widening racial wealth gap - Gerald R. Ford School of Public Policy

WIDENING RACIAL
WEALTH GAP
Tom Shapiro
Pokross Professor of Law and Social Policy
Director, Institute on Assets and Social Policy
Heller School, Brandeis University
RISING WEALTH INEQUALITY:
CAUSES, CONSEQUENCES, AND POTENTIAL RESPONSES
National Poverty Center
Ford School of Public Policy
School of Social Work
Panel Study of Income Dynamics
Department of Economics
April 24, 2015
Racial Wealth Gap Matters
• Why it Matters
• State of the Art and Baseline
• Widening Gap
• Why it is Widening
• Racial Wealth Audit™
$120,000
$100,000
Racial Wealth Gap vs. Income
Inequality
Gap
$104K
Gap
$103K
$80,000
$60,000
$40,000
$20,000
$0
Median Wealth
Whites
Blacks
Median Income (Annual)
Latinos
The Widening Racial Wealth Gap,
1984 - 2009
What’s Driving the Increasing Racial Wealth Gap
28%
Number of Years of Homeownership
Household Income
17%
College Education
6%
Unemployment
5%
Financial Support/Inheritance
4%
0%
5%
10%
15%
20%
25%
30%
Policies and the Racial Wealth Gap
• Public policies have been key in increasing RWG:
• G.I. Bill
• Housing/Redlining
• Retirement Savings
• Past policies have inadvertently exacerbated
wealth disparities
• Need to evaluate policies’ impact on the RWG
• The Racial Wealth Audit aims to serve this need:
• A new tool and framework for policy impact
Racial Wealth Audit ™
• Distributional Impact on Racial Wealth Gap
What if…
…Home equity investments
created the same wealth gains
for African Americans as they
do for whites?
…The return to a college
education was the same
among Latinos as among
whites?
The Racial Wealth Audit™
Purpose: Impact of Policy/Program on RWG?
Utilize Statistical Methods for Modeling
Predictions
• National Datasets (PSID, SIPP, SCF)
• Create Modeling Predictions of Policy Impacts
Based on Empirical Data
• Analysis based on reimagined scenarios or
specific policies
• Data Projections (e.g. Reweighting & Regression
Model Predictions)
Policy Example: Equalizing
Homeownership Rates
Wealth Gap Compared to White Households
Latino Families
Black Families
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Current Wealth Gap with White Households
Gap Closure after Equalizing Homeownership rates
$160,000
Report: The Racial Wealth Gap: Why
Policy Matters
• Policies are drivers of the racial wealth gap
• Disparities in rates and predicted financial gains of
asset ownership both matter
• For example:
• Homeownership rates are: 73% for whites,
47% for Latinos, 45% for Blacks
• Equalizing homeownership rates would reduce
Black-white wealth gap by 31 percent
• Equalizing predicted gains in homeownership
by race would reduce Black-white gap by 16
percent
The Racial Wealth Gap: Why Policy
Matters
• Analysis in new report looks at three key areas
shaping wealth gaps
• Housing
• Education
• Labor Markets/Income
• Findings suggest that new policy proposals could
reduce RWG, including:
• First-time homebuyers programs
• Affordable College Compact
• Easing unionization efforts and supporting work-place
benefits
• Report first in series utilizing the Racial Wealth
Audit™
THANKS!
tshapiro@brandeis.edu
iasp.brandeis.edu
@tmshapiro
@IASP_Heller
IASP is searching for a Senior Research Associate, to learn more please
visit www.iasp.brandeis.edu