The U.S. has long operated without being an inclusive economy.
It’s a fact of American life that’s most apparent in data on racial wealth gaps. In 2019, the median net worth of a white family in the U.S. was about $188,200 compared to $24,100 for Black families, according to the Survey of Consumer Finances. Two broad factors help to explain the roots of the American racial wealth: discriminatory laws and compound interest.
The U.S. has a long history of discriminatory policies that have made it difficult if not impossible for Black families to build wealth, from slavery and Jim Crow laws, to redlining and the unfair execution of the GI Bill. Although the Civil Rights movement eliminated most forms of explicitly discriminatory laws, some effects of those policies still echo across the nation today.
That’s partly due to the power of compound interest. For example, a white family who was able to secure loans to start a business and buy a house in the 1950s would have likely seen their assets and savings appreciate significantly in value over time. The family’s children would have access to generational wealth. In contrast, a Black family who was, say, denied a business loan and prevented from buying a home in a desirable location would not have had the same opportunities to start building wealth.
For subsequent generations, the lack of generational wealth likely made it harder to pay for college tuition, weather economic recessions, and access the capital necessary to start businesses. Today, Black Americans are about three times less likely to receive an inheritance than white Americans, while the amounts they do inherit are significantly less, according to the Federal Reserve.
Read the full article about building wealth for Black communities at Skoll.
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