In 2016, the average white family in America held about $919,000 of wealth. The average black family, by contrast, held just $140,000; the average Hispanic family held only $192,000. What’s worse, this disparity has remained essentially unchanged since the early 1960s.
In a report published last week, researchers from the Samuel DuBois Cook Center on Social Equity at Duke University highlight and dispel 10 of the the most pernicious and damaging myths surrounding the racial wealth gap, most notably the following three:
- More education or more work effort can close the racial wealth gap.
- Saving more, or making better financial decisions, can close the racial wealth gap.
- Family structure, namely the higher rates of single motherhood among African Americans, is driving the racial wealth gap.
To learn more about the inaccuracies of these myths, we spoke with William Darity, one of the report’s authors and a public policy professor at Duke University.
One myth you tackle in the report, which I think is pretty widely held even among very well-intentioned people, is this idea that education can eliminate the racial wealth gap.
Right, there’s this idea that everything would be solved if black folks had more education. Now, let me say this: Black folks with higher levels of education do better than black folk who have lower levels of education, at least economically. But actually, education can do very little to lessen the wealth gap. If you’re looking at disparities between blacks and whites, those are not bridged significantly by additional education.
If we were to look outside of the arena of wealth to another economic domain—employment—the standard observation is that the black unemployment rate is two times the white unemployment rate. But it’s also the case that the black unemployment rate is two times the white unemployment rate at every level of education. If we were just looking at employment, which is a path toward additional income, it’s pretty clear that equalizing educational outcomes doesn’t have the effect of equalizing the economic outcomes. And it gets worse when you look at wealth.
In the report you compare the wealth levels of black and white American households at different levels of education. These comparisons are pretty striking: For example, the median household net worth of a black household with a college education is actually less than the median net worth of a white household with less than a high school education.
In some ways, it’s disheartening. It would be great for these kinds of disparities to be eliminated by different kinds of actions that black people could take unilaterally. But that simply is not the case. These inequalities are baked into the system through the process of transfers that take place across generations. It’s those intergenerational transfers—which are not merit-based, they’re affectional and familial based—that set up sustained racial inequality and wealth. That’s not bridged by getting more education.
(Photo: Duke University)
Let’s move on to the topic of financial responsibility and financial behaviors. Here, the myth is that the wealth gap exists because African Americans just don’t save enough money, or they make irresponsible decisions, such as relying on payday lenders. What does the evidence say on this?
There’s been a consistent finding across a number of studies that if you take into account a household or a family’s level of income, there are no significant differences between blacks and whites in terms of savings rates. And in some categories, the black savings rate is actually a little bit higher than the white savings rate.
Keep in mind, the American saving rate is low relative to the rest of the world, but if we want to try to claim that the reason for the black-white wealth gap is because black folks are more profligate, there’s really no evidence to support that, even if people believe it strongly.
And then on the topic of payday lenders, I think the reason people use lenders described as predatory is because those are the lenders they have access to. And so folks who are not making use of more predatory lenders do so because they’ve got the capacity to obtain loans from lenders that offer far better terms. I don’t think it’s a matter of making bad choices, it’s a matter of what choices are available to you. There’s a different set of constraints. And those constraints are not unique to black borrowers, those constraints are heavily driven by the income level and the wealth level of the individual house. It just happens to be the case that blacks are disproportionately at the bottom of the wealth distribution.
The last big myth I wanted to tackle is this question of family structure. We know that kids do better in stable, two-parent households; we know that two-parent households are economically secure; and we know that the rate of single parenthood is much higher among African Americans. Some people argue that family structure in African-American communities is driving higher rates of poverty—and, similarly, that increasing marriage rates would reduce poverty. You argue the opposite is true.
Right, we argue that poverty and inequality increase rates of single motherhood in black communities. The big point we make here is that if you compare white families that have a single parent to black families that have two parents, the white families still have significantly more wealth.
Can you talk me through the rationale for how inequality and poverty might drive family structure?
The key argument that’s long been made is actually in the context of a patriarchal society. We do have societies in the world where there’s a presence of single-parent families but there’s no significant economic penalty that’s associated with that. In a number of Scandinavian countries, for example, family structure doesn’t really seem to matter in the way it matters here.
So I think this relationship exists here in part because of the intensity of the way in which patriarchy operates in the United States, and the expectation here that men are typically going to be the economic providers for families. And when women are the economic providers, they suffer from a gender penalty in terms of the kinds of incomes they can earn. If you have a situation where there’s a significant number of men who are not able to really support their families effectively, you’re going to have fewer and fewer formal partnerships that emerge as marriages. And this is, of course, compounded by the fact that we have the highest incarceration rates in the world, and that burden falls heavily on black men.
In other words, there aren’t enough marriageable black men?
Exactly.
OK, so if many of these popular policies—increasing educational attainment, or encouraging people to get married—are not going to meaningfully narrow the racial wealth gap, what would?
One straightforward approach is to have a reparations program on behalf of black Americans that targets the wealthy.
A second route is a universal program that would have a stronger reach for those communities with populations that have the lowest levels of wealth. Everybody would receive this program, but the amounts they would be allocated would vary.
We call this the baby bonds proposal, but it’s not really a bond. The premise here is that every child would have a trust fund—so not just rich kids whose parents provide it, but every American child would have a trust fund that’s assigned to them through public resources. And the inequality-reducing dimension is that the amount of the child’s trust fund would depend upon the wealth and position of their families. Kids from the wealthiest families, we give them a $50 trust fund. But for kids at the bottom end of the wealth distribution, we give them a $50,000-$60,000 trust fund. And we would guarantee at least a 1 percent rate of interest above the inflation rate.
People could access these accounts or trust funds when they reach either adulthood, or slightly later, at some point in young adulthood. The idea is that every kid would start their young adult years with a financial endowment that would permit them to have greater economic security over the course of their lifetimes.
How would such a program be funded?
Well, this [baby bonds] program is not that expensive. The reparations program would be very expensive, but this program would be not as expensive.
There are about four million new children born in the U.S. each year. If the mean amount of the trust fund was $25,000, the program on an annual basis would cost $100 billion. That’s about 2 percent, or less than 2 percent, of the federal budget. You could fund this out of annual revenues each year, and you don’t have to start payouts to the first cohort until they’re at least 18 years of age. You could build up the collective trust fund and it could be allocated to each cohort of young people when they reach the relevant age of maturity.
This interview has been edited for length and clarity.
