Janine Jackson: The lead of the Washington Post storyreads:
The incomes of middle-class Americans rose last year to the highest level ever recorded by the Census Bureau, as poverty declined and the scars of the past decade’s Great Recession seemed to finally fade.
The piece ends with a source’s comment that this is “unambiguously good news.” Somewhere in between, you might catch the notes that “inequality remains high” and “yawning racial disparities remain,” but the story’s framing encourages you to see those as asterisks.
Much media coverage presents the economic well-being of non-white Americans as an afterthought, or a tangent from an overall picture. And if those groups’ fortunes are out of step with those of white people, the implication is that they’ll catch up with time. Whatever positive trends there are will naturally “trickle down” to them at some point. But this implication is wrong, and it would be important to understand why it’s wrong, even if black and Latinx people were not on course to be the country’s majority.
A new report helps us see what’s happening. It’s called The Road to Zero Wealth: How the Racial Wealth Divide Is Hollowing Out America’s Middle Class’s Middle Class. It comes from the groups Prosperity Now and the Institute for Policy Studies, and we’re joined now by one of its authors. Dedrick Asante-Muhammad is Senior Fellow, Racial Wealth Divide, at Prosperity Now. He joins us now by phone from somewhere near Washington, DC. Welcome to CounterSpin, Dedrick Asante-Muhammad.
Dedrick Asante-Muhammad: Thanks for having me.
The Census report is about income, of course, money from wages or capital gains, and this new report looks at wealth, which is the amount of assets someone has after you subtract their debts. Can you tell us why you think it’s important to focus on racial disparities in wealth, and then give us a sense of what that gap looks like?
Yes. I think wealth as a foundational economic indicator is very important. Wealth tells a stronger story about where people are situated socio-economically. Wealth is what allows people to ride out or deal with challenging economic times, which we all go through. Wealth is what allows you to take advantage of opportunities that might put you in a better socio-economic position in the future, whether it’s starting a business, money to buy a home, money to go to higher education with less debt. And so we see that wealth is a much stronger indicator of socio-economic status, and we think this is what needs to be looked at more often to help us understand how the economy’s doing.
And let me point out, related to the article you previously mentioned about middle income being at the highest it’s been, and that we’ve kind of recovered from the Great Recession. I think it’s great, you know, we need strong incomes, we need strong employment figures, and racial minorities, blacks and Latinos in particular, still have great divides in income and employment.
But I also want to note that for the country as a whole, black, white or Latino, no one has recovered in terms of wealth from where they were before the Great Recession. And I think too often people get it wrong, [they think] that people just feel like the recovery hasn’t touched them, but it deeply has. But when you look at wealth, no one has gotten near to the wealth they had before the Great Recession, regardless of race. So there is a strong reason for all Americans to feel more economically insecure than they did before the Great Recession.
So the numbers and the information in this report, there are a number of different ways that you come at it, in terms of data. But what can you tell us about the size of this gap in wealth according to race?
Well, I think it’s also helpful to understand the difference in income and wealth. Like African-Americans, Latinos make about 60 cents on every dollar, about that, depending on how you measure it, that whites make. But in terms of wealth, the disparity is much greater. The median wealth for whites in 2013, where you have the most recent data, is about $117,000. That’s the median wealth for whites. The median wealth for blacks is $1,700. The median wealth for Latinos is $2,000. So you see this huge gap, of around $2,000 to $117,000, that shows a disparity that’s even much greater than the strong disparity in income, or in employment as well.
Before I ask what drives the wealth gap, what doesn’t drive it, that people might think does?
That’s an interesting question. There’s been some reports coming out recently, from some Yale authors, about how it’s interesting that higher-income whites are those who seem to be most off in understanding the economic difference between blacks and whites, historically. And the Yale authors point to this idea that when people are economically successful, they like to believe that a system is working. And so then they must assume that when people aren’t doing well, there’s something that they aren’t doing right, and they will underestimate inequality.
And I think in general, in terms of economic differences and with wealth differences, there’s some belief that, well, if African-Americans or Latinos, whatever group you want to focus on, would just use their money better, that they would be in a much better economic situation, versus that maybe something structurally has been driving the inequality that’s existed throughout the history of the United States. And I think we can point to what has structurally helped create the wealth divide, and what is a challenge to the American middle class as a whole.
Yeah, you often hear about, well, if communities would value education…. You know, that educational attainment is really the difference between lacking wealth and having wealth.
That’s one thing we highlight in the report as well, is we highlight that even if you look at educational attainment, you see there’s massive wealth disparities. We see that whites with a high school diploma have more wealth, almost twice the wealth, of blacks and Latinos with a college degree. So education in itself does not at all bridge the racial wealth divide.
And, too, if you look back, again, median wealth for blacks is $1,700, median wealth for Latinos is $2,000. That’s a very small amount. A minor car accident will wipe that away. That might cover your salary for a week or two, depending on what you’re paid. So there’s not much room for any type of error or crisis or setback, and not much money to take advantage of opportunity. That won’t pay for a semester of college almost anywhere. So we see when you have that little, there’s very little you can do to actually advance your economic fortunes, when you’re stuck at a $1,700, $2,000 median wealth that seems to be on the decline.
You sort of hinted toward it, but here’s where we do need to know some history. Because when you hear about the creation of the middle class in this country, it wasn’t just history’s inevitable march, you know. When we’re talking about structural drivers, there was policy behind that, right?
No, absolutely. Many people might assume that the country has always historically been a large middle-class economy, and that’s not true. And it wasn’t just market forces that created a strong middle class, and it wasn’t just market forces that created, in particular, a strong white middle class. The majority of whites did not become homeowners until the ’40s and ’50s, after the New Deal, following the Great Depression, helped create a strong social safety net to help all Americans, and white Americans in particular, to get back on their feet after the Great Depression, and provided things like Social Security and other things to help people, and actually even work opportunities to help people stabilize themselves economically.
And then this was followed up with a very strong economy post–World War II, with a lot of the benefits of becoming a victor in a global war, and with this policy, like the GI Bill, that did massive investment in social infrastructure, and massive subsidies for higher education, home ownership. As we know, in the ’40s and ’50s, we had outright legal segregation, outright legal discrimination, that prohibited African-Americans and other people of color to benefit from this mass investment that helped create the middle class, that made whites the majority of homeowners for the first time, that made the American economy a strong middle-class economy for the first time. Blacks, Latinos, Native Americans were not able to get that type of investment. And my analysis is without that investment, blacks, Latinos and Native Americans, and other people of color, never will be able to catch up to the historic strong white middle class that we like to think back upon.
Home ownership, I know, is one of the things cited as continuing to drive the wealth gap that we see today, and there are some other things, though, as well. When you think about main drivers of this wealth divide, what are some of them?
Yeah, and homeownership, it’s not just being a homeowner. There is a massive divide in homeownership: White Americans have a homeownership rate a little over 70 percent, black and Latinos are not quite 45 percent homeowners, and so that’s a huge divide. But also, as Thomas Shapiro has shown, it’s also the delay in homeownership. African-Americans in particular, if they do become homeowners, become homeowners eight years later than whites, and that means getting eight years less of a return on that home.
We also have the fact that there still is discrimination in the marketplace, and that any home in a predominantly black neighborhood is going to be valued less than a home in a predominantly white neighborhood, which oftentimes means less appreciation. So even though homeownership is an important tool in wealth-building, it is still a tool that African-Americans and Latinos are going to get less of a return on than white Americans.
And the same can be said about higher education. Higher education is very important, but you see that median wealth return is much less for blacks and Latinos with higher education than it is for white Americans.
So even when people are doing things right, when we look at the highest income levels or highest educational levels, we still see this massive wealth disparity. And actually I shouldn’t say when they’re doing things right, I should say when they’re able to attain those things that people say you should be doing — becoming a homeowner, having high income, having high education — there’s still this massive racial wealth divide.
Well, media talk incessantly about the “middle class.” You know, that’s who we’re told politicians need to appeal to, not the wealthy, and certainly not the poor, but this sort of prototypical family, who need and deserve the basics of a good life. You know, the Washington Post said they focused on the Census report because “it’s one of the most closely watched indicators of how the middle class is faring financially.” It seems like it’s a murkily understood term anyway, but when you factor in race, the definition of middle class, the meaning of middle class, changes.
Absolutely. And that’s why we attempted in this paper to help lay out a definition of middle class by wealth, having middle-class wealth, because oftentimes middle class is associated with a certain type of income-earning. But if you look at middle-class wealth, which we have put at being between $68,000 and $200,000, we then start seeing that the estimates of how many blacks and Latinos are “in the middle class” will greatly decrease. We see that only about 30 percent of African-Americans and Latinos have enough wealth to break into that $68,000 to $200,000 level of middle-class wealth or higher, so really $68,000 or higher, while we see that over 70 percent of white Americans have this wealth of $68,000 or higher. Again, the median wealth for whites right now is about $117,000.
So when we’re doing an analysis of the middle class, we need to look much more at wealth indicators. And I think with that, we also note that the median wealth of the country as a whole since 1983 has been declining. It was a little over $70,000 in 1983, it was like $78,000, I think, in 1983, and it’s gone down to $64,000 in 2013. And so what we’re showing, actually, is already that a slim majority of Americans don’t have enough wealth to have middle-class wealth, to be what we would consider in the middle class.
The big datum that’s been emphasized in media coverage of this report is the fact that the median wealth of black Americans will fall to zero by 2053, and Latinos sometime after that. And, of course, we have to remember that “median” means half are below that. But that’s if things are not made worse, if they just continue as they are. But it seems like things are being made worse, or the problem is being exacerbated.
Yeah. We’ve been using a wealth data, strong wealth data; we found that you could start getting it, particularly by race, starting in 1983. So we looked at between 1983 and 2013, and looked at those 30 years, to see, if things keep going in that way, what will happen with black wealth and Latino wealth and white wealth. And we’re seeing that white wealth, even with the Great Recession, that did take wealth away from all Americans, white Americans never got below the median wealth of what they had in 1983. But we see that African-Americans had $6,800 of wealth in 1983, Latinos had $4,000 of wealth in 1983, and in 2013, black wealth had gone all the way down to $1,700 for African-Americans, $2,000 for Latinos. And if we keep going with this 30-year trend, we are in a path where African-Americans and Latinos are in a path to zero wealth, white wealth will continue to increase, though at a small rate.
And one of our great concerns, though, is that we believe that the declining wealth of blacks and Latinos, two of the largest minority groups in the country that’s becoming majority minority, is helping to lead the bringing down of the national median wealth. And this is really a big sign of a collapse of America as a middle-class economy. So we think these are issues that should be looked at. You know, we look at the racial wealth divide as one of the most fundamental challenges to the American economy in the 21st century, not just a challenge of particular communities in our country.
Yes, it’s important to emphasize it’s not about, oh, those poor black and brown people. And I will note here that the report does also address declining wealth in Asian-American communities and in Native American communities. That’s in there as well. And it’s really a question about what kind of country we want to live in. This information indicates that we’re headed towards, well, it says, a “racial and economic apartheid state,” which I think people should just let sink in for a minute. But it is on that scale.
And to add on that, a worsening one. I think the importance of looking at racial wealth inequality is that the basic narrative for racial inequality is: We might not be where we want to be, but we’re headed in the right direction. This report, and other reports we’ve done, is showing that the country is not even headed in the right direction, we’re headed in a wrong direction, where racial inequality is getting worse. And I do believe that racial economic inequality is the foundation of racial inequality, and that’s not good for the country and for the individuals who live here.
Let me ask you — clearly intervention is necessary. What interventions do you think are appropriate?
Prosperity Now and the Institute for Policy Studies have been doing work for years now looking at the tax code. Many people will say, oh, well, there’s not enough money for big government programs, even though it was big government programs that created the American middle class to begin with. And I would say, in some ways, we can’t afford not to continue investing in the American middle class.
But even if we weren’t to spend any extra money, the country already spends over $650 billion a year in wealth development. The great challenge is that this money disproportionately goes to the already wealthy. So we’re spending $650 billion in a manner that is allowing millionaires to get over $100,000 of benefits from our tax policies, while working-class families are getting maybe $200 from the wealth-development policies and programs that we have in our tax code. So we argue that we should turn right-side up this upside-down tax code, so that asset development — wealth development — is actually going to low-wealth households. That’s one, I think, big easy fix. I mean, it’s not easy in that it’s easily passed politically, but I think it makes a lot of sense to most people that we should be investing that type of money into low-wealth people, not so much into high-wealth people.
Finally, one of the things that takes things that we think of as straightforward and makes them difficult, as you say, is the political process. And for me, media have a role there in saying, this is something we can achieve, this is something that’s too hard, and in taking political resistance as being the same thing as popular resistance to an idea. I really fault corporate media with that.
I just wonder, finally, if there’s anything on this set of issues that you would like to see more of or less of from reporting, that might shape how things go.
I do think a stronger analysis of wealth, and understanding economic well-being, is very important. So we don’t just say, oh, well, income has gone up for the median, so everyone must be doing well, when we see that wealth has been going down for all Americans. I think it’s really important to also note who isn’t doing well. When the press says that we already have almost full employment, well, African-Americans have twice the unemployment of white Americans, and have an employment rate that whites had during the height of the Great Recession. And Latinos have an unemployment rate at about 6 percent, which is much higher than anyone would think for full employment.
So we have to have a better lens in looking at, racially, how things are affecting people and wealth, to get a better understanding of how the economy is going, and when the economy is doing well, who is it going well for. And is it going well mostly for people, is it going well mostly for corporations, stock markets? We have to have a much stronger analysis in all of this, and be more diligent in our reporting.
We’ve been speaking with Dedrick Asante-Muhammad, Senior Fellow, Racial Wealth Divide, at Prosperity Now. You can find their work, including this new report, online at ProsperityNow.org. Dedrick Asante-Muhammad, thank you very, very much for joining us this week on CounterSpin.