What We Get Wrong About Closing The Racial Wealth Gap

Transcript

1 What We Get Wrong About Closing the Racial Wealth Gap By William Darity Jr., Darrick Hamilton, Mark Paul, Alan Aja, Anne Price, Antonio Moore, and Caterina Chiopris Samuel DuBois Cook Center on Social Equity Insight Center for Community Economic Development April 2018 1

2 Introduction th gap is large and shows no signs of closing. Recent data from the Survey The racial weal of Income and Program Participation (2014) shows that black households hold less than 1 The seven cents on the dollar compared to white households. white household living near verty line typically has about $ 18,000 in wealth , while black households in similar the po near zero. This means, in turn, that many economic straits typically have a median wealth black families have a negative net worth. (Hamilton et al. 2015). At the other e nd of America’s economic spectrum, black households constitute less than 2 percent of those in the top one percent of the nation’s wealth distribution; white households constitute more than 96 percent of the wealthiest Americans. Moreover, even ation’s wealthiest households, extreme differences persist on the basis of among the n race: The 99th percentile black family is worth a mere $1,574,000 while the 99th percentile white family is worth over 12 million dollars. This means over 870,000 white families hav e a net worth above 12 million dollars, while, out of the 20 million black families in America, fewer than 380,000 are even worth a single million dollars. By comparison, over 13 million of the total 85 2 million white families are millionaires or better (Mo ore and Bruenig 2017). 1 Data from the Federal Reserv e Board’s Survey of Consumer Finances for 2016 indicate that the median black household has ten cents for every dollar held by the median white household, still a staggering disparity. The Survey of the income distribution while the Survey of of Consumer Finances oversamples households at the upper end Income and Program Participation oversamples households at the lower end of the income distribution. Regardless which data set is used, if all vehicles are removed, including the household car, the net worth calculation, the median black household has only about three cents per dollar held by the median white household (Moore and Bruenig 2017). 2 The statistics reported here are drawn from the 2016 round of the Survey of Consumer Finances. 2

3 Blacks, while constituting just under thirteen percent of the nation’s population, collectively own less than three percent of the nation’s total wealth (Moore 2015). e. While income primarily is Patently, wealth is far more unequally distributed than incom earned in the labor market, wealth is built primarily by the transfer of resources across -in the deep divides we observe across racial groups (Shapiro 2004, generations, locking Gittleman and Wolff 2004, Hamilton and Darity 2010). In this report, we address ten commonly held myths about the racial wealth gap in the United States. We contend that a number of ideas frequently touted as “solutions” will not make headway in reducing black -white wealth disparities. These convention al ideas and greater educational attainment, harder work, better financial decisions, other include changes in habits and practices on the part of blacks . While these steps are not necessarily undesirable, they are wholly inadequate to bridge the racial ch asm in wealth. These myths support a point of view that identifies dysfunctional black behaviors as the basic cause of persistent racial inequality, including the black -white wealth disparity, in the United States. We systematically demonstrate here that a narrative that places the onus of all of its permutations. the racial wealth gap on black defectiveness is false in We challenge the conventional set of claims that are made about the racial wealth gap in the United States. We contend that the cause of the gap must be found in the structural characteristics of the American economy, heavily infused at every point with both an inheritance of racism and the ongoing authority of white supremacy. –i.e. by Blacks cannot close the racial wealth gap by changing their individual behavior assuming more “personal responsibility” or acquiring the portfolio management insights associated with “financially literacy” – if the structural sources of racial inequality remain 3

4 unchanged. There are no actions that black A mericans can take unilaterally that will have much of an effect on reducing the racial wealth gap. For the gap to be closed, America must undergo a vast social transformation produced by the adoption of bold national policies, policies that will forge a way forward by addressing , finally, the long -standing consequences of slavery, the Jim Crow years that followed, and ongoing racism and discrimination that exist in our society today. Our report indicates that closing the racial wealth gap requires an accurate assessment of the causes of the disparity and imaginative action to produce systemic reform and lasting change. Addressing racial wealth inequality will require a major redistributive effort or another major public policy intervention to build black American wealth. This could take the form of a direct race- specific initiative like a dramatic reparations program tied to compensation for the legacies of slavery and Jim Crow , and/or an initiative that addresses the perniciousness of wealth inequality for the entire American population, which could disproportionately benefit black Americans due to their exceptionally low levels of wealth. the two strategies -- Indeed, reparations for America’s record of racial injustice or the provision of the equivalen t of a substantial trust fund for every wealth poor American — need not be mutually exclusive. widely held myths In what follows, we come to grips with the ten most important , about closing the racial wealth gap. 4

5 more work effort Myth 1: Greater educational attainment or on the part of blacks will close the racial wealth gap A common -sense hypothesis ascribes disparities in wealth mainly to differences in the level of education. A college degree is associated with higher earnings and more stable employm ent, even in times of economic crisis (Day and Newburger, 2002; Chung, Davies, and Fitzgerald, 2010). Families with college -educated heads appear to accumulate more wealth than families with heads with lower levels of education over a lifetime. Therefore, touted as the “great equalizer” higher education often has been , as a mechanism to reduce the wealth gap between whites and blacks. According to this logic, we would expect blacks education to display comparable levels of wealth. and whites with similar levels of Figure 1 su mmarizes our findings when we compare wealth levels for heads of households with the same educational attainment across racial groups . Both for black s and white s, s highe of r levels median household wealth increases as the head of household obtain 5

6 education degree, or a graduate s getting a college . However, it is apparent that for black degree is far from sufficient to close the wealth gap. , the median wealth among black families is At every level of educational attainment y lower than white families . White households with a bachelor ’s degree or post - substantiall graduate education (such as with a Ph.D., MD, and JD) are more than three times as wealthy as black households with the same degree attainment. -educated head ha Moreover, on average, a black h ousehold with a college s less wealth than a white family whose head did not even obtain a high school diploma. It ta kes a post- graduate education for a black family to have comparable levels of wealth to a white household with some college education or an associate degree (Hamilton et al. 2015 and Meschede et al. (2017), who use the Panel Study of Income Dynamics). Figure 1: Median Household Net Worth by Race and Education 70,219 $ Source ’ calculations, Survey on Income and Prog ram Participation (SIPP) 2014. : Authors Note : Many of these figures were updated from a prior report entitled Umbrellas Don’t Make it Rain: Why Studying Hard and Working Hard Isn’t Enough for Black Americans (Hamilton et al. 2015). 6

7 Furthermore , low family wealth the next generation’s can have an adverse effect on both educational attainment. Family wealth is a predictor of college college attendance and completion (Meschede et al. 2017). Black students are more likely to take on student loans and accumulate stude nt loan debt, and they are more likely than white students to drop -out of a university because of financial concerns . Ironically, their wealth position could deteriorate because of their intense motivation to pursue higher education (Shapiro et al 2013). Another commonly held misconception is that black families have a cultural predisposition to under -value education (Loury 1985, Ogbu 1978). Black parents are alleged to invest in their children’s education. However, the best evidence indicates that black insufficiently families, controlling for household type and socioeconomic status, tend to be more supportive than white families of their children’s education through direct financial support . Black parents who provide some support for their children’s hig her education h ave two - thirds of the median net worth of white parents who provide no support for their children’s higher education . (Nam et al., 2015). For given levels of household income, parental educational attainment, and/or parental occupational status, black youth also get more years of schooling and more credentials than white youth whose parents have a acquire similar status (Mason 1997, Mangino 2010). While education does not appear to be the great equalizer, it could be argued, alternatively, that hard work can close the wealth gap. Since blacks face a higher unemployment rate than whites at every level of education (Jones and Schmitt, 2014), the difference in wealth ultimately could be due to the difference in employment status. If that were t he case, we would observe similar levels of wealth for blacks and whites with similar employment statuses. But Figure 2 contradicts such an expectation. As one would expect, the median household wealth is higher for employed families than for unemployed families in both races. However, 7

8 white households with an employed head have more than ten times higher wealth than Furthermore, white households with an unemployed head have a similar black households. higher net worth than black households with a head wh o is working full time. Figure 2: Median Household Net Worth by Race and Employment Status Source : Authors ’ calculations, SIPP, 201 4. , higher levels of household income are not associated with significant reductions In addition in the ra cial wealth gap. Figure 3 shows how black families have much lower wealth than white families even when they have comparable earnings. In particular, black households in zero net worth, whil e the the lowest 20 percent of the income distribution essentially have poorest white families have on average $15,000 - $18,000 in net worth. Even belonging to the highest quintile does not make black families as wealthy as whites: their median wealth is approximately half of that of white families in the same income qu intile . The pattern is evident: studying hard and working hard clearly is not enough for black families financial position. to make up for their marginalized 8

9 Figure 3: Median Household Net Worth by Race and Household Income Quintile Source ’ calculations, SIPP, 2014. : Authors 9

10 Myth 2: The racial homeownership gap is the “driver” of the racial wealth gap A 2017 New York Times Magazine article by renowned sociologist Matthew Desmond stated what he thought to be obvious (and uncontroversial): “[d]ifferences in homeownership rates remain the prime driver of the nation’s racial wealth gap.” Desmond is far from alone in perpetuating this misperception . A 2015 report from the think tank Demos claimed “[e]liminating disparities in homeownership rates and returns would substantially reduce the racial wealth gap,” while the Institute on Assets and Social Policy at Brandeis University wrote an entire report on how interest deductions for home -owners “drive” the racial wealth gap. After all, the typic al household, regardless of race, holds most of its wealth in home equity. Since black families own homes at substantially lower rates 10

11 than their white counterparts, the argument has it that if blacks only achieved rates of home ownership similar to white s, the racial wealth gap would be eliminated. The word “drive” suggests a causal link homeownership/home equity and between intergenerational wealth. However, a major flaw in this reasoning is that, by definition, homeownership/home equity is a componen t of wealth. Hence, the statement that “homeownership drives wealth” is equivalent to saying that “wealth drives wealth.” As discussed below under Myth 5, blacks with positive wealth do tend to have a greater share of their asset portfolio in homeownersh ip than whites, since a home is the largest non-depreciating major asset held by most American households, regardless of (usually) whites have considerabl y more resources than race. Nonetheless, in the aggregate, in every other type of asset . blacks, higher values greater home equity and also Furthermore, empirically, the evidence simply does not support the claim that the racial homeownership gap explains the racial wealth gap. Figure 4 shows median household wealth by homeownership rates. For those house holds who do not own a home, wealth -homeowner levels are low for both white and black households; however black non households have a mere $120 in net worth – insufficient to feed a family for a week. The data indicates that white households who are not home -owners hold 31-times more wealth than black households that do not. Among households that own a home, white households have nearly $140,000 more in net While the wealth ratio between whites and blacks may worth than black households. mong those who own a home, a six -figure wealth differential remains. narrow somewhat a Clearly increased homeownership is far from sufficient to close the racial wealth gap. 11

12 Figure 4: Median Household Net Worth by Race and Homeownership ’ calculations, SIPP, 2014. Source : Authors Homeownership and wealth are clearly correlated, but it is a severe misstatement to claim that if blacks owned homes at the same rate as whites the racial wealth gap would be closed. To be sure, a sizeable difference in o wnership rates exists, as well as a dramatic difference in home equity across black and white homeowners. Figures from the 2017 U.S. Census indicate that 72.5 percent of whites own a home 3 Nevertheless, substantial reg ional variation exists. with 42 percent of blacks. compared For instance, in Los Angeles, blacks have slightly higher homeownership rates than Asian the Indians ; however, using data from National Asset Scorecard for Communities of Color Project ( NASCC), Indian households in Los Angeles have substantially greater levels Asian of owning of wealth than blacks despite, statistically, having no greater likelihood a home 4 (De La Cruz -Viesca et al. 2016). While closing the gap in homeownership rates may have some benefits, the story is complicated. Indeed, there are various pathways to wealth and assets in which wealth is 3 These levels are s imilar to those reported in the 2014 SIPP sample, where home ownership rates are 76 percent for whites and 44 percent for blacks. 4 In Los Angeles, U.S. black household s had a median net worth of $4,000 compared to $592,000 for Japanese for Asian Indian households, and $408,200 for Chinese households. households, $460,000 12

13 stored, and these pathways and assets will vary across context, including geographic . Nonetheless, a major u nderlying difference in homeownership rates is an initial location difference in endowments. Broad -based homeownership in the United States as a means to achieve economic security was brought about through public policy reforms, starting with New Deal legislatio n. The New Deal created relatively s ound long -term mortgage markets and down payment capital finance. It also reduced down payment requirements for homeownership. This transformed the housing landscape, allowing many working-class households to move fro m the rental lifestyle to obtaining a piece of the American dream - owning a home. Yet the path to homeownership has been riddled with entrenched racism, as the Federal Housing Administration (FHA) systematically refused loan applications to black famili es 5 Richard Rothstein (2017) has made the following through the policy of redlining. in a recent book on the racialized character of post observation -World War II social mobility polic : ies The Color of Law is concerned with consistent government policy [My book] -twentieth century to enforce residential racial that was employed in the mid segregation. There were many specific government actions that prevented African Americans and whites from living among one another, and I categorize them as unconstitutiona l... For example, many African American World War II veterans did not apply for government -guaranteed mortgages for suburban purchases because they knew the Veterans Administration of their race, so applications were pointless. would reject them on account Those veterans then did not gain wealth from home equity appreciation as did white veterans, and their descendants could not inherit that wealth as did white veterans’ descendants. Further, the racialized history of housing policy in the U.S., including residential segregation, redlining, and discriminatory credit practices, have exacerbated inequality in wealth and homeownership rates and have also contributed to the rate of return on the asset itself. Part of the persistent 5 es see Richard Rothstein (2017). For an extensive discussion on the development of racialized housing polici 13

14 wealth -gap across homeownersh ip status may be explained by the fact that a home is one of the only assets in which the race of the owner affects the rate of return. Further, the idea that homeownership creates wealth simply may put the relationship backward. Rather than homeownershi p creating wealth, having family wealth in the first place leads to homeownership, particularly high equity homeownership. As we discussed in the introduction, blacks have minimal initial wealth to invest in homes or pass down to with down payments. Research by Gittleman and Wolff (2004) their children to assist suggests that when black households do obtain some wealth, one of the first assets they purchase, similar to other Americans, is a house. But without sufficient wealth in the first place, households have limited means to invest in homeownership. Wealth, after all, begets more wealth. While achieving parity in homeownership and rates of return on housing is certainly a worthwhile goal that might improve economic security, stability and fairness, it is a widely held myth that improving homeownership rates amongst black households will close the racial wealth gap. Today, simply advocating the purchase of a new home will not overcome the existing gap produced by national policies. As illustrated above , even blacks who own their home encounter a large racial disparity in home values. If the goal truly is to eliminate the racial wealth gap, policymakers should be concerned with providing , at the very least, an initial, significant financial endowment to black young adults to invest in an asset like a new home , as well as an aggressive campaign against housing and lending discrimination, which limits the asset appreciation of the housing stock and financial products available to blacks . 14

15 Myth 3: Buying and banking black wi ll close the racial wealth gap ,” Martin Luther King Jr. called for In his famed 1968 speech “I’ve Been to the Mountaintop a ‘bank -in’ movement. To a ssert black independence, King called on his followers to “strengthen black institutions” by taking “your money out of the banks downtown and deposit your money in Tri -State Bank,” a black owned bank. This idea, that buying and banking from black owned bus inesses will empower the black community and close the racial wealth gap, has been widely embraced, historically by a diverse array of Americans including Booker T. Washington, Marcus Garvey, Richard Nixon, and, recently, by the #BankBlack movement. 15

16 From this perspective, if only black consumers would invest in their own communities, turning inward for solutions to their economic woes, rather than asking the state for a handout, they would become economically self-sufficient and eventually thrive. After all, the premise works as follows: A group with a low profile of achievement does not have to persuade members of the dominant group to embrace policies to repair the out - group that may impose costs on the dominant group. Everything ultimately can be solve d internally with the right amount of spit and polish. (Darity 2009) Rather than creating an inclusive and just economy that does not greatly disadvantage a group solely based on their race, politicians across the aisle embraced the idea of buying -in,’ none other than and banking black. In 1968, the same year King called for a ‘bank presidential hopeful Richard Nixon came out endorsing ”. “black capitalism In his speech to the Republican National Convention, Nixon proclaimed: Instead of government jobs, and government housing, and government welfare, let government use its tax and credit policies to enlist in this battle [against poverty] the greatest engine of progress ever developed in the history of man —American private enterprise. Black capitalism , in Nixon’s eyes, was the solution. So while white America received ample government support through public policies to b uild and maintain wealth, black Americans were offered a deficient private sector strategy (Katznelson 2005). Black capitalism was a solution that would allow the government to hand over the economic “problems” of 16

17 poverty and insufficient wealth in the black community to the community itself, effectively ridding the government of responsibility (Baradaran 2017). banks cannot thrive on a separate and unequal playing field. For But black businesses and instance, in the U.S. black banks are smaller and less profitable than similar white institutions (Baradaran 2017). This is not because the black -owned institutions lack a strong business model or viable leaders, but because of the economic situation of the communities where they operate and their own disparate levels of access to start-up and developmental finance. For instance, since black families have minimal liquid wealth, their bank accounts tend to hold money for day -to-week expenses. Small and unstable deposits due -to-day and week to continued economic penalties forced upon black workers and households makes profitability a significant challenge for these banks. In the end, if black banks and businesses are a supposed solution to the racial wealth gap, we must address a basic math problem that arises: to close the gap, black banks and enterprises must earn a much higher rate of return than white businesses. Without this condition bein g met, the gap only will be perpetuated rather than ended. What is the state of black business in the United States today? A recent report by the Association for Enterpr 2.58 million U.S. black -owned ise Opportunity indicates that s, only generate $150 billion in revenue . Unfortunately, this represents negligible businesse ownership and control over the nation’s productive capacity (Gorman 2017). Black Enterprise -owned firms ide ntified by For instance, in 2016, the top 100 black 6 In contrast, Walmart, the collectively grossed $24 billion and employed 73,940 workers. 6 -100s -2017/ http://ww w.blackenterprise.com/lists/be 17

18 top firm by revenue in the U.S., grossed more than twenty times as much in revenue and more workers than the entire top 100 black -owned firms combined in employed 2.2 million 7 In fact, Walmart, t the same year. st private employer in the U.S., generates more he large 8 all 2.58 million black owned businesses combined. revenue than Black -owned banks also are miniscule in the conte xt of the general scale of American banking. The largest five black owned banks recently were estimated to have assets totaling $2.3 billion, while J.P. Morgan alone had an estimated $2 trillion in assets. Thus, the top five black banks’ assets were a tiny 0.1 percent of Morgan’s assets (Fontinelle 2017). This indicates that the existing infrastructure of black -owned banks lacks the capacity to produce wide and substantial increases in black wealth. Even if they were to black banks would not be major players on the double, triple, or quadruple their as sets, American economic landscape, never mind the global landscape. Moreover, since black wealth is so low in the first place, it is a mere fantasy to anticipate that the existing black consumer base could buil -owned equivalent of J.P. Morgan by banking black. d a black Indeed, the illusion that blacks have the capacity to build a separate, major economy is perpetuated by the oft -repeated observation that black Americans possess $1.2 trillion dollars in buying power that, allegedly, has been misspent thus far. Jared Ball has advanced the following potent deconstruction of this contemporary cliché: 1. The claim that Black America has roughly $1 trillion in “buying power” is popularly repeated mythology with no basis in sound economic logic or data. While the myth has a longer history , it is today largely propelled by misreadings and poor (false) interpretations of Nielsen surveys and marketing reports... 2.“Buying Power” is a marketing phrase that refers only to the “power” of consumers to purchase what are strictly available goods and is used as a 7 https://www.marketwatch.com/investing/stock/wmt/financials 8 fortune500/walmart/ http://fortune.com/ 18

19 measurement for corporations to better market their products. “Power” here there is no collective has nothing to do with actual economic strength and $1+ trillion that Black people have and just foolishly spend ignorantly to their economic detriment. 3.The myth of “buying power” functions as propaganda working to deny the reality of structural, intentional and necessary economic inequality required to maintain society as it is, one that benefits an increasingly decreasing number of people. , also, even if we accept the estimated $1.2 trillion total of “black buying power” as Note valid , it still is only 60 percent of the value of J.P. Morgan’s total assets. A strategy for closing the racial wealth gap currently in popular circulation is to have each of the nation’s 40 million black Americans contribute $10 a month ($120 a year) to a fund to support black owned banks who, in turn, will finance further development of bl ack owned businesses. But the total amount of that fund would only come to $4.8 billion, a tiny speck in America’s overall wealth and national income. The key to assisting black businesses in their development and growth lies in leveling the terrain of racial wealth differences and increasing black entrée to start-up and Prior research has confirmed that individuals with developmental capital in the first place. access to family wealth both directly, through transfers from immediate family members, and, i ndirectly, through kin networks, have markedly higher rates of entrepreneurship and are more likely to start larger businesses (Evans and Jovanovic 1989; Hosseini 2016). See Myth 6 below. More than two decades ago , Timothy Bates (1995) found that individu als with relatively and at least $100,000 in net worth were the persons most likely to high levels of education undertake self-employment. But, , one today , the median black household’s net worth is - tenth of the threshold figure for successful entry advance d by Bates in 1995. 19

20 While some may argue that the “wealthy tend to make better entrepreneurs” Evans and Jovanovic argue strongly that “the data reject this explanation,” and that the levels of capital required to start businesses systematically exclude no n-wealthy individuals , regardless of their entrepreneurial talent . Thus, with the denial of black wealth accumulation and with the continued exclusion of blacks from business credit markets, blacks simply do not have access to the necessary resources to bu ild corporations that can be players in a global economy ( Blanchflower et, al.). A black American corporate monolith cannot be built on $1.2 trillion in spending capacity, ne ver mind $4.8 billion in seed capital. Mehrsa Baradaran (2017) forcefully argues that “buying black, banking black” is a stance that is symptomatic of an attraction to the chimerical dream of “black capitalism.” She of a wide, deep, and independent foundation in contends that, again, in the absence wealth among black Americans, the prospect of a world of giant black -owned corporations is no more than a fantasy. Baradaran’s central conclusion is capitalism, whether black or white, cannot fix problems created by racialized public policies. We must make it clear that we have no objection to banking black or buying black. In the interest of black solidarity , the idea has great merit. But the failure to bank black or buy black does not explain why we have a racial wealth gap of this magnitude, nor will banking black or buying black do much to reduce the gap. 20

21 Myth 4: Black people saving more will close the racial wealth gap The finding advanced in peer reviewed articles in economic journals is clear: there is no evidence that black Americans have a lower savings rate than white Americans once (Hamilton and Chiteji, 2013). For example, Maury household income is taken into account Gittleman and Edward Wolff (2004) using data from the Panel Study on Incom e Dynamics (PSID), tracked the financial position of black and white families and found that, once income is controlled , if anything, black families actually have a slightly higher savings rate than their white counterparts. 21

22 This mild savings rate advantage is indicative of even greater thriftiness among blacks, since they typically have more kin obligations to assist low-income relatives which, further Chiteji and Hamilton 2002; and Heflin and Patillo 2006). If reduces the ability to save ( anything, it a ppears that blacks generally live more frugal lives than whites; a study conducted by the Institute on Assets and Social Policy using the 2013 Survey of Consumer Finances found that, at comparable levels of income, whites spend 1.3 times Traub et al.). more than blacks ( Nonetheless, the conventional wisdom has it that blacks in search of immediate gratification lack self -control and are plagued, uniquely, by a culture of frivolous consumerism This belief was magnified by Ronald Reagan’s use of the “welfar e queen” . trope during his campaign, and, recently, via internet financial gurus pushing images of black America spending money on Jordan brand Nike shoes, rather than household needs. Yet, the empirical evidence indicates that it has not been the case hist orically, nor is . In addition to the it the case today, that blacks are more financially wasteful than whites -conservative Milton Gittleman and Wolff (2004) study, economists ranging from arch Friedman to Marjorie Galenson to Marcus Alexis, a founder of th e Caucus of Black Economists, all found that blacks have a slightly higher savings rate than whites. tudy However, authors ’ in a 2009 Ariel/Hewitt s claim there is a white savings advantage with regards to pension accounts . Using a sample of 57 large companies, they maintain have lower participation and contribution rates in company that black employees at sponsored 401(K) plans even after controlling for salary, job tenure and age. Hamilton and Darity (2010) offer a critique and explain that while the Ariel/H ewitt study uncover s racial difference in pension account participation and value, t here are no racial the same 2012, differences in pension savings rate. Although the study was updated criticisms apply. 22

23 First, it is not clea r from the Ariel/Hewitt report whether or how income, job tenure and age are controlled. For example, the Ariel/Hewitt study compares participation rates across race, not in a continuous way, but at various income categories. The lowest participation rate difference, 92 versus 91 percent, occurs in the highest income category – those earning above $120,000, while the widest participation rate difference, six percentage points (56 versus 50 percent), occurs in the lowest income category – those earning below $30,000. Nevertheless, the report states that blacks, overall, are seven percent less likely to participate in a 401(K) plan after controlling for salary, age and job tenure. it is inconsistent for the overall racial participation rate After controlling for incomes, differential to be seven percent, while the largest percentage point difference within each of percentage points. This would suggest an their defined income categories is at most six unlikely scenario that blacks are better positioned in ter ms of salary within the defined income brackets and/or have longer job tenure and/or are older on average. Also, the unit of analysis for the Ariel/Hewitt study is the individual rather than the family. This is relevant since wealth generally is measured at the family or household level, and savings decisions are often made at the family level. Individual income controls are inadequate to determine family savings rate “behavior,” since saving decisions are based on the entire family’s expenses and income flows. Furthermore, 60 percent of the black sample in the Ariel/Hewitt study consists of women in comparison with 48 percent for whites. Given racial differences in marriage rates, using individual, rather than family income, masks the potential lower r esources to save in the black sample. Urban Institute Fellow, Kilolo Kijakazi, in her 2010 testimony for the Employee Retirement Income Security Act (ERISA) Advisory Council on Disparities for Women and Minorities in epresentative study by the Center on Retirement Retirement cited a more nationally r Kijakazi observed that Research, which finds no residual difference in pension savings. 23

24 “for comparably situated individuals, Blacks, whites, and Hispanics respond in a similar fashion in terms of joining a 401(k) plan and deciding how much to contribute...” In addition to savings out of income or “active savings,” family wealth also can increase as a result of “passive savings.” In short, if the value of a family’s assets rises/appreciates, then so will thei r net worth. The Gittleman and Wolff (2004) study cited above, based on data collected before the predatory subprime and mortgage market crisis, also finds no significant racial advantage in “passive savings” for white families with positive assets, the claim that the again, after family income is taken into account. This leads to Myth 5, racial wealth gap is driven by a lack of financial literacy on the part of black s. Myth 5 includes the assertion that blacks display inferior portfolio management skills. 24

25 Myth 5: Greater financial literacy will close the racial wealth gap Hamilton and Darity (2017) have argued that, all too often, the framing of the racial wealth gap focuses on poor financial choices and decisions on the part of blacks. Evi dence put forth to make the case for black financial illiteracy includes blacks’ disproportionate use of alternative financial service products, like payday loans and check cashing , auto -title loans, institutions. These financial services have fees and int erest payments that far exceed more conventional options. Other evidence put forth also includes racial variations in portfolio in the form of composition in which the blacks have a much larger share of their assets zed as making the suboptimal decision to invest home equity. Here, blacks are characteri 25

26 in “low -return” housing assets instead of higher yield financial assets (Boshara et al. 9 2015). For many Americans with any significant level of wealth, home equity makes up a predominant amount of their assets. The consumption value of homeownership, including access to schools and other desirable neighborhood amenities, and the tax -preferred status of owning a home , should be considered when examining portfolio shares. Regardless of race, historically a hom e is the first major asset purchased by most Americans . The key point is whites generally have more resources to invest at the outset—not only do they invest more in homeownership, they invest more in financial assets too. Basically, whites have more of e very asset simply because they have more resources. Hamilton and Darity (2017) have observed that “...attributing the racial wealth gap to a more diverse asset portfolio for whites is ambiguous at best, given that it is wealth in the first place that is associated with having a more diverse asset portfolio.” The problem with assigning differences in cost of finance and asset portfolios to difference in financial acumen is its directional emphasis. Meager economic circumstances —not poor ficient knowledge —constrain choices and leave asset -poor decision making or de borrowers with little to no other option but to use predatory and abusive alternative financial services (Hamilton and Darity, 2017). A negligible level of economic resources readily explains why blacks, specifically, use more predatory financial institutions. Indeed, Jonathan Morduch and Rachel Schneider’s (2017) 9 This argument obviously contradicts the premises of Myth 2 discussed above. More recent work by the authors of the report cited here has been expanded to emphasize financial circumstances as an alternative to financial choice as ex planation for racial differences in portfolio composition (see, for instance, Emmons et al., 2016). 26

27 U.S. Financial Diaries (USFD) project reveals that the use of predatory financial products ast-resort finance options for economically and alternative financial services are often l fragile borrowers after all other options, including borrowing from family and friends, have been exhausted. As we have noted above, wealth begets more wealth. Higher levels of wealth enable greater access to more favorable terms for credit. Wealth provides individuals and families with financial agency and choice; it provides economic security to take risks and shields against the risk of economic loss. Basically, wealth is cumulat ive . It provides people with the necessary capital to secure finance and purchase an appreciating asset, which in turn, will generate more and more wealth (Hamilton, 2017). Literally, it takes wealth to make wealth, while blacks largely have been excluded from intergenerational access to capital and finance. It merits noting, again, that the Gittleman and Wolff (2004) study cited in the previous 2007 predatory subprime mortgage panel data long prior to the section, which used lending crisis , did not find a significant racial differ ence in asset appreciation rates for households with positive assets, once household income is taken into account. This result emerged despite the well -documented evidence of historical and ongoing housing and lending discrimination (Bocian, Li, and Ernst, 2010; Institute on Race and Poverty, 2009; Oliver and Shapiro, 2006; Katznelson, 2005). There is also a presumption that, as a result of financial irresponsibility, blacks carry much greater debt than whites, but, this presumption is not valid (Hamilton and Darity, 2017). (2014) find that, overall, a slightly larger share of white families has Tippett and coauthors unsecured debt than black families. Furthermore, after controlling for basic socioeconomic and demographic characteristics, the study finds no significant difference in the value of black and white family unsecured debt holdings. 27

28 When unsecured debt is disaggregated into three categories: (1) store bills and credit card debt, (2) loans from a bank or credit union, and (3) “other” types of debts, including student loans and medical bills, it is only the “other” category in which there is a statistically significant racial difference in unsecured debt —21.5 percent for black families and 19 borrowing for school and other percent for white families. This debt category represents critical needs , including medical care (Tippet et al., 2014). Paul et. al. (2016) demonstrate that among relatively better -off students who are able to attend college, blacks are 25 percent more likely to accumulate student debt and, on average, borrow 10 percent more than their white counterparts. The adverse implications of the liability produced by these racial differences in self-investment debt are compounded by the fact that black students are one-third less likely to complete their degrees, often because of the greater financial burden that precipitated student loan borrowing in the first place. Paul et. al. (2014) f ound that 29 percent of black students 10 who leave college after their first year do so for financial reasons. Student loan debt and mortgage debt traditionally have provided Americans with access a job to needed to purchase an appreciating asset such as a house or secure finance the in the professional or managerial sector. In effect mortgage debt and student loan debt may be considered a form of “good debt,” especially in comparison to other types of debt 10 In terms of student loan debt, there is evidence that for -profit colleges and universities, which often issue misleading claims about graduation and job placement rates, disproportionately enroll and target black students (see Huelsman, 2015; McMillan- Cottom, 2017; Seifert, 2017). Huelsman (2015) states that “[t]he University of Phoenix, for example, was spending as much as $400,000 a day on advertising. A ds for these colleges were ubiquitous in communities of color, on commercials for daytime television programs, at bus stops and subways, and in other places where black and brown people congregated. They enlisted leaders in the black community to advertise on their behalf, as comedian and television host Steve Harvey has for Strayer University, or as Al Sharpton has when he devoted glowing television coverage to the University of Phoenix in a special sponsored by the for - profit behemoth.” 28

29 like credit card debt, which is often associated with consumption or some good that rapidly depreciates in value (Hamilton, 2017). However, the implication of so -called “good debt” has different meaning, once we consider race and the prevailing framework of subjecting a marginalized racial group to inferior housing and educational products, predatory finance, and labor market discrimination (Hamilton and Darity 2017). Also relevant is the intensifying context of economic precarity and income volatility in U.S. labor markets, where Americans, and blacks in particular, increasingly have less control of when and for how long they work (Lambert et al., 2013; Hardy and Ziliak, 2014; Hardy, 2016). This makes access to short -term credit, including credit card debt, an essential element in management of household budgets, particularly for vulnerable households without the financial cushion of liquid assets. Pressure to utilize credit cards to balance household budgets in the midst of expense and income volatility continues despite substantial reported disdain for their use (see evidence from a consumer attitude survey published by The Pew Charitable Trusts 2015). As stated above, it is ultimately racial differences in initial endowments of and access to financial resources that sustain and fuel the racial wealth gap. According to the Pew end to have greater access Charitable Trusts (2015), white families t to mortgages, and homeowners are able to credit Latino families. Even when black and Latino than black and secure mortgages, they experience higher rates of foreclosure and housing distress than white families, in part because they This obviously are systematicall y off ered riskier loans. Myth 2, that the racial homeownership gap is the “driver” has implications with regards to of the racial wealth gap as well. Furthermore, home equity for black American homeowners has not increased at the same t has for white homeowners largely because home values in the neighborhoods to rate as i which blacks have been systematically restricted, have been slow to recover since the 29

30 housing crisis. Consequently, they also have generated lower returns on mortgage debt. Oth er research suggests that inheritances and other intergenerational wealth transfers 11 than black families. benefit white families more often Greater financial literacy can be valuable if an individual or household has finances to nage. Financial literacy without finance is meaningless. There is no magical way to ma transform no wealth into great wealth simply by learning more about how to manage one’s monetary resources. While wealth begets wealth, typically no wealth begets no wealt h, regardless of how astute a money manager the person may be. 11 As a result of t he higher finance costs and lower appreciation rates, Dorothy Brown (2012), a professor of tax law at Emory University, urges those promoting homeownership as a mechanism to bridge the racial wealth gap to be the market penalizes integration: The higher the percentage of blacks circumspect. Brown asserts that “[p]ut simply, in the neighborhood, the less the home is worth, even when researchers control for age, social class, household structure, and geography.” 30

31 Myth 6: Entrepreneurship will close the racial wealth gap Entrepreneurship has long been praised as a route to eliminate racial wealth inequality. As , entrepren an adjunct to eurship has been identified as a path to the phantasm of Myth 3 black capitalism. For at least three decades , internet wealth gurus, black and white, have told people if they only left salaried employment and struck out on their own, they could th been borne out century robber bar ons. The problem has neither late 19 get rich like the by the evidence, nor has it proven to be accurate advice under current circumstances. salutary, it Not all of the effects of successful large-scale entrepreneurship are can also destabilize communities: a term entrepreneurs these The most successful entrepreneurship is disruptive — days have donned as a magic mantle: “We have a disruptive business model, a on disruptive technology, and will disrupt the market” goes the startup pitch. Amaz 31

32 has disrupted book stores and other retail chains, Zipcar disrupted car rentals, Netflix is disrupting cinemas and cable companies, Airbnb disrupts hotels, and Bitcoin may disrupt the payment industry. But the meaning of “disruptive” was never meant to be pure and all -positive: its synonyms include “troublemaking,” “disorderly,” “disturbing,” “unsettling,” and “upsetting” (Isenberg 2014). Not only does successful large -scale entrepreneurship have a disruptive effect on existing businesses, it can accent uate the wealth divide between rich and poor. It often creates some of the worst social outcomes by grossly exacerbating rather than closing the racial wealth gap: The problem is entrepreneurship, when successful, always leads to local income t least in the short and medium run, and ironically, the more successful inequality, a the entrepreneurship, the more extreme the inequality. ... But on the negative side, the newly wealthy can now afford to bypass, for example, the local public school system or health ca re services if they don’t think they are good enough, draining public institutions’ vital resources. The wealth can also dramatically drive up the proximal cost of living: Properties will get reassessed, driving taxes up when neighbors pay millions for the house next door. The cost of some local services may also increase sharply, from cars to high -end restaurants to babysitting (Isenberg 2014). In addition, Levine and Rubenstein (2017) have shown that the significant edge in e males originates in their serendipitous birth into more entrepreneurship held by whit affluent families. No better example is available than billionaire Mark Zuckerberg, owner of -made, in fact according to businessinsider.com Facebook, who, while often touted as self purportedly received initial working capital from his professional father in 2004, in exchange for shares in Facebook that are now worth millions. Another good example is billiona ire Jeff Bezos , who started Amazon in 1994 with a $300, 000 loan from his parents (“Who Is Jeff Bezos?” 2013). an In general, the net effect of entrepreneurship is to recycle an expanding – often circuit of wealth among members of an upper class of white outrageously expanding -- 32

33 st players. In the 21 y, the number of persons coming from poverty, whether white or centur -rich via entrepreneurship are infinitesimally small. black, to enter the ranks of the super When we compile the data even those members of marginalized communities who manage to enter into e ntrepreneurship largely fail. This is due to a number of factors ranging from under -capitalization, limited market access, or outright theft or destruction. Blacks are far less likely to own a business, and for blacks that do own a business they have far l ess equity. Black business literally has been annihilated nearly as often as it has , the razing of one of the sprouted in America, dating back to the Tulsa Massacre of 1921 historically prosperous black communities dubbed at the time as a “Black Wall nation’s Street” (Fain 2017). In reality the data paints a daunting picture for diversity in entrepreneurship. According to the U.S. Census Bureau’s Survey of Business Owners (SBO), which is conducted every five years , over 90 p ercent of L atino and black firms ’ do not have even one employee other than the owner s. The proportion of owner only firms reaches a high of close to 98 percent for the sub-group of black female led businesses. When blacks do own a business the return to that business is lower than that of whites and falls well short of closing the racial wealth gap. In a report prepared for the Cen ter for Global Policy Solutions, Algernon Austin (2016) observed: Businesses with paid employees have a much greater economic impact than those without employees. The annual sales of businesses without employees are on average only a fraction of the sales of businesses with employees. While there are some firms without employees that are very successful financially, the majority are not. ... 67.3 percent of firms without employees had annual sales of less than $25,000. Any profits these firms made —if they did make profits —would only be a fraction of the total sales. This means that many firms without employees do not make enough to ke ep their owners and their owners’ families out of poverty if the firm is the owner’s sole source of income. On the other hand, a majority (57.9 percent) of businesses with paid employees had annual sales of more than $249,999. It is more likely that these firms are earning profits for their owners. 33

34 Austin (2016) went further, adding: -color firms were proportional to their distribution If the number of people-of in the labor force, people of color would own 1.1 million more businesses with employees. These firms would add about 9 million jobs and about $300 billion in workers’ income to the U.S. economy.” In short, the composition of entrepreneurship type would need to be dramatically different in terms of ethnic and class makeup to have a net positive effect on the racial wealth gap. the question of the Yet, even if blacks had the same business ownership rate as whites, scale and profitability of the business still would be an issue. If we narrowed the black - difference in business ownership, it would not necessarily result in the reduction of white black -white difference in the value of businesses. Whites, for example, are more likely than any other racial or ethnic group to be business owners. Twelve percent of whites are entrepreneurs compared of Asians, 8 percent of Latinos, and only 6 percent of Blacks. to 11 percent and 6 percent of Latinos ... For the 8 Blacks that respectively engage in and business ownership, the median net worth of Black ($91,500) and Hispanic ($81,391) business owners is each over 10 times higher than the median net worth (inclusive of home equity) of Blacks and Hispanics generally ($91,500 vs. $7,113 and $81,391 vs. $8,113 respectively). While entrepreneurship clearly provides increased wealth outcomes to people of color, a tremendou s wealth gap remains. The median net worth of Black and Latino households is still less than a third of the median overall net worth of White business owners ($287,166) (Tippett, et . al 2014) Data from the Small indicates that jus t over 19 million businesses, Business Administration or 70.9 of all U.S. businesses , are white owned. Blacks own about 2. 6 million percent businesses or 9.5 percent of all U.S. businesses, and Latinos own 3.3 million businesses or 12.2 of all American businesses. But the sales, and employment numbers tell a percent more depressing story . The 19 million white owned businesses have 88 percent of the overall sales, and control 86.5 percent of U.S. employment , while black businesses have a d 1.7 of the nation’s employees. percent mere 1.3 percent of total American sales, an 34

35 Latino 4 percent of U.S. sales and 4.2 percent of U.S. employment have businesses (Mcmanus 2016). No amount of tutorials or online courses from wealth experts can change the reality of the racialized advantages an d disadvantages that undergird entrepreneurship in America. In a 2010 study the Minority Business Development Agency found that white business owners started their businesses with an average of $106,702 in capital, compared to $35,205 for African -America n-owned businesses. We must keep in mind the primary reason for business failure is low capitalization at the start, and blacks begin the entrepreneurship game with low capital finance, reinforcing the theme that wealth begets . wealth ) no Even since President Nixon’s emphasis on “ Black Capitalism ,” (see Myth 3 administration has offered the transformative policy changes to create any significant support for black business development . We did not see it under the Obama are not seeing it under the Trump administration . Administration and we entrepreneurs During the 2016 Global Entrepreneurship Summit President Obama called "entrepreneurship remains the engine of growth" . a form of social glue and also stated that All while under President Obama, Small Business Administration loans dropped reported: The Louisiana Weekly for black Americans. substantially Black borrowers received 1.7 percent of the $23.09 billion in total SBA loans. The percentage is down sharply from 8.2 percent of overall SBA loan volume ns, black in fiscal 2008 [Under President Bush] . By number of loa -owned small businesses got 2.3 percent of the federal agency’s roughly 54,000 loans last year, down from 11 percent in 2008. (Curry 2014). 35

36 Robust black entrepreneurship also will require an environment where the racial wealth disparity already h as been confronted and altered directly. Greater black wealth , and hence financial capital, is the vital prerequisite for greater black entrepreneurship, rather than vice versa ’s overemphasis . 36

37 Myth 7: Emulating successful minorities wil l close the racial wealth gap In a recent book by legal scholars Amy Chua and Jed Rubenfeld (2013), a longtime trope re-emerged. According to Chua and Rubenfeld, the reason why certain ethnic, or “cultural groups” as they call them, achieve relative levels of economic success compared to ly high others (read: blacks, most Latino s, and Native Americans), is a result of superior group traits not possessed by the others. Using circumstantial and other evidence, including comparative household income and occupational status across particular social groups, the argument rehashes a now half- century old “culture of poverty” theory (Lewis, 1966). 37

38 This theory, as applied, holds that “self -sabotaging” group to individual -level values learned ons of concentrated poverty are recycled intergenerationally and under the conditi 12 constitute a barrier toward favorable economic outcomes. This can include behavioral impediments to being able to acquire and hold down a job, an indifference toward educational attainment, saving or general asset building practices , and other alleged negative group -level attributes, including a predisposition toward pathological family structures (see Murray, 1986). In the past, much of what is commonly referred to as the “model minority” n arrative has relied on the perceived bootstrap success of American Jews and other southern European immigrant groups, and, more recently, select Asian, Latino, Caribbean and African immigrant communities. Notwithstanding the diverse, complex social and eco nomic make- up of these groups in the first place, the immigrant success trope has yielded the 13 With blame centered on problematic inference that “if they can do it, why can’t you?” ed right” black and Latino communities, the contemporary claim that “if they only act perpetuates the myth that by emulating successful minorities, subaltern groups can close the racial wealth gap by their own unilateral efforts. Take the Cuban -American and Korean communities for example, which, if we examine the groups using in come alone, appear to provide prima facie evidence for the immigrant (Darity 1989) success trope. But the “lateral mobility” hypothesis argues that the relative social position held by the majority of adult immigrants in their country of origin will be . In short, so -called “successful” immigrant groups actually reg ained by their children retrieve a comparable class position as the one they held in their country of origin. Their 12 Steinberg (2011) and Darity (2011) offer comp rehensive critiques of the culture as destiny hypothesis. 13 See Steinberg (1981) and Pierre (2004) for critical discussions of this trope. 38

39 thei r financial -migration capital, whether embodied in their education and training or pre resources, is critical in determining their outcomes in the United States. Furthermore, this does not take into direct account other structural factors and national policies, including the selectivity of documented immigration (which favors more “skilled” immigrant groups) and any official support provided for particular immigrant groups by the state. For example, while the favorable class position and predominantly white phenotype of the initial 1960s arrivals from Cuba has been well -documen ted, there is less attention paid to the role of the Cuban Refugee Program. By 1994 the program had invested more than $1 billion in successful integration of the community through resettlement resources, Warren housing and educational training and other programs (see Masud -Piloto,1995; and and Twine, 1997). For Koreans, who have been hailed as a successful immigrant group due to their savvy entrepreneurship, what generally is ignored is the fact that the immigrant community that has come to the United St ates is a highly self -selected sample (educated, urban, middle class). They have been able to provide opportunities for themselves by bringing substantial and Bates 1997). start-up capital with them (see Yoon 1996; Perversely , discrimination against blac ks by default assisted Korean entrepreneurs in many US cities where they share urban spaces (see Bogan and Darity, 2009; also see Min 1988). In addition, as Tamara Nopper (2010) notes, institutions played a role in their perceived “group-based” success. Wh ile their own exposure to discrimination in America’s -concentration in self labor markets has played a role in leading to Korean over - employment, the role of government agencies in actively supporting Korean business development is disregarded far too often. 39

40 If we look at groups based upon their wealth position instead of their income, it is even more apparent that the “if they only acted right” narrative falls flat on its face. For instance, let us apply the embedded belief in the immigrant success trope that the wealth gap is due largely to blacks “not valuing” education. In two recent reports, Bootstraps Are for Black Kids (Nam et al. 2015) and Umbrellas Don't Make it Rain (Hamilton et al. 2015), the authors consistently found , as noted above under Myth 1 , that black families hold a longstanding commitment toward their children’s education. Black families attempt to exercise that commitment despite having considerably less income and wealth to draw upon than whites. Data from the 2013 wave of the Pan el Study of Income Dynamics indicates that the median income of black parents who provided some financial support for their children’s did not . The higher education was $44,640, while it was $63,346 for white parents who discrepancy was even more pronounced for wealth. The median net worth of black parents who provided some financial support for their children’s higher education was $24,887, while it was $73,878 for white parents, again, who did not (Nam et al. 2015). Furthermore, the typical U.S. white ho usehold with a head who held a college degree had $268,000 in wealth, compared with $70,000 for a black household with a comparably Myth educated head – slightly less than a staggering $200,000 difference (see Figure 1 in ). White households with heads wh o reported having completed some college but did not 1 finish their degrees, still possessed substantially more wealth (net worth) than the typical black household with a head who finished a college degree. Most astonishing is the fact with a head with a college degree were substantially more “wealth - that black households poor” than whites who never finished their high school diplomas (Hamilton et al. 2015). 40

41 Additional evidence that contradicts the model minority myth is drawn from regional variation in the wealth position of so-called “model” minority groups themselves. For instance, the National Asset Scorecard for Communities of Color (NASCC) project reveals that the Korean family median wealth of $496,000 ranks amongst the highest in the Washington, DC m etropolitan area, while their median wealth of $23,400 in the Los Angeles metropolitan area where they make up a much larger share of the population, ranks amongst the lowest of all ethnic groups in the study (De La Cruz -Viesca, et al. 2016; Kijakazi, et al. 2016). Suc h large regional intra -ethnic variation in wealth is not indicative of a consistent ethnically based cultural predisposition toward economic success. In short, the argument that intergroup disparities in wealth are borne out of group based cultural/behavi oral deficiencies is misleading and misdirected. Instead, we should focus on the long exposure of low wealth racial/ethnic groups to theft of wealth and blockades on To suggest that blacks, and Native Americans racialized Latinos wealth accumulation. should emulate other supposedly successful “minority” groups perpetuates , the false narrative that their asset poverty is due to a lack of hard work, effort, or ambition. 41

42 Myth 8: Improved “soft skills” and “personal responsibility” al wealth gap will close the raci More than Just Race, s ociologist William Julius Wilson (2009) argues that both structural In and cultural factors interact to perpetuate persistent racial economic inequality in the United States. He invokes an example from larger changes in the economy to illustrate his thesis. Proposing that the structural shift from manufacturing to service sector jobs in the U.S. economy had a particularly devastating effect in isolating black male workers, he then (2009, p.76) says their isolation has occurred because these jobs require a set of “soft skills” that black men frequently do not possess. bility, Def ined loosely as “employa ” “soft skills” ostensibly are necessary to produce job opportunities and occupational mobility. These skills can ran ge from promptness to 42

43 14 interpersonal and collaborative skills that employers might seek in potential candidates. -held At the level of individual behaviors, this can include the negative effects of the widely belief that blacks have a tendency to show up late to work, to hold an oppositional -attitude toward the work environment, to be rude to customers, and/or to be uncooperative and 15 -workers. Although Wilson’s focus is on labor markets unfriendly with co , the cultural deficiency trope is often used to explai n racial disparities more broadly . From this perspective, if blacks simply learn and apply those so -called “soft skills,” their will im , thereby, closing the wealth labor market experiences, earnings and income prove The implication is if blacks just acquire the requisite “soft skills ,” then, gap. presumably, employment, income, and wealth gaps will close as well . There are two major reasons why this belief is incorrect. First, if it is true that blacks (and racialized L atino communities, for that matter) need to adjust their individual behavior -- -situated “soft skills” to invite the conditions that hence learn and apply these motivation what explains the crowding of blacks and Latino at the lower end close the wealth gap -- of the labor market (those very “service sector” jobs!), while their absence from the better paying, upper echelons remains apparen t, even when they have appropriate educational credentials? Hamilton et al. (2011) found that when taking educational attainment into account, black men are overrepresented in low wage jobs that require interpersonal contact and -paying jobs that do not require these “soft skills.” Their underrepresented in higher 14 For more background see Spalter -Roth and Lowenthal (2005) and Conrad (1999). 15 In an on- line publication by the Am erican Sociological Association, Spalter -Roth and Lowenthal (2005), Ibid., define “soft skills” as “an array of employee characteristics that are subjectively evaluated by employers” hence how they “look and dress,” whether they are perceived to hold “moti vation, cheerfulness, and interpersonal skills,” and maintain an “ability to represent the organization.” 43

44 dence against absence from the construction industry affords powerful evi . Black Myth 8 already are largely located in service sector jobs that require, or depend, men on “soft- skills .” It is not “soft skills” requirements that distinguish black and white male sites of employmen t. It is relatively lower pay in the jobs held by the former and relatively higher pay in jobs held by the latter (Aja et al. 2013). Second, it is important to stress that, contrary to conventional wisdom, earnings and other types of income are not key determinants of wealth. Deliberate acts of personal savings out of earnings and other types of income do not actually play the fabled role assigned to them in the process of wealth accumulation. The linchpin for wealth accumulation is the transfer of resources across generations, maintaining higher wealth positions among Earnings and other types of parents and grandparents for their children and grandchildren. income are derivative from opportunities created by the wealth position of one’s parents (and grandparents). In sum, much of the “soft e that individuals skills” trope repeats the conventional trop should simply “act right,” “pull up their pants” and hold and apply the same “personal responsibility” centered values that supposedly successful immigrant groups possess (see Myth 7 above). the discussion of While some ind eat the odds,” the larger structural ividuals can indeed “get ahead or b conditions, well -document wage and unemployment gaps, demonstrate that even when ” it does not close the racial wealth gap. black people “do the right thing, More personal responsibility or motivation on the part of blacks is not what is needed. Rather, what is needed is an active program of wealth redistribution and the removal of ng the wealth divide. discriminatory obstacles that stand in the way of bridgi structural and 44

45 Myth 9: The growing numbers of black celebrities prove the racial wealth gap is closing Official White House Photo by Pete Souza Going as far back as the early days of Motown, black celebrity has played a prominent role merican consciousness. But starting during the early 1980s, the image of the in the A position of overall black wealth came to be projected through the lives of a small set of Unfortunately, from “The Cosby Show” to Michael Jackson’s famous black Americans. -platinum albums to Will Smith’s meteoric rise to the present day mega couple Jay multi -Z , black celebrity has masked black poverty , rather than contributed to closing and Beyoncé the racial wealth gap. 45

46 No s, –not Asians, not Latinos, and not whites – have been ethnic or racial group other framed so dramatically through celebrity status as black Americans. Despite recently 2016 Federal Reserve data showing that the median black family has a net worth released 7,600, (Jan while the median white family has a net worth closer to $1 70,000 of about $1 2017), black life has come to be seen through th e lens of radically exceptional cases, rather than typical ones. The ascendency of blacks to the most elite positions of society has been put forth to make have the case for a grand racial progress in America . These cases of black exceptionalism e examples of what individual or familial acts of perseverance been held out as prima faci and hard work can (Hamilton 2017). achieve (2015), n o singular show played a more prominent role in this shift in According to Moore “Cosby Show”, which aired on NBC from 1984-1992. The article “Cosby view than the Show Dreams African American Financial Realities” made the following observation about the program: Yet, despite this positive impact on the exceptional black individuals’ acceptance into white America’s psyche, it may have done the opposite for America’s ability to relate to the average black family’s struggles that resulted from a legacy of Jim Crow and slavery. For a generation of white Americans that had little contact with black America in daily life, the apathy Thursday nights with the Huxtables created toward the experience of black struggle has been understated. The idea that if Cliff Huxtable did it you can too rang loudly in expectations of black progress. (Moore 2015) Post-Cosby black progress came to be signaled by the historic rise of African American media billionaire Oprah Winfrey, leaving little space for empathy for everyday black families in America’s urban centers. struggling under the pressure s of economic deprivation 46

47 The celebrity -esque image of President Obama only furthered this perception . The election of Barack Obama to the highest office was trumpeted by many as the arrival of a post- (Hamilton , 2010 ). For example, after his historic racial America 2008 and Darity [All] of our excuses have been removed. presidential election, actor Will Smith proclaimed “ There’s no White man trying to keep you down, because if he were trying to keep you would have [also tried to keep] Obama down” (John -Hall 2009; Hamilton and down he Darity, 2010). The pr esident himself was complicit in using his ascendancy in this regard. Playing on tropes about black American life, President Obam a reportedly told Israel’s Prime standard “I’m the African -American son of a single mother, and I live here, in this house. I Minister The implication of this type of rhetoric is a shift in American live in the White House.” lity for the low sentiment away from a public responsibi wealth of the general body of black Americans , to a view of famous aberrations as a false lens suggesting that all black Americans full access to the American dream. finally had arrived at Consider the recently released GOP Tax Reform pr oposal. Rather than use the abundance of wealthy whites as an example to illustrate American wealth inequality, Republicans made gratuitous use of NBA player Stephen Curry, an extreme black outlier, as an example of the American rich: The Tax Cuts and Job s Act includes specific safeguards to prevent tax avoidance and help ensure taxpayers of all income levels play by the rules under this new fairer, simpler tax system. Our legislation will ensure this much-needed tax relief goes to the local job creators i t’s designed to help by distinguishing between the individual wage income of NBA All-Star Stephen -through business income of Steve’s Bike Shop Curry and the pass ( Payne 2017). 47

48 Black celebrity has largely been placed at the vanguard of an imagined black achievement of affluence. While many of the wealthiest black Americans derive their fortunes from some form of entertainment, they frequently are portrayed as major corporate owners, without ever making clear what their stake in percentage or control is in a given company. Some of the celebrities actually have low stakes in their investment companies . As an example, according to the Bloomberg article “Diageo Turns to Dutch, Diddy Part nerships for Vodka Expansion,” n held out as an owner of Ciroq, but in Sean Combs has bee actuality he is a profit participant whose main hand is in marketing, not in producing or financing the product. Earvin “Magic” Johnson a lso admitted on “HBO Real Sports” t hat he has only invested rs, $50 million dollars into the $ 2 billion dollar purchase of the MLB’s Los Angeles Dodge which according to Yahoo Sports works out to 2.3 percent of the team aka . Sean Carter ( -Z ) with the NBA’s Brooklyn Nets, was reported to be part of 100 owners of the team Jay at one point by Vox Media , leading to the creation of what some call the “Jay -Z rule” being adopted by the NBA b oard of governors, whereby a team can have no more than 25 The owners, and each must invest enough to own at least 1 percent of the team . necessity of adopting policies to eliminate the racial wealth gap becomes harder to are held out in media as evidence of establish, when a handful of African Americans significant black corporate power. When in fact, whatever power they possess is narrowly held and greatly circumscribed. “Decadent Veil: Black America’s According to a Huffington Post article (Moore 2014), framed a picture of a black celebrity filled social veil that replaces a push Wealth Illusion” , for greater policy changes that address racial wealth disparities. Transformative social policies readily are pushed aside and replaced by what seems easier to attain: individual 48

49 celebrity status that is presented as a normal and accessible means of access to the “American Dream”, rather than a fantasy. st Century, Thomas Piketty (p.380) observed: In his widely acclaimed book Capital In the 21 The vast majority (60 percent to 70 percent, depending on what definitions one chooses) of the top 0.1 percent of the income hie rarchy in 2000– 2010 consists of top managers. By comparison, athletes, actors, and artists of all kinds make up less than 5 percent of this group. In this sense, the new US inequality has much more to do with the advent of “super -managers” than with that of ‘superstars.’... The financial professions (including both managers of banks and other financial institutions and traders operating on the financial markets) are about twice as common in the very high income groups as in the economy overall (roughly 20 pe rcent of the top 0.1 percent, whereas finance accounts for less than 10 percent of GDP). control industry in America is This reflects a larger truth that the wealth held by those who far greater than the amounts found in any celebrity’s personal account, whether they are black or white. Therefore, a gap in wealth will not be closed through access to film, music, or sports careers. It is more likely to be found as being passed on through inheritance. Or ch, in the tiers of positions Piketty in elite professions and wealth management for the ri -managers” who receive “super -salaries.” In America t calls “super are hese positions overwhelmingly reserved for whites. A article titled “Black Executives are Losing Ground at Some Bloomberg Business News Big Banks” note d: At JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc., the percentage of senior black executives and managers fell over the past five years, according to U.S. workforce data compiled by Bloomberg. They make up no more than 2.6 percent of top positions at the three banks, lower than across corporate America, where the percentage is slightly better and ticking up (Abelson and Holman 2017 emphasis added) . 49

50 In addition, the absolute number of black CEOs of Fortune 500 companies has dwindled from eight in 2015 to four in 2017. And black Americans make up just 2.6 percent of those holding post s within striking distance of corporate chief executive suites (Hymnowitz 2016). To push toward closing the racial wealth gap, the veil of black celebrity must be pulled back enabling all Americans to understand there is no racial meritocracy in wealth, despite what is displayed on television networks from ESPN to BET. 50

51 Myth 10: Black family disorganization is a cause of the racial wealth gap The typical American family, if there truly ever were one, is drastically changing. The number of two -parent household s has fallen , and there is no longer on e dominant type of in the U.S (Pe family w Research Center 2015). The decline in children living in two -parent families has been offset by an almost threefold increase in those living with just one —typically th e mother. parent There are substantial differences in living arrangements of children by race and ethnicity. Most white (72 percent) and Asian -American (82 percent) children still are being raised by of Latino percent children. In sharp contrast, only 31 two married parents, as are 55 51

52 percent of black children are living with two married parents, while more than half (54 percent) are being raised by a single-parent (Pew Research Center, 2015). Evidence shows that growing up in a two-parent, married home results i n significant benefits to children’s outcomes and life chances, including better physical and mental health, higher future wages and social ties, and college completion (Kearney and Levi ,n 2017). One explanation for the growing marriage gap between whites and blacks and the decline in two parent families among blacks is the shortage of marriageable black men (Darity and Myers, 1995). The supply of marriageable black men – measured as the ratio of – may help explain unmarried males in the labor force or in school to unmarried females the rate of black single mother households and their reduced marriage opportunities. Research reveals that the rise in single motherhood is possibly driven by different mechanisms for blacks and whites (Craigie, Myers Jr, and Darit y, 2017). The paucity of marriageable males in the black community may in part be due to higher rates of incarceration and early death (Hamilton, et al. 2009; McLanahan and Jencks, 2015). On the other hand, white women have more plentiful options for marri age. There is statistical evidence that the greater lack of marriageable men is responsible for the persistence of never -married motherhood among black women. (Craigie, Myers Jr, and Darity, 2017). The increasing rate of single parent households is often invoked to explain growing inequality, and the prevalence of black single motherhood is often seen as a driver of racial wealth inequities. These explanations tend to confuse consequence and cause and are largely driven by claims that if blacks change thei r behavior, they would see marked increases in wealth accumulation. This is a dangerous narrative that is steeped in racist stereotypes. 52

53 Single motherhood is a reflection of inequality , not a cause. White women still have whether or not they are raising , regardless considerably more wealth than black women . In fact, single white women with kids have the same amount of wealth as single children black women without kids. Recent research also reveals that the median single -parent white more than twice the wealth of the median black or Latino family with two parents. family has points show that economic benefits that are typically associated with marriage These data Traub et al. 2017). Having the “ideal” family type does will not close the racial wealth gap ( in wealth not enable black households to substantially reduce the racial gap A prominent explanation for the decline in marriage among blacks and its negative consequences is that the decline is a culturally drive n phenomenon. For the last half century, American social scientists and policymakers have treated the causes of poverty as largely cultural, and they focused on single mother families as perpetuating a “culture of The Negro Family: The Case for National poverty.” Since t he 1965 Moynihan report, there is a conventional discourse that alleges self -detrimental behaviors stemming Action, from legacies of discrimination and concentrations of poverty within the black community are the main cause for observed raci al differences in quality and quantity of life. Moynihan racialized and gendered poverty. In his view, the persistence of poverty was due to the disproportionate presence of black families with female heads, leading, in turn, to “tangle of pathology.” This long -standing the entrapment of black families in a notorious narrative still permeates the national discourse on poverty and economic security, and it often has been used to advance the argument that black families are insufficiently disciplined and responsible to merit better economic conditions. Explanations that focus on behavior and so -called cultural factors also miss the point that employment, retained wealth is a driving force for education, and income outcomes. Rather than simply being shaped by family structure, wealth actually shapes family 53

54 structure as well . Social demographers point to the phenomenon of assortative mating, where persons of similar social status and resources tend to join as marital partners. The share of d wealth who marry one pers ons with higher education, higher levels of income an another is on the rise. Figure 5: Median Household Net Worth of Women by Age, Family Structure, College Education and Race, 2013 Bachelor’s Degree With Bachelor’s Degree No MARRIED SINGLE SINGLE MARRIED BLACK WHITE AGE BLACK WHITE BLACK WHITE BLACK WHITE 29 $4,000 20- $13,000 $0 $2,000 $7,700 $18,700 $-11,000 $3,400 30- 39 $12,000 $33,450 $0 $0 $-20,500 $97,000 $0 $7,500 40- 49 $60,000 $22,501 $3,006 $1,000 $12,000 $195,000 $6,000 $25,000 59 $38,000 $155,000 50- $8,200 $2,000 $9,500 $117,500 $198,000 $430,000 $344,700 $89,500 60+ $12,000 $60,000 $778,000 $424,000 $11,000 $384,400 Source: Zaw , Khain g, Jhumpa Bhattachayra, Anne Price, Darrick Hamilton and William Darity, Jr. Women, Race and Wealth Samuel DuBois Cook Center for Social Equity and the Insight Center for Community Economic Development 2017. However, marriage does little to help equalize wealth among white and black women with a college degree. For example, married white women without a bachelor’s degree are in households where they have more than two and a half times the wealth of married black Racial wealth disparities widen among married women with a women with a degree. bachelor’s degree; married white women are in households that have more than five times the amount of wealth as their black counterparts (Zaw et al. 2017). White households with a single white parent have more than two times the net worth of two parent black households (Traub et al. 2017). the racial gulf in Evidently, having th e “ideal” family structure does not substantially narrow wealth for black America. 54

55 Wealth inequality and insecurity cut across family types and most of the measurable . Louis Federal inequality occurs within demographic categories. Research from the St Reserve finds the connection between family structure and wealth to be weak and inconsistent. The St. Louis Fed’s researchers conclude that “any correlation between family structure and wealth that exists in aggregate data is largely spurious .” ( Emmons and Ricketts 2017). Our nation’s underlying economic structure is supported by harmful narratives and unequal access to assets which begets unequal opportunities to preserve or increase It is wealth to be passed on to subsequent generations. time to move beyond these auses of the racial wealth gap. Otherwise we will fallacies and confront the root c whistle in the wind, and the racial wealth gap will remain unchallenged. 55

56 research is Center The Cook a The 1969, in Founded Insight Center whose mission is the initiative Development Community Economic for comparative, cross -national is a national, and consulting research, group investigation of inter - dedicated legal organization to helping disparities and the assessment of and become communities and people of new design and existing policies driving economically secure. The remain policies such to eliminate disparities. is to behind all of our work force an interdisciplinary approach, Utilizing hidden truths expose root to address the Center scholars not only address causes exclusion and of economic overarching social problem of general inequity. racial We aim to challenge social explore also but inequality, power structures so current inequitable - group with associated problems in can fully participate everyone that ethnicity, based (gender, race, the and the to freedom economy, have and disparities religious affiliation) selves to our diverse full bring their conflict. nation. 56

57 About Authors the is associate professor in the Department of Puerto Rican and Latino Studies. A lan A. Aja He has published in a range of scholarly and public outlets with focus on inter -group ability. His disparities, economic stratification, public policy, collective action and sustain recent publications include the book Miami's Forgotten Cubans: Race, Racialization and -Cuban Experience (Palgrave- McMillan, 2016) and independent and the Local Afro collaborative pieces in the Boston Review, Rolling Stone, Teen Vogue, the Nation, Dissent, the American Prospect, Latino Rebels and other publications. Before academia, Aja worked as a labor organizer in Texas, an environmental researcher in Cuba, a human rights organizer in Argentina and in a refugee hostel in London. He recently a ssisted on a forthcoming documentary by filmmaker Rudy Valdez on the effects of mandatory minimum sentencing policies on families. Caterina Chiopris Master of Arts in Analytical Political Economy is a student in the program. She is a graduate research assistant with the Samuel DuBois Cook Center on Social Equity. of Public A. (“Sandy”) Darity Jr. is the Samuel DuBois Cook Professor Policy, William Economics American Studies, and African and the Director of the Samuel and African Dubois Cook Center on Social Equity . Darity’s focuses on inequality by race, research and class, ethnicity; stratification economics; schooling the racial achievement gap. and He received the Samuel Z. Association, Award in 2012 from the National Economic Westerfield the honor. organization’s highest Hamilton is the Darrick and director of the doctoral program in public and urban policy, jointly as a professor of econ omics and appointed policy at The Milano School urban of International Affairs, Management and Urban Policy and the Department of The New Economics, School for Social Research at The New School. He is a co - associate director of the Cook Center on Social Equity, a fa culty research fellow at the Schwartz Center for Economic Policy Analysis; a fe llow at the Roosevelt Institute, and a national advisory c ommittee member of . the Robert Wood Johnson Foundation (RWJF) Policies for Action, Policy and Law Research Program Ham ilton economist, who examines the causes, is a stratification consequences remedies of and and racial inequality in economic and health outcomes, ethnic which includes an examination of the of identity, racism, colorism, and intersection socioeconomic outc omes. Antonio Moore is an attorney based in Los Angeles, he is one of the producers of the Emmy -nominated documentary "Freeway: Crack in the System." Moore has contributed pieces to the Grio, The Huffington Post, and Inequality.org on the topics mass incarceration, and wealth inequality . of race, 57

58 is a Postdoctoral Associate at the Samuel DuBois Cook Center on Social Mark V. Paul Equity at Duke University. His research focuses on inequality by race, class, ethnicity, and gender; environment economics; and stratification economics. He works on innovative policy solutions to the pervasive inequality in the U.S. and abroad, and has teamed with organizations such as The Federal Reserve, Demos, the United Nations, and the Urban Institute. Dr. Paul’s Work has appeared in places such as The Washington Post, The American Prospect, U.S. News & World Report, The Nation, and other national and regional news outlets. Anne E Price is President of the Insight Center for Community Economic Development. She previously served as Director of the Closing the Racial Wealth Gap Initiative at Insight from 2011 to 2016. Anne is an experienced researcher, advocate and trainer. She has spent 25 years in the public sector working on a wide range of issues including , hunger, welfare reform, workforce development, community development and child welfare higher education. Prior to joining the Insight Center, Anne served as Project Director for California Tomorrow’s Community College Access and Equity Initiative. Anne also spent several years at Seattle’s Human Services Department where she served as the Community Development Block Grant Administrator and Strategic Advisor to the Director. 58

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66 Pierre, Jemima “Black Immigrants in the United States and the ‘Cultural Narratives’ of Ethnicity” 11: 141-170, 2004. Identities: Global Studies in Culture and Power Piketty, Thomas Cambridge: Harvard University Press 2014. Capital in the 21at Century Rothstein, Richard The Color of Law: A Forgotten History of How Our Government Segregated America New York: Liveright 2017. Security and Exchange Commission “Facebook Form S -1 Registration Statement” February 2012 https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1. htm Shapiro, Thomas The Hidden Cost of Being African American: How Wealth Perpetuates Inequality New York: Oxford University Press 2004. Business Shontell, Allyson “Mark Zuckerberg’s Dentist Dad May Be Worth $60,000,000” http://www.businessinsider.com/mark -zucker Insider February 5, 2012 -dentist-dad- bergs is-now -worth --60000000-2012-2 Spalter -Roth, Barbara and Terri Ann Lowenthal “Race, Ethnicity and the American Labor June 2005. ASA Topics Market: What’s at Work?” http://www.asanet.org/sites/default/files/savvy/images/research/docs/pdf/RaceEthnicity_LaborMar ket.pdf Steinberg, Stephen. “Poor Reason: Culture Still Doesn’t Explain Poverty” Boston Review January 13, 2011 http://bostonreview.net/steinberg.php Steinberg, Stephen. The Ethnic Myth Boston: Beacon Press 1981. Tippett, Rebecca, Avis Jones -DeWeever, Maya Rockeymoore, Darrick Hamilton, and William Darity, Jr.. “Beyond Broke: Why Closing the Racial Wealth Gap is a Priority for National Economic Security” Report prepared by Center for Global Policy Solutions and The Research Network on Ethnic and Racial Inequality at Duke University 2014. -content/uploads/2014/04/Beyond_Broke_FINAL.pdf http://globalpolicysolutions.org/wp 66

67 Traub Meschede, and Thomas Shapiro The Asset Value of , Amy, Laura Sullivan, Tatjana Whiteness: Understanding the Racial Wealth Gap Demos and the Institute on Assets and Social Policy 2017. Warren, Jonathan, and France Winddance Twine. 1997. “White Americans, the New Minority?: Non -Blacks and the Ever -Expanding Boundaries of Whiteness” Journal of Black Studies , 28(2):200-218 The Washington Post August 5, 2013. “Who Is Jeff Bezos?” Wilson, William Julius. More than Just Race: Being Black and Poor in the Inner City New York: W.W. Norton 2009. Zaw, Khiang, Jhumpa Bhattachayra, Anne Price, Darrick Hamilton and William Darity, Jr. Samuel DuBois Cook Center for Social Equity and the Insight Women, Race and Wealth Center for Community Economic Development 2017. 67

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