A new study says the wealth gap between white and African-American families increased more than four times between 1984-2007, and middle-income white households now own far more wealth than high-income African Americans.
The analysis was released Monday by the Institute on Assets and Social Policy (IASP) at Brandeis University.
IASP, in a research brief, also reported that many African Americans hold more debt than assets and at least 25 percent of African-American families had no assets to turn to in times of economic hardship.
The fourfold increase in the wealth gap, it said, reflects public policies, such as tax cuts on investment income and inheritances, which benefit the wealthiest and persistent discrimination in housing, credit and labor markets.
"Our study shows a broken chain of achievement. Even when African Americans do everything right -- get an education and work hard at well-paying jobs -- they cannot achieve the wealth of their white peers in the workforce, and that translates into very different life chances," said Thomas Shapiro, IASP director and co-author of the research brief.
"A U-turn is needed. Public policies have and continue to play a major role in creating and sustaining the racial wealth gap, and they must play a role in closing it," said Shapiro.
Using economic data from the same nationally representative set of families from 1984 to 2007, the IASP analysis found that the real wealth gains and losses over the time demonstrate an escalating racial gap.
Over those 23 years, it said, the racial wealth gap increased by $75,000 – from $20,000 to $95,000. Financial assets, excluding home equity, among white families grew from a median value of $22,000 to $100,000 during that period while African Americans saw very little increase in assets in real dollars and had a median wealth of $5,000 in 2007.
Summing up all assets and debt, one in 10 African Americans owed at least $3,600 in 2007, nearly doubling their debt burden in real terms since 1984, IASP said.
The growth of the racial wealth gap significantly affects the economic future of American families, it said. The current gap is so large that it would pay tuition at a four-year public university for two children, purchase or make a solid down payment on a house, or provide a nest egg to draw upon in times of job loss or crisis.
IASP said that higher income alone will not lead to increased wealth, security and economic mobility for African Americans. Consumers of color face a gauntlet of barriers -- in credit, housing and taxes -- that dramatically reduce the chances of economic mobility, it said. The general trend in lending, in which consumers of color pay more for accessing credit, increases their debt and blocks opportunities to move forward, putting them at a severe economic disadvantage.
These are concerns that must be addressed through the creation of a Consumer Financial Protection Agency, now being debated in Congress, and other policy changes, IASP said.