The Racial Wealth Gap: Why Policy Matters | Demos
There is a strong correlation between wealth and happiness, the authors say: “ Rich . You can opt out, step off the treadmill, and escape from the rat race. To do. After those declines, the median white household will own 86 times more wealth than its black counterpart, and 68 times more wealth than its Latino one. The wealth gap measures the difference between the median wealth of blacks versus the median wealth of whites. While the income. Product Description. Relationships,Riches,and Race is a lecture film from best selling author/film producer Tariq Elite Nasheed. In this live lecture,recorded at.
So take time to really think about what having Enough means to you. Discuss it with your family, and explore the idea with your best friend. Is being debt-free Enough? Being able to pay cash for a new boat? Having a million dollars saved for retirement? Decide what Enough means to you, and then write it down. Practice conscious spending Because the notion of Enough is so vague, the best way to approach it is to be mindful of your financial habits.
The act of consciously choosing how you spend can help you make purchases that are in line with your goals and values. The idea is to spend with intent, deliberately deciding where to direct your money instead of spending impulsively. Did I receive value from this equal to the amount I spent? Conscious spending is about striving to get the most bang for your buck. Is this spending aligned with my goals and values? Conscious spending means prioritizing: But if your extra-hot nonfat caramel latte is the highlight of your day, then buy the latte!
Spend only on the things that matter to you. The box below tells the story of Chris Guillebeau, who has made a lot of unorthodox choices to be sure his spending matches his priorities. Your Money And Your Life: One of his ambitions is to visit every country in the world by his 35th birthday. Travel is expensive, so in order to meet his goal, Guillebeau has made it his top priority. But I spend thousands of dollars to fly all over the world. To read more about his unconventional life, check out his blog at www.
Reduce clutter If you have so much Stuff that you need to rent a storage shed, you have more than Enough. Purging clutter can be a profound experience, but it can be difficult, too: Getting rid of Stuff only hurts for a little bit. Some people find the process so liberating that they go farther and practice voluntary simplicity, even to the point of moving into a smaller home.
For example, Dave Bruno is chronicling his fight against materialism at his website http: The Missing Manual suggests lots of great ways to de- clutter your life. Seek balance A balanced life is a fulfilling life. You can surround yourself with family and friends, and rediscover the importance of social capital—the value you get from making personal connections with people in your community see Social Capital.
And because you no longer feel compelled to buy more Stuff, you can use your money to save for things that truly matter. Based on their survey, they came up with a three-part model: About half of your happiness is biological. These include biological traits like age, race, nationality, and gender, as well as things like marital status, occupational status, job security, and income.
Whereas circumstances happen to you, intentional activity happens when you act by doing things like exercising, pursuing meaningful goals, or keeping a gratitude journal.
1. It’s More Important to Be Happy Than to Be Rich - Your Money: The Missing Manual [Book]
You can read the entire article at http: Because of this, many Americans spend their lives striving for more money and possessions—but find that this materialism makes them less happy.
These problems all stem from one issue: By taking charge of your finances, you can get rid of many of these stressors and be happier. Wealth gives you options and makes it easier to focus on things that can make you content. This book will teach you specific ways to gain control of your finances.
The first step to leading a rich life is learning how to set priorities. Happiness by the Numbers In their book Happiness, Ed Diener and Robert Biswas-Diener talk about the happiness formula, their attempt to quantify all this psychological stuff about money and well-being. They found that a larger income generally makes people happier—but not always.
You might say that happiness is equal to what you have divided by what you want. On paper, that sounds like a lot of money, but if you yearn for expensive luxuries and experiences, you may actually feel poor. This is why frugality is so important.
For another attempt to quantify well-being, take a look at this happiness formula from Dilbert creator Scott Adams: Living a Rich Life Living richly means figuring out what to spend your time, money, and energy on—and what to ignore.
Psychologists generally agree that a life well-lived is rich in: By living below your means and avoiding debt, you can gain some financial control over your life. True wealth comes from relationships, not from dollars and cents. Wealthy or poor, people with five or more close friends are more apt to describe themselves as happy than those with fewer. A long-term, loving partnership goes hand in hand with this. As explained in the Note on How Money Affects Happinessmemories tend to grow more positive with time, but Stuff usually drops in value—both actual value and perceived value.
To further improve your relationship with money, keep these guidelines in mind: Spend on the things that make you happiest. For another way to prioritize, see the box on Living a Rich Life. Eat right, exercise, and get enough sleep Your Body: The Missing Manual has loads of tips on how to do all those things.
Financially, psychologically, and socially, keeping up with the Joneses is a trap. Focus on your own life and goals. Studies have found that watching lots of TV can influence your levels of materialism—how much you think you need to be happy. The average Joe believes that materialism is the path to happiness—but the average Joe is wrong. Research shows that materialism actually leads to unhappiness and dissatisfaction. Altruism is one of the best ways to boost your happiness.
It may seem counter-intuitive and maybe even a little self-servingbut donating to your church or favorite charity is a proven method for brightening your day. Because it can be difficult to make the time for these activities, he argues that we should make rituals out of them.
If you enjoy biking, make a ritual out of riding to the park every evening, for example. See the box below for tips on finding time for what you love. But for a goal to be worthwhile, it has to be related to your values and interests—it has to add something to your life. Fun Things First You lead a busy life. There never seems to be enough time to do the things you really want, like doing yoga, running, or having a weekly night out with your sweetie.
With so much already on your plate, how can you fit it all in? The secret, he says, is prioritizing: Imagine you have an empty jar, a collection of a few large rocks, and several handfuls of gravel.
Your task is to put all the large and small rocks into the jar. Let too many little things take priority, and there never seems to be time for the big things.
Consider the Big Rocks to be really important things you want to accomplish in life, the things that define you. Get the big things in first, work on the right projects and priorities, and let the little stuff fit in around the edges.
From the continuing impact of redlining on American homeownership to the retreat from desegregation in public education, public policy has shaped these disparities, leaving them impossible to overcome without racially-aware policy change.
Eliminating disparities in homeownership rates and returns would substantially reduce the racial wealth gap. While 73 percent of white households owned their own homes inonly 47 percent of Latinos and 45 percent of Blacks were homeowners. In addition, Black and Latino homeowners saw less return in wealth on their investment in homeownership: Eliminating disparities in college graduation and the return on a college degree would have a modest direct impact on the racial wealth gap.
In34 percent of whites had completed four-year college degrees compared to just 20 percent of Blacks and 13 percent of Latinos. In addition, Black and Latino college graduates saw a lower return on their degrees than white graduates: Eliminating disparities in income—and even more so, the wealth return on income—would substantially reduce the racial wealth gap. Black and Latino households also see less of a return than white households on the income they earn: This would shrink the wealth gap with white households by 43 and 50 percent respectively.
The Racial Wealth Audit is designed to fill the void in our understanding of the factors contributing to the racial wealth gap and clarify our ability to reduce the gap through policy. This paper, which presents the first analyses using this new tool, will be followed by a series of policy briefs using the Racial Wealth Audit to analyze specific public policies and policy proposals.
Introduction America is becoming both a more diverse nation and a more unequal one. Over the past four decades, wealth inequality has skyrocketed, with nearly half of all wealth accumulation since going to the top 0. As a result, racial wealth disparities, like wealth inequality overall, continue to grow. Political thinkers increasingly recognize that rapidly growing inequality threatens economic stability and growth. But in a country where people of color will be a majority by mid-century, any successful push to reduce inequality must also address the structural racial inequities that hold back so many Americans.
Stratospheric riches on the scale of the wealthiest Americans will never be accessible to the vast majority. Wealth functions as a financial safety net that enables families to deal with unexpected expenses and disruptions of income without accumulating large amounts of debt. At the same time, wealth can improve the prospects of the next generation through inheritances or gifts. Intergenerational transfers of wealth can play a pivotal role in helping to finance higher education, supply a down payment for a first home, or offer start-up capital for launching a new business.
The racial wealth gap is reinforced by federal policies that largely operate to increase wealth for those who already possess significant assets. Black and Latino households are disproportionately among those receiving little or no benefit. Unless key policies are restructured, the racial wealth gap—and wealth inequality in general—will continue to grow. In this paper, we assess the major factors contributing to the racial wealth gap, considering how public policies around housing, education, and labor markets impact the distribution of wealth by race and ethnicity.
Each factor is evaluated using a new tool: The Racial Wealth Audit draws on a baseline of representative data discussed in this paper to provide an empirical foundation for existing wealth among groups and the major determinants of wealth accumulation. For more information on the primary data source—the Survey of Income and Program Participation SIPP —and the analysis techniques used in this study, please see the Appendix. In this report, we briefly discuss the historic and policy roots of the wealth gap in each area and quantify the extent to which each policy area contributes to the current gap.
Next, we look at the extent to which changes in housing, education, and labor market trends would affect the wealth gap—for example, the wealth impact of increasing the rate of Black and Latino homeownership to match white homeownership rates, and the impact of increasing the wealth returns that households of color receive as a result of homeownership to match white returns.
We note policy ideas for reducing the racial wealth gap in each area. From the starting position of existing disparities, the Audit predicts wealth increases or decreases for affected populations according to the components of a proposed policy.
The Audit uses the most conservative assumptions possible, avoiding overstating changes in the gap. Finally, the Audit provides insight into the impact of policies on the racial wealth gap within a discrete time period, such as 1 year or 5 years ahead.
The Racial Wealth Audit is designed to fill the void in our understanding of the racial wealth gap and enhance our ability to reduce the gap through policy. It is an essential new measurement framework for assessment to facilitate informed decisions about the role of policy in asset-building, economic stability, and the racial wealth gap. Equally important, it can prevent the unintended side effects of policies that are not explicitly aimed at household wealth or financial disparities, yet contribute to worsening inequality.
Defining the Racial Wealth Gap In this report, we define the racial wealth gap as the absolute difference in wealth holdings between the median household among populations grouped by race or ethnicity.
Terminology This report analyzes data on white, Black, and Latino households. Latinos include everyone who identified as Hispanic or Latino and may be of any race. All dollar figures are in dollars. In addition, tracing the same households over 25 years revealed that the number of years a household owned their home explained 27 percent of the growing racial wealth gap. We note that because the disparity in rates and returns to homeownership operate simultaneously to impair wealth building among households of color, policies that only address one aspect will not solve the entire portion of the racial wealth gap driven by homeownership.
Homeownership Policy Shapes the Wealth Gap Lower homeownership rates among Blacks and Latinos have many roots, ranging from lasting legacies of past policies to disparate access to real estate ownership. The National Housing Act offor example, redlined entire Black neighborhoods, marking them as bad credit risks and effectively discouraging lending in these areas, even as Black home buyers continued to be excluded from white neighborhoods.
While redlining was officially outlawed by the Fair Housing Act ofits impact in the form of residential segregation patterns persists with households of color more likely to live in neighborhoods characterized by higher poverty rates, lower home values, and a declining infrastructure compared to neighborhoods inhabited predominantly by white residents.
Discriminatory lending practices persist to this day. When households of color access mortgages, they are more often underwritten by higher interest rates. The fact that Black and Latino families are more likely to have taken on subprime mortgages in recent years contributed significantly to the devastating impact of the housing collapse that began in While the median white family lost 16 percent of their wealth in the housing crash and Great Recession, Black families lost 53 percent and Latino families lost 66 percent.
Today, Latinos and Blacks are less likely to own their homes and accrue less wealth, at the median, as a result of homeownership than white families.
The next two sections use empirical estimates to explore impacts on the racial wealth gap if these disparities were eliminated. How Equalizing Homeownership Rates Affects the Wealth Gap We tested the effects of equalizing homeownership rates among white, Black, and Latino families on the racial wealth gap. Our model looks at wealth accumulation by race and ethnicity if the existing home owning population among Black and Latino households matched the 73 percent rate of white families.
In other words, what if Black and Latino homeowners made up 73 percent of each of their respective population subgroups, without changing typical home values for whites or households of color?
The model did not control for other characteristics that might distinguish homeowners from non-homeowners. The results suggest that equalizing homeownership rates has substantial effects on the wealth accumulation of Black and Latino households. Those numbers represent a percent wealth increase for Black households, and a percent wealth gain for Latino households.
Equalizing Black and Latino homeownership rates with those of whites raises wealth among Black and Latino families, and substantially reduces the racial wealth gap. This is a 31 percent reduction in the Black-white wealth gap. The first step in this model estimates the wealth returns to homeownership using a multivariate median regression model for the white population.
This assignment raises Black and Latino wealth by the difference between their existing median equity and the white median. Equalizing wealth returns to homeownership raised wealth among Black and Latino families while white wealth was held constant, significantly reducing the racial wealth gap.
This is a 16 percent reduction in the Black-white wealth gap see Figure 7. Yet just as past and continuing policies have helped to shape the distribution of wealth in America today, policy change could alter the existing trends for better or worse.
A bold, comprehensive approach would be required to move us towards the level of equality in homeownership modeled in our analyses; however, a number of policy efforts could bring us closer to expanding opportunities to build wealth through homeownership in the U.
While far from a comprehensive list, here are three sample homeownership policies that could help to build housing wealth for people of color and shrink the racial wealth gap. Stricter enforcement of housing anti-discrimination laws. As noted above, residential segregation is a key reason that Black and Latino homeowners do not benefit from as great a rate of return on homeownership as their white counterparts.
By limiting the residential market, segregation means that homes in predominantly Black and Latino neighborhoods accrue less value. Studies find that Black and Latino homebuyers still face barriers to purchasing homes in predominantly white areas. Authorizing Fannie Mae and Freddie Mac to reduce mortgage principal and make other loan modifications for struggling homeowners.
A policy that enables these federally-chartered institutions to reduce mortgage principal and modify mortgage loans in other ways that make them more sustainable would help to protect the home equity wealth of Black and Latino homeowners, potentially reducing the racial wealth gap.
Lowering the cap on the mortgage interest tax deduction.
As we have seen, typical Black and Latino homeowners own homes of less value than typical white homeowners. Today, more students than ever before are entering 4-year colleges.
However, despite rising college attendance rates among Black and Latino households, barriers to completing a degree have actually widened the college attainment gap between whites and people of color over the past decade.
In34 percent of whites completed a four-year college degree, compared to just 20 percent of Blacks and 13 percent of Latinos see Figure 8. Gaps in college attainment by race and ethnicity also reflect other inequities in the K education system and in household income.
Your Money: The Missing Manual by J.D. Roth
In addition to attainment gaps, the returns to college education differ across racial and ethnic groups. The returns to Black and Latino families are impacted by, among other things, their greater need to take on debt to pay for college and their disparate experiences in the labor market after graduation. According to previous research from IASP, differences in college completion rates accounted for about 5 percent of the growth in the racial wealth gap over a 25 year period This section looks more closely at the factors contributing to disparities in higher education, and evaluates how equalizing rates of college completion defined as graduating with a four-year degree and returns to college completion between whites, Blacks, and Latinos would each impact the racial wealth gap.
Education Policy Shapes the Wealth Gap Public policy decisions are critical to understanding why Latinos and Blacks are less likely to have completed a four-year college degree than whites, as well as why Latino and Black graduates build less wealth as a result of their degrees.
Disparities in education begin early in the lives of children in the U. While quality K education is essential for college readiness, residential segregation leaves many Black and Latino students, particularly those from low-income families, concentrated in low-quality, under-resourced schools. As policy has shifted away from efforts to integrate public education that prevailed after the Brown v.
Board of Education Supreme Court decision inresearch has documented dramatic increases in segregation, with Black and Latino students increasingly attending the same schools.
At public institutions, increasing tuition and fees are primarily a result of declining state support for higher education shifting a greater share of the costs to students. However rather than facilitating economic mobility, according to our analyses, current educational inequalities end up being a small, direct net contributor to the racial wealth gap. In addition, it is also likely influencing a number of other variables that shape unequal asset-building opportunities.
The next two sections present our empirical analysis exploring how the racial wealth gap would change if educational disparities were reduced. How Equalizing College Graduation Rates Affects the Wealth Gap We tested the effects of equalizing college graduation rates among white, Black, and Latino families on the racial wealth gap. This test did not control for other characteristics that might distinguish those who finish college from those who do not.
Instead, it looks at wealth accumulation by race and ethnicity if the proportion of Black and Latino households with a college degree matched the 34 percent college completion rate of whites. Compared to the effects of changes in homeownership rates on the racial wealth gap, the effects of changing college attainment rates on household wealth for Black and Latino families are modest.