By Chuck Self, Community Foundation Board Director
You have probably heard many explanations about why we have a racial wealth gap. Duke University published a paper, “What We Get Wrong About Closing the Racial Wealth Gap.” They systematically review ten of the most prevalent “excuses” for keeping Blacks poorer than Whites. And disproves all of them.
This is my second of a two-part report as part of Black History Month, in which I am sharing information about a problem many don’t realize we have. (See yesterday’s Part 1: What causes a racial wealth gap?)
There are many myths about the racial wealth gap. For the sake of time (and because I encourage you to read the full report), I will share one of them. It is a myth that if most individual Blacks have educational levels comparable to Whites, both groups would have the same levels of wealth. It is well known that Blacks and Whites in the same job don’t even have equal income. If you don’t have equal income, you won’t close the racial gap.
In this chart below you can see the household net worth by race and education. At every level of education, Blacks are behind Whites. The reality is that the average Black person with a college degree has less wealth than a White person who didn’t finish high school:
Obviously, we should aim to become as educated as possible. It increases our individual income and wealth potential. But education equality alone will not close the racial wealth gap.
What Has Caused the Racial Wealth Gap
- Greater educational attainment or more work effort on the part of blacks will close the racial wealth gap
- The racial homeownership gap is the “driver” of the racial wealth gap
- Buying and banking Black will close the racial wealth gap
- Black people saving more will close the racial wealth gap
- Greater financial literacy will close the racial wealth gap
- Entrepreneurship will close the racial wealth gap
- Emulating successful minorities will close the racial wealth gap
- Improved “soft skills” and “personal responsibility” will close the racial wealth gap
- The growing numbers of Black celebrities prove the racial wealth gap is closing
- Black family disorganization is a cause of the racial wealth gap
The authors conclude that historical racism and white supremacy are the root causes of this phenomena. Even if opportunities became equal today and we were able to take advantage of them, there will always be a racial wealth gap given Blacks’ late start economically.
President Lyndon Johnson, during a commencement speech at Howard University in 1965, gave us a vision that unfortunately, over one-half of a century later, still needs to be realized:
“You do not take a person who, for years, have been hobbled by chains and liberate him, bring him to the starting line of a race and then say, ‘You are free to compete with all the others,’ and still justly believe that you have been completely fair…We seek not freedom but opportunity. We seek not just legal equity but human ability, not just equality as a right and a theory, but equality as a fact, and equality as a result.”
Chuck Self serves as a Board member for the Community Foundation, and is the Chief Investment Officer of Sumnicht & Associates, a wealth management firm and multifamily office located in Appleton, Wisconsin.