Racial Wealth Divide: The Dollar Cost of White Privilege
By Jason Papallo, NCCJ E-Communications & Marketing Specialist
Wealth Inequality: An uneven distribution of assets within a working society.
Fact: The United States has the largest disparities of wealth between high and low earners and/or assets holders of any major developed nation.
What does wealth include?
Assets: Consists of things such as cash held in savings accounts, owned personal residence(s), retirement accounts, real estate, and stock investments and bonds.
Liabilities: These consist of any money a household owes, such as mortgages, credit card balances, student loans, car loans or any other outstanding bills.
Wealth inequality is a problem in the United States that outweighs income inequality, which is often a factor in wealth inequality, but not it’s main contributor, nor an identical issue.
THE POLICY OF CATCHING UP: A RIDICULOUS STRUGGLE
It would take 228 years for people of color to earn an equal amount of wealth to whites if current policies don’t change, says a recent analysis from the Corporation for Enterprise Development and Institute for Policy Studies.
The figure comes from a study the groups released on the United States’ racial wealth divide. The study covers the growing disparity between races in the U.S., focusing on the policies that contribute to the growing division, as well as the plans put forth in order to help reverse the issue.
Assuming the average wealth of white families stays the same, the report says that by the year 2241 the average family of color would finally accumulate wealth equal to a white families’ current wealth status. It would take Latinos until 2097, and they still wouldn’t have reached complete wealth equality.
Where does this data come from? The IPS and CFED reviewed 30 years worth of records from the Federal Reserve’s Survey of Consumer Finances. This includes a wide variety of financial information, such as income, pensions and the characteristics of demographics.
The groups saw that the average wealth of white families grew 84 percent. This equates to three times the growth rate for families of color and 1.2 times the growth rate for Latino families.
In the language of money, this mean white families would see an average annual wealth increase of almost $18,000 over another 30 years without policy change. Families of color would see their wealth raise only $750 per year, while Latino families’ wealth would increase an annual average of $2,250.
INCOME INEQUALITY: IT HURTS ALL OF US
The social and political consequences of racism are both numerous and horrendous, with pay discrimination based on race costing $2 trillion in gross domestic product in the United States annually.
According to two reports, “The Business Case for Racial Equality,” from the W.K. Kellogg Foundation and “The Equality Solution: Racial Inclusion is Key to Growing a Strong New Economy,” from PolicyLink, if the racial income gap were closed, America’s GDP would go up by 14 percent, or an increase of $2 trillion per year.
How do disproportionate wages based on racial discrimination hurt the economy directly? According to PolicyLink, it translates into major economic losses overall due to less consumption and thus less money flow.
Additionally, the influx of spending would be a benefit to both corporations and the government, as higher profits and more tax revenue would be generated if minority workers earned the same amount white workers in the U.S.
FINDING TRANSPORTATION: WORKING AGAINST IMPOSSIBLE ODDS
So does income inequality specifically factor in to the systematic oppression of wealth inequality? Well, even acquiring a much-needed car can become an issue, with most jobs depending on the ability to commute to an office or worksite, and the associated costs of an automobile impossible to maintain. In areas without urban hubs and options for commuters, it’s worse. Trains aren’t an option for most, nor is walking or riding a bike. Bus schedules are inconsistent, and in most locations outside of cities it’s impossible to meet the demands of an average work week. This wouldn't add to the racial wealth divide if minority workers didn't have the bulk of low-wage jobs within the United States.
The United States Census Bureau shows that in 2013, 86 percent of U.S. workers used automobiles to get to work. Most of these car owners and leasers use them out of necessity, and don’t decide to drive automobiles because its preferable, but rather the only realistic option for transportation.
Last Week Tonight host John Oliver featured a clip during an episode from August that showed a single mother of two commuting two hours on a bus to make it to her job versus 10 to 15 minutes if she were to use a car. Many in her situation would consider getting a loan, and taking a bit more time to pay off a car that will be slightly more expensive in the long run. That would provide her with more time to raise her family, seek out opportunities, and better establish her life as a contributing member of society. Only, most in this mother’s situation don’t have the ability to get a regular loan for a car, because they haven’t been able to establish credit due to their financial circumstances. These circumstances? Inherited from a system that doesn’t offer alternatives to modern indentured servitude to low-wage workers, many of whom work full-time while fighting to receive basic needs from a frayed and failing safety net that some high-wage workers and industry leaders wish could be cut rather than repaired. So the alternative? Exploiting our low-wage workers even more, through offering subprime mortgages, which are now at a 10-year high.
“In practice, these dealerships can trap people with few options into paying vastly more than what the car is worth. It’s just one of the many ways when you’re poor, everything can be more expensive,” he said, noting that the average interest rate for these car loan is 19 percent, and goes as high as 29 percent annual interest, on top of add-ons and markups that inflate the cars value even more, he highlighted.
This all leads to a default rate of one in three loan recipients, most of which do so within the first seven mosts of getting their loan. Those cars are immediately repossessed, often due to a tracking device on the car that alerts these loan predators as soon as a payment is missed. The device can also remotely shut down the vehicle, not allowing it to start.
Many of these cars end up with various owners over their lifespans, getting resold and repossessed over and over. Oliver cited an L.A. Times report that showed one car being resold eight times over three years, often times at double or triple it’s bluebook value.
Subprime auto loans aren’t only predatory, they’re competitive as an industry, with companies springing up left and right to nab a share of what those with poor credit have to offer. Even big players are diving in, like Santander and GM Financial, Oliver included, with others like Exeter Finance Corp. and Skopos Financial establishing their empires on the business of low-income earners.
This has created a loan bubble much like the housing crisis of 2008, and while the impact won’t be nearly as severe, it will be heavily felt.
QUESTIONS AND MORE TO CONSIDER
With the odds stacked up significantly against low-wage workers, specifically those of color, how can the "American dream" ever truly be reached, and with wealth so disproportionate, how can we even define what that dream is for average minority citizens that have always been treated as an underclass?
Are you troubled by how racial income inequality factors into hurting the overall economy? How do you see this disparity changing in the years to come? Will it get better? Will it get worse?
Consider how transportation factors into everyday life. Could you make the income that you presently do if you couldn't get to your place of work easily, or to the interview(s) that acquired you the job in the first place?
More to Consider:
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