Wealth Inequality in America

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Wealth inequality, struggle, poverty, and the lack of opportunity is an ugly and unfortunate reality for far too many black and brown people throughout America. There are a number of policies and laws that were born out of bigotry and White supremacy. These policies have made it extremely difficult for communities of color to thrive financially. In this blog post, I’m going to discuss three factors that have made it hard for people of color to build wealth. But, let’s first take a look at a few statistics.

According to the U.S. Federal Reserve, White families have a median net worth that is almost 10X higher than that of Black households. In addition to this, White households are more likely to have other assets like retirement accounts and family businesses. Assets measure wealth, and homeownership is a major asset that White people hold over Black Americans. The national average for homeownership in America is 63.7%. Only 44% of Black families in America own a home compared to 71.9% of White families. So, how did this happen?

G.I. Bill of Rights

Post-World War II, the G.I. Bill of Rights helped returning veterans with housing, education, and jobs. Between the mid 1940s through the early 1970s (1944-1971) $95 billion was spent on benefits but it was the states responsibility to administer the funds. Thousands of southern black veterans were denied their piece of the pie. Many lenders would not provide loans for housing making the dream of owning a home for Black Americans just that…a dream. To make matters worse, lenders would literally outline in red ink neighborhoods many black and Latino people lived as less desirable through a process called redlining.

Redlining Contributes to Wealth Inequality

Federal government agencies actually supported redlining. This systemic rejection of loans for creditworthy borrowers is one of many reasons the wealth gap still exists today. Imagine not being approved for a loan simply because of the color of your skin. Then imagine not being approved because some White guy with a red pen said the neighborhood, you’re in is deemed to be at risk of default! This practice, according to real estate app Redfin, has been a direct result of approximately $212,000 of potential accumulated wealth for Black and Latino families over the past 40 years.

Applicants of Color Receive Higher Interest Rates for Loans

According to the pew research center, black borrowers face the highest rejection rates at 27.4%. This is double the rejection rate compared to White and Asian borrowers. The reason being is insufficient credit history, which opens up an additional can of worms as banks are less likely to extend lines of credit to Black people.

The Freedman’s Savings Bank was the first of its kind – banking institution for Black Americans. Sadly, it failed and as a result, many Black Americans continue to struggle financially. Reversing wealth inequality will take years of strategic work. Though, equipping yourself with knowledge, reading, and sharing content like this is undoubtedly the first step.

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