Laura Shin, Forbes, March 26, 2015

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The typical black household now has just 6% of the wealth of the typical white household; the typical Latino household has just 8%, according to a recent study called The Racial Wealth Gap: Why Policy Matters, by Demos, a public policy organization promoting democracy and equality, and the Institute on Assets and Social Policy.

In absolute terms, the median white household had $111,146 in wealth holdings in 2011, compared to $7,113 for the median black household and $8,348 for the median Latino household. (All figures come from the U.S. Census Bureau Survey of Income and Program Participation.)

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Homeownership

For most U.S. families, a home usually comprises the largest portion of their assets.

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But disparities in homeownership fall along racial and ethnic lines. Seventy-three percent of whites own a home, compared to 47% of Latinos and 45% of blacks.

The median white homeowner’s house is worth $85,800 compared to $50,000 for black homeowners and $48,000 for Latino homeowners.

Much of that disparity comes from the gap in the home values in white neighborhoods versus the neighborhoods where people of color live. The roots of the gulf stem at least as far back as the 1934 National Housing Act, which redlined black neighborhoods, marking them as credit risks. Though redlining was outlawed in the ’60s, the effect persists today in the form of neighborhoods, consisting mostly of people of color, that have high poverty rates, low home values and declining infrastructure.

Discriminatory lending also exists today: Mortgages obtained by households of color tend to have higher interest rates. Even as recently as 2012, Wells Fargo admitted it had steered black and Latino households into subprime mortgages but had offered white borrowers with similar credit profiles prime mortgages.

Education

A college education is all but required to flourish in the labor market, establish financial stability and build wealth. But the gap in college attainment by whites versus blacks and Latinos has widened over the last decade. In 2011, 34% of whites completed a four-year college degree, whereas just 20% of blacks and 13% of Hispanics did.

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Labor Markets

Labor markets can provide economic security through earned income, employer-provided health coverage, paid leave and workplace retirement plans. But inequality in the labor market is responsible for 20% of the growth in the racial wealth gap in the last 25 years, and unemployment another 9%.

Disparate outcomes in the labor market can come from employment discrimination, geographic barriers to jobs and differing levels of social capital.

The typical white family earns $50,400, while the typical black family earns $32,038, and the typical Latino family, $36,840.

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Additionally, black and Latino families earn a lower return on their incomes, meaning they are less able to turn each additional dollar of income into wealth. A white family will typically see a return of $19.51 for each dollar earned, while a black family will see only $4.80 in return and Latino families $3.63.

Causes include the fact that blacks and Latinos are less likely to have jobs that include employer-sponsored health care, a retirement plan or paid time off. The net result is that families of color spend more of their savings on dealing with life’s emergencies such as out-of-pocket health care. Or, they have fewer wealth-building vehicles, such as tax-advantaged accounts, available to them.

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