Our Economy for the 1% is Bad News for Most Americans, but Particularly Americans of Color
This post was originally published on Oxfam America’s blog, The Politics of Poverty, on January 28.
Inequality is on the rise worldwide, but even the effects of inequality are unequal.
Wealth inequality in the United States is far greater than income inequality, and the disparities are huge between the typical white household and African American and Latino households, according to the 2016 Asset and Opportunity Scorecard released Monday by the Corporation for Enterprise Development (CFED).
“For many families, striving for financial security is like a present-day Sisyphus,” Andrea Levere, CFED’s president, said. “This is particularly true for families of color. Racial and ethnic disparities exist on all metrics from average earnings to assets to life expectancy.”
Wealth inequality is a global story, as new study released by Oxfam International last week demonstrated. The report, An Economy for the 1%, shows that the wealth of the poorest half of the world’s population has fallen by 41 percent, of $1 trillion, since 2010, while the wealth of the world’s 62 richest billionaires increased by more than half a trillion to $1.76 trillion.
In the US, the divide between a super-wealthy elite and the rest of the population are dramatic, but racial disparities are particularly profound. Median household net worth among whites, at $111,000, is 16 times that of African American households ($7,000) and 12 times that of Latino households ($9,000). Among women, white median wealth is about 45 times that of African American or Latino wealth. And these disparities have been widening: While the typical white family’s net worth rose by 2 percent between 2010 and 2013, African American and Latino families’ net worth plummeted by 34 percent and 15 percent respectively, according to a new report by the Annie E. Casey Foundation.
Although small businesses created primarily by people of color have been increasing in recent years somewhat faster than white-owned small businesses, the value of white-owned small businesses is, on average, three times that of black-owned businesses. CFED researchers also believe that some of the increase in micro-enterprise creation among people of color may reflect a disproportionate lack of jobs.
It is a particularly disturbing sign of our unequal times that 44 percent of American households do not have enough liquid savings to subsist at the poverty level for three months or more without any income. Such “liquid asset poverty” is true for 67 percent of African American households and 71 percent of Latino households, compared to 35 percent of white ones. Home ownership has fallen for eight straight years and again, the racial differences are stark: 41 percent of African American and 45 percent of Latino households own their homes, compared to 71 percent of whites.
Given such wealth differentials, it is not surprising that people of color are more likely to be forced to make trade-offs in spending. One example is health care: Nearly one quarter of Latinos and one-fifth of African Americans forgo doctor visits for economic reasons, compared to one in nine whites.
Living on the edge, with few or no assets, closely tracks low wages. With more than 40 percent of US workers paid less than $15 per hour, many without any benefits, it is hardly surprising that so many Americans are unable to save or build a net worth much above zero. For low-wage workers without any paid leave, the recent blizzard on the East Coast meant lost income that they literally can’t afford to lose.
Reducing wealth inequality seems very much like a Sisyphean task. However, there are a variety of basic policies, cited in both the Oxfam and CFED reports, which could make a substantial dent.
Tens of millions of US workers need to be paid higher wages, with essential benefits like paid family and sick leave and retirement plans. Governments need to be able to collect enough in taxes from corporations and wealthy individuals — many who avoid paying billions in taxes — to support opportunity-enhancing policies. Policies that would make higher education, health care, child care, and housing affordable and accessible to all; institute universal free preschool; expand workforce development initiatives, and ensure that every American has sufficient resources to meet their needs. A good place to start would be raising the federal minimum wage, from $7.25 / hour to a living wage that would – at the very least – be enough for workers to live above the poverty line.
As Ms. Levere said: “Bold systemic reforms are necessary to ensure that anyone who works hard can get ahead.”