their offspring. As a result, white families are 5 times more likely than black or Latino families to receive large gifts and inheritances, and the amounts they receive are far greater. An analysis of data from the Panel Study of Income Dynamics finds that white recipients collect $5,013 more than black families on average over a two-year period. Not only do these funds add up to a substantial amount over time, but they can also be used to jump-start further wealth accumulation, for example, by enabling white families to buy homes and begin acquiring equity earlier in their lives and to make larger down payments on a first home, reducing interest rates and lending costs.

For black and Latino households with at least some college education, the high cost of college is another reason why pursuing higher education—and even attaining a degree—is not more effective at reducing the racial wealth gap. Our earlier research finds that even if black and Latino students graduated college at the same rate as white students, the reduction in the racial wealth gap would be modest: cut by just 1 to 3 percent at the median. Because of the existing racial wealth gap, white college students disproportionately come from wealthier family backgrounds than black and Latino students. As a result, the research finds that black students borrow at much higher rates, and in higher amounts, to receive the same college degrees as their white counterparts. The higher rate of borrowing may in turn contribute to other disparities, including college dropout and completion rates. With less student loan debt to pay off over their working years, the typical white college graduate has a head start on building wealth compared to their black peers. The picture is different for Latino households, which attend and graduate from college at lower rates than both black and white households. Evidence suggests that Latino students may be more averse to taking on student loans even when they face substantial financial need for school.

The result is that whites with little formal education still benefit disproportionately from social networks that help them to attain jobs, and inheritances and gifts that help them to build wealth. Black and Latino households that have pursued higher education often lack access to these networks and resources, but black college-goers in particular carry a disproportionate burden of student loan debt that saps their resources and diminishes their ability to build wealth. While attending and graduating college is associated with greater wealth for all American households and is a boost to lifetime earnings and wealth, it’s not enough to overcome historic and accumulated white advantages in building wealth. An individual’s striving to get a degree is not sufficient to close the racial wealth gap
.

Raising children in a two-parent household does not close the racial wealth gap.

Raising children is expensive. The high cost of child care and difficulty of supporting a family on a single income make it particularly difficult for single parents to get by, much less build wealth. Not surprisingly, single parent households have much higher poverty rates and significantly lower wealth than two-parent households. Yet, raising children in a two-parent household isn’t enough to overcome racial disparities in wealth. According to data from the Survey of Consumer Finances, the median white single parent has 2.2 times more wealth than the median black two-parent household and 1.9 times more wealth than the median Latino two-parent household.

The median white single parent has 2.2 times more wealth than the median black two-parent parent household and 1.9 times more wealth than the median Latino two-parent parent household.

As Figure 2 shows, black couples with children had $16,000 in wealth at the median, while Latino couples with children had $18,800 in wealth at the median. For each group, this is significantly more than the wealth of single-parent households. Yet it is a fraction of the $161,300 in median wealth held by white couples with children—and is still significantly less than the $35,800 in median wealth held by white single parents. Despite the financial benefits of marriage and partnership, including the opportunity to share expenses, provide child care within the family, or have two adult earners, the median white single parent is $19,800 wealthier than the median black couple with children, and $17,000 wealthier than the median Latino couple with children. It’s clear that raising children with two parents is not enough to overcome the racial wealth gap—or even to pull families out of poverty. In 2014, black children with married parents were 3 times more likely to be living in poverty than white children with married parents, while Latino children with married parents were 4 times more likely to be living in poverty than their white counterparts.

In 1965, Senator Daniel Patrick Moynihan’s report, The Negro Family: The Case for National Action, attributed racial inequality as well as poverty and crime in the black community to family structure, particularly the prevalence of families headed by single mothers. Not only did research at the time cast doubt on this causality, but evidence over the last the 50 years demonstrates that rates of child poverty, educational attainment, and crime do not track rates of single parenthood. Thus, even though the share of children living with a single mother rose for all racial and ethnic groups through the mid-1990s and has remained high since then, school completion and youth arrests for violent crimes have declined significantly, while poverty rates have fluctuated according to economic conditions. Family structure does not drive racial inequity, and racial inequity persists regardless of family structure. The benefits of intergenerational wealth transfers and other aspects of white privilege discussed above benefit white single mothers, enabling them to build significantly more wealth than parents of color.

Working full time does not close the racial wealth gap.

Full-time work is critical to the economic security of most American households. Full-time jobs generally pay more per hour than comparable part-time work and are more likely to offer benefits such as employer-provided health coverage, paid sick time, and workplace retirement plans that can provide greater opportunities for employees to build wealth. At the median, households in which at least 1 member works full time (35 or more hours per week) have greater wealth than households where the only jobs held are part-time positions (less than 35 hours per week). But working full time isn’t enough to close the racial wealth gap. According to data from the Survey of Consumer Finances, the median white household that includes a full-time worker has 7.6 times more wealth than the median black household with a full-time worker. The median white household that includes a full-time worker also has 5.4 times more wealth than the median Latino household with a full-time worker. Even white households that include only part-time workers—with at least 1 person in the household employed but not working more than 35 hours a week—have statistically indistinguishable levels of wealth as black households with a member employed full-time.

The median white household that includes a full-time worker has 7.6 times more wealth than the median black household with a full-time worker. The median white household that includes a full-time worker also has 5.4 times more wealth than the median Latino household with a full-time worker.

As Figure 3 shows, black households with at least 1 worker employed full time had $10,800 in wealth at the median, while Latino households with at least 1 worker employed full time had $15,300 in wealth at the median. For both groups, this is significantly more than the wealth of households where workers held only part-time jobs. Yet it is nowhere near the $82,400 in median wealth held by white households with a full-time worker. Working full time is far from enough for households of color to catch up to white wealth. Despite all the wealth-building benefits of full-time employment, median black and Latino households with full-time workers had essentially the same level of wealth as the median white household with only part-time employment.

Americans of all races and ethnicities work hard: among working white, black, and Latino households with a head under age 55, all work at least 40 hours a week at the median and 80 percent or more have an adult employed full-time. Yet work effort does not pay off equally: in 2012, white workers employed full time earned a median wage of $792 a week, compared to $621 for African Americans and $568 for Latinos. Considering gender makes the pay disparities even more glaring: Latina women employed full time earned median weekly wages equal to just 59 percent of the wages earned by white males, while black women earned just 68 percent as much. However, even if households earned the same income, the racial wealth gap would persist. Previous research from Demos and Institute on Assets and Social Policy at Brandeis University finds that if the distribution of incomes for black and Latino Americans was similar to that of white households (with a median equal to $50,400 in 2011), the wealth gap between black and white households would shrink just 11 percent at the median and the wealth gap between Latino and white households would shrink just 9 percent. An individual’s striving to get a higher paid job or work more hours is not enough to close the racial wealth gap.

Spending less does not close the racial wealth gap.

Personal finance experts abound with advice on how to build wealth by moderating personal spending and shifting a greater share of income into savings and investment. Yet, evidence from a recent Duke University study suggests that reduced spending is not enough to close the racial wealth gap between black and white households. Drawing on data from the 2013 and 2014 Consumer Expenditure Surveys, researchers find that the average white household spends 1.3 times more than the average black household of the same income group. In general, little research has been published on racial and ethnic differences in spending patterns and no findings were available on consumer spending among Latino households.

The average white household spends 1.3 times more than the average black household of the same income group.

The Duke study divided households into low-, medium-, and high-income groups and found that white households in every income group spent more on average than black households in the same group. On average, white households spent $13,700 per quarter, compared to $8,400 for black households. Even after accounting for factors such as family structure, income, occupation, and geography, as well as wealth and homeownership, white households at all income levels continued to spend more than comparable black households, with low-income white households spending $1,200 more per quarter than low-income black households and high-income white households spending $1,400 more than their black counterparts.

The study also looked at specific categories of spending, finding that white households spend about twice as much as black households on entertainment among all income groups and that white households, especially those with low incomes, spend more than black households on cars. The researchers note that “for clothing, jewelry, personal care, entertainment, eating out, and other non-essential spending, our findings show that black consumers in fact spend the same or much less than whites, at all income levels.” The only category in which black households were found to consistently spend more was for utilities, including payments for electricity, heating fuel, water, sewer and telephone service; this may be due to the common utility company practice of risk-based pricing, which requires a deposit or other form of additional payment from customers with low credit scores, without stable employment, or with criminal records. While technically color-blind, risk-based pricing can have a disproportionate impact on black consumers, causing them to be charged more than white households for the same service.

Differences in spending habits cannot explain the racial wealth gap: white households spend more than black households with similar incomes, yet also have more wealth. While spending less and saving more may be excellent advice for individuals, the evidence suggests that personal spending habits are not driving the racial wealth gap and cannot succeed in closing it.

Conclusion

In order for our nation to begin addressing disparities in wealth and opportunity, we must recognize that the racial wealth gap exists and clearly understand its causes. Public polling data suggests that there remains much work to be done. When asked in a 2016 opinion survey to assess “the financial situation of blacks compared with whites today,” just half of Americans (including 47 percent of white respondents, 58 percent of black respondents, and 49 percent of Latino respondents) recognized that white households were better off financially. No comparable question was asked comparing the finances of Latino and white households. Similarly when the same survey asked about “reasons why black people in our country may have a harder time getting ahead than whites,” majorities of black, white and Latino Americans endorsed explanations such as “lack of motivation to work hard” and “family instability”—factors which the data reveal cannot account for the growth and persistence of the racial wealth gap. Although 77 percent of respondents also identified “racial discrimination” as a reason that black Americans might have a harder time economically, 66 percent asserted that “discrimination that is based on the prejudice of individual people” was a greater problem than “discrimination that is built into our laws and institutions.”

Racial inequality in wealth is rooted in historic discrimination and perpetuated by policy: research shows that individual behavior is not the driving force behind racial wealth disparities. Typical black and Latino households that attend college and live in two-parent households still have much less wealth than similarly situated white households. Black and Latino households that include a full-time worker have much less wealth than white households with a full-time worker, and only slightly more wealth at the median than white households where the only person employed works part time. Differences in spending habits also fail to explain wealth disparities between black and white households.

Building a more equitable society will require a shift in focus away from individual behavior towards addressing structural and institutional racism. To aid in that effort, the Institute on Assets and Social Policy developed the Racial Wealth Audit as a framework to evaluate public policy proposals for their potential to reduce the racial wealth gap. When policymakers explicitly consider the racial wealth gap in developing policy,
the Racial Wealth Audit can provide information to achieve greater racial wealth equity.

Methodological Appendix

In this report, we present key descriptive statistics of household wealth for specific subgroups of interest. Data derive from the Survey of Consumer Finances (SCF) from 2013, the most recent available year for the data, which is among the best national sources of data on household wealth in the United States.
We calculated medians and their confidence intervals for wealth of white, black, and Hispanic [the term used by SCF] households by education, family structure and full-time employment. For the analysis of households by educational level and full-time employment status, only households who reported any positive work hours and whose head was less than 55 years of age were included in the analysis to focus on working households in their prime workforce years.

Because of the highly skewed nature of wealth, the median is the preferred statistic, as it is not affected by extremely high values. Confidence intervals indicate the range in which we are 95 percent confident the true median value in the population lies. Overlapping confidence intervals between 2 groups indicate that the values for the groups cannot be statistically distinguished; conversely, if the confidence intervals for 2 groups do not overlap, we have sufficient statistical evidence to indicate that the values of the 2 medians are distinct in the true population.

Analysis by race/ethnicity is shaped by the available data in the SCF on the U.S. resident population. Whites are defined for this analysis as non-Hispanic whites. Hispanics may be of any race. There are insufficient data in the SCF to produce this analysis for Native Americans and Asians.

Analysis Results

Education: Median wealth is compared among race/ethnicity subgroups for households whose heads have not completed high school and those whose heads have completed some college or hold an undergraduate degree. Those households with no work hours, with heads greater than 54 years old, and with heads with more than 16 years of education (i.e. those who started or completed graduate school) have been excluded from the analysis.

Since this report focuses on median wealth, 95 percent confidence intervals for all median point estimates are provided. Confidence intervals are calculated using a dataset which averages the data from the 5 implicates that are provided in the SCF data for every survey household in the survey due to multiple imputation (see SCF website for further information on the survey design of the SCF). Median point estimates vary slightly when the dataset is averaged across implicates; however, these confidence intervals provide a conservative estimate of the confidence intervals while adjusting for the structure of the publicly available data.

Family Structure of Parents: Median wealth is compared for parent households—who have children of the head or spouse of any age living in the household—by marital status of the household head among white, black, and Latino households. Households who are married or living with a partner are included in the married sample.

Full-Time and Part-Time Work of Households: Lastly, median wealth is examined by race/ethnicity for working households categorized by whether a household has an adult employed full time or if the household has only workers employed part time. Households that have at least 1 full-time working adult (at least 35 hours per week) are selected into the group of households working full time, while those with positive work hours but no individual working at least 35 hours per week are included in the group of part-time working households. Households with no work hours and those with heads greater than 54 years old have been excluded from the analysis to focus on working households in their prime years and avoid the inclusion of part-time workers transitioning into retirement.

End Notes

  1. For more on the causes of the racial wealth gap, see Melvin Oliver and Thomas Shapiro, Black Wealth, White Wealth: A New Perspective on Racial Inequality. (New York: Routledge, 1997).
  2. For more on SCF, see Federal Reserve website which provides detailed information and documentation about the survey, https://www.federalreserve.gov/econresdata/scf/scfindex.htm.
  3. Darrick Hamilton, William Darity Jr., Anne E. Price, Vishnu Sridharan, Rebecca Tippett, Umbrellas Don’t Make It Rain: Why Studying and Working Hard Isn’t Enough for Black Americans, Insight Center for Community Economic Development, April 2015, https://gallery.mailchimp.com/bf2b9b3cf3fdd8861943fca2f/files/Umbrellas_Dont_Make_It_Rain8.pdf.
  4. Since wealth accumulation tends to increase with age and is influenced by the time period when a worker is employed, our analysis looked exclusively at households where someone is currently employed and looked only at heads of households under age 55. Our analysis also excludes households with a graduate or professional degree.
  5. We analyze households with at least “some college” rather than college graduates because the sample size in the Survey of Consumer Finances was not large enough to make statistically significant comparisons of college graduates of color.
  6. William R. Emmons and Bryan J. Noeth, Why Didn’t Higher Education Protect Hispanic and Black Wealth? Federal Reserve Bank of St. Louis, December 2015, https://www.stlouisfed.org/publications/in-the-balance/issue12-2015/why-didnt-higher-education-protect-hispanic-and-black-wealth#table2.
  7. Dalton Conley, “Capital for College: Parental Assets and Postsecondary Schooling,” Sociology of Education, Vol. 74, no. 1, pp. 59-72, (January 2001), http://www.jstor.org/stable/2673145?seq=1#page_scan_tab_contents.
  8. Mark Huelsman, Tamara Draut, Tatjana Meschede, Lars Dietrich, Thomas Shapiro, and Laura Sullivan, Less Debt, More Equity: Lowering Student Debt While Closing the Black-White Wealth Gap, Demos, November 2015, http://www.demos.org/publication/less-debt-more-equity-lowering-student-debt-while-closing-black-white-wealth-gap.
  9. Signe-Mary McKernan, Caroline Ratcliffe, Margaret Simms, and Sisi Zhang, Do Financial Support and Inheritance
    Contribute to the Racial Wealth Gap? Urban Institute, Opportunity and Ownership Facts no. 26, September 2012,
    http://www.urban.org/sites/default/files/alfresco/publication-pdfs/412644-Do-Financial-Support-and-Inheritance-Contribute-to-the-Racial-Wealth--.PDF.
  10. McKernan, et. al.
  11. Thomas Shapiro, Tatjana Meschede, and Sam Osoro, The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide, Institute on Assets and Social Policy, February 2013, http://iasp.brandeis.edu/pdfs/Author/shapiro-thomas-m/racialwealthgapbrief.pdf.
  12. Amy Traub and Catherine Reutschlin, The Racial Wealth Gap: Why Policy Matters, Demos, 2015, http://www.demos.org/publication/racial-wealth-gap-why-policy-matters.
  13. Huelsman, et. al.
  14. Alissa Cunningham and Debra Santiago, Student Aversion to Borrowing, Institute for Higher Education Policy and Excellence in Education, 2008, http://www.ihep.org/research/publications/student-aversion-borrowing-who-borrows-and-who-doesnt.
  15. U.S. Census Current Population Survey, Bureau of Labor Statistics, 2014.
  16. The Negro Family: The Case for National Action, U.S. Department of Labor, Office of Policy Planning and Research, 1965, http://www.dol.gov/oasam/programs/history/webidmeynihan.htm
  17. Jeffrey Hayes and Phillip Cohen, Moynihan’s Half Century: Have We Gone to Hell in a Hand Basket? Council on Contemporary Families, March 2015, https://contemporaryfamilies.org/moynihan-half-century-brief-report/.
  18. Differences in wealth may be influenced by a greater share of households that include 2 adults working full time. Sample sizes were too small to permit separate analysis of single- and dual-earner households. Additional analysis of single-earner households suggests similar work patterns by race/ethnicity to those found among both single and couple households. To avoid including households on the brink of retirement who are a working part time as they transition out of the workforce, this analysis includes only households headed by an adult under age 55.
  19. Authors’ calculations based on the 2013 Survey of Consumer Finances.
  20. Current Population Survey, Bureau of Labor Statistics. Weekly and hourly earnings data from the Current Population Survey, 2014.
  21. Raphaël Charron-Chénier, Joshua J. Fink, and Lisa A. Keister, “Race and Consumption: Black and White Disparities in Household Spending,” Sociology of Race and Ethnicity, (May 2016), http://sociology.duke.edu/uploads/media_items/charronchenier-etal-2016.original.pdf.
  22. Raphaël Charron-Chénier, Joshua J. Fink, and Lisa A. Keister, Racial Inequality and Consumption: Exploring Disparities in White and Black Household Expenditures, Duke University, May 2015, https://wealthinequality.org/content/uploads/2015/10/Racial-Inquality-and-Consumption.pdf.
  23. Jonathan S. Spader, “Beyond Disparate Impact: Risk-based Pricing and Disparity in Consumer Credit History Scores,” The Review of Black Political Economy Vol. 37, no. 2, pp 61-78, (June 2010), https://www.researchgate.net/publication/226802620_Beyond_Disparate_Impact_Risk-based_Pricing_and_Disparity_in_
    Consumer_Credit_History_Scores”>
    ; Racial Justice and Equal Economic Opportunity Project, Past Imperfect: How Credit Scores and Other Analytics ‘Bake In’ and Perpetuate Past Discrimination, National Consumer Law Center, May 2016, https://www.nclc.org/images/pdf/credit_discrimination/Past_Imperfect050616.pdf.
  24. Pew Research Center, On Views of Race and Inequality, Blacks and Whites are Worlds Apart, Pew Research
    Center, June 2016, http://www.pewsocialtrends.org/files/2016/06/ST_2016.06.27_Race-Inequality-Final.pdf.