Right now, there are families in America who feel they have done all the "right things." They have played by the rules and worked hard but they aren't getting ahead financially. In fact, they are falling further behind and are basically beyond broke. They have many things in common but the thing that is most striking is their racial make-up; they are mostly African-American and Latino.
In the so-called "recovery period" following the Great Recession, the average African-American and Latino household still owns only six and seven cents respectively for every one dollar in wealth held by the typical white family, an increase of only a penny per group since 2009. And despite reports that U.S. households have regained much of the wealth they lost since the Great Recession, communities of color have yet to see the benefits of the economic recovery.
Our analysis of U.S. Census Bureau Survey of Income and Program Participation data show that between 2005 and 2011, the median net worth of households of color remained near their 2009 levels, reflecting a drop of 58 percent for Latinos, 48 percent for Asians, 45 percent for African-Americans but only 21 percent for whites. Steep losses in homes and home equity in the lead up to and during the Great Recession contributed to more dramatic declines in the net worth of households of color.
But it gets even worse, for the data shows that many African-American and Latino households are considered "liquid asset poor," meaning that they do not have cash or assets readily converted to cash to cover basic living expenses if they are without income for three months. In fact, the average liquid wealth of whites is now over 100 times that of African-Americans and more than 65 times that held by Latinos.
It's not an accident that these communities have less wealth and cash on hand. Their low wealth position can be correlated with discriminatory governmental policies that largely excluded people of color from the formal economy up until the latter half of 20th century and policies that continue to permit market discrimination today. As a result, many in these communities are barely hanging on at the margins of the U.S. economy.
The tragic irony of this predicament is that the same populations who were shut out of the economy for much of America's history are rising to become its majority population in a few short decades. And the question becomes: Will America rise to the challenge of building an inclusive and fair economy or will it allow the bigotry of the past to stunt its progress? This is not a hypothetical question.
The U.S. relies on its workers to boost the nation's gross domestic product as well as generate taxes to pay for everything from Social Security and public education to bridges, roads, mail delivery and local garbage collection. It will be difficult for the U.S. to sustain and grow its economy or support the kind of society we have come to expect without investing in building human and financial capital in communities of color.
I have to say that I am not encouraged by the current national debate over income inequality because income only looks at a part of the problem and the critical element of race/ethnicity has been ignored. Instead, we must discuss wealth inequality, which includes attention to income and assets, in the context of America's racialized class system if we are serious about pursing effective and equitable solutions. Discussing economic data as if all racial/ethnic groups are equally positioned in society only hides the inconvenient truth of racial and ethnic wealth inequality and will retard efforts to pursue targeted solutions for closing the gap.
For this very reason, the Closing the Racial Wealth Gap Initiative is seeking to raise the visibility of this critical aspect of the national debate with the release of a new report and the launch of our 2014 Color of Wealth Summit being held in Washington, D.C. this week. Among the issues raised will be the racial gap in pay and employment and the importance of paycheck fairness and living wage policies. We will also highlight the need for low- and no-cost financial services and the importance of future mortgage settlements including the collection of racial/ethnic, gender, geographical and other demographic data in order to ensure that relief programs are transparent, fair and targeting the hardest-hit communities.
We also uplift new proposals like the Baby Bond Trust Program, which seeks to build assets in low-income communities by progressively endowing children with an account seeded with federal funds at birth. It is clear that communities of color have greater financial hurdles to overcome in their effort to not just recover from the Great Recession but also from the lingering history of oppression. Policy discussions must give attention to this issue and policy interventions should be designed to meet this need.
Dr. Maya Rockeymoore is President of the Center for Global Policy Solutions, a social change nonprofit dedicated to making policy work for people and their environments. She is also a member of the Closing the Racial Wealth Gap Experts of Color Network.