The racial wealth gap is an example of how structural discrimination and limited opportunities for education and employment advancement result in very negative economic consequences for marginalized communities. In a new report published this week by the Institute on Asset and Social Policy (IASP), Director Tom Shapiro examines and explains the concerning economic divide between black and white families – a phenomenon known as the racial wealth gap.
This groundbreaking report looks at the same set of households over a 25-year period of time, and finds that the total wealth gap between white and African-American families nearly triples during that time. The wealth gap in 1984 totaled $85,00, whereas this gap reached an astounding $236,500 in 2009. This extreme wealth inequality is not just detrimental to individuals and families, but has far-reaching negative impacts on our communities and the general economic health of our country.
To understand the forces behind this huge wealth gap, IASP examined several possible explanations, including family, employment, and wealth characteristics. The results showed five major factors driving the growing racial wealth gap: years of homeownership, household income, unemployment, college education, and inheritance, financial supports from friends and families, and/or preexisting family wealth.
This problem can and must be addressed with thoughtful public policy and increased access to economic opportunities. Here in Illinois, Heartland Alliance, through it's work with the Illinois Asset Building Group, is advocating for two pieces of legislation that would work to close the racial wealth gap.
- The first is an Automatic IRA bill (SB2400 / HB2461) that would create a statewide infrastructure to provide retirement accounts to the 2.5 million Illinois private-sector workers who are not currently offered this opportunity. Auto-IRAs will give people the tools they need to save save for retirement and help prevent vulnerable workers from falling into poverty later in life. (Download the Fact Sheets)
- The second piece is a bill that removes asset limits for TANF eligibility (SB2319 / HB2262). As the law currently stands, families are deemed ineligible for public assistance if they own more than $2000 in assets. This problematic policy punishes families for accumulating savings and incentivizes them to spend down retirement or college savings in order to remain eligible for aid. Eliminating the asset test would allow families to continue to build their savings while remaining eligible for much needed assistance. (Download Fact Sheets)