The Wealth Gap and Race

A couple of weeks ago Elias Isquith linked to an article from the National Journal about the wealth gap between blacks and whites. It’s important to note here that the article is talking about wealth, not income. The reason why this is important is that while a lot of claims about racism can be attributed to both, the wealth gap also has a significant relationship to cultural attitudes about the accumulation of assets. More on that in a minute but first, a quote from the article:

So what’s going on? It’s not that white families are better at saving more of the income they earn, Hamilton says—although white families are more likely to have savings accounts.

“It’s actually ownership of an asset at a key point in life—an asset that’s going to appreciate, and is going to lead to some sort of forced savings,” Hamilton says. Often, assets young people receive from family members become powerful sources of future wealth. Think of parents paying the down payment on their daughter’s condo, or grandparents creating an investment account for their grandson. Think of the kind of assets that slowly and automatically increase in value for the rest of a person’s life.

I do agree that the assistance of older generations in helping younger generations buy homes is important. My wife and I benefited from the generosity of relatives which in turn helped us purchase a nicer home, in a better neighborhood, with better schools nearby. Furthermore, several years of my college education was financed with my inheritance from my father’s estate. While I would have much rather had my father still alive, he had made it clear to me for years before he passed that the farm and the rest of his assets would be his final gift to us and in that he was correct.

What interests me though is why whites seem committed to wealth creation through the purchase of assets while minorities seem to be making other decisions. On Twitter I took a little heat for an offhand remark I made about the choice of words blacks use to describe their living situation compared to whites. In my completely anecdotal experience many blacks will ask, “Where does he stay at?” while most whites will say, “Where does he live?” This may seem a trivial variation in language but I think it is telling. The former example suggests impermanence and there is a great deal of evidence to support this difference in attitudes.

My last work group was made up of mostly lower-tier employees that all make equal pay (my company has a standard pay scale for all employees). We had 16 workers, of which 3 were black and 13 were white. Of the black employees, all of them live in apartments. Of the white employees, 12 of them own homes and one rents a townhouse (a slight step up from an apartment). Additionally, none of the black employees are married and all but one of the white employees are. We know there is also a marriage gap between whites and blacks (less so between whites and Hispanics – we can probably thank the Church for that.)

The marriage factor is huge. I am a vocal proponent of marriage not just as an important social institution but also because it makes good economic sense. My children have many, many more opportunities because my wife and I have two incomes. It creates margin in our finances and that is used both to give them tangible experiences that improve their intellects and also to build wealth that will allow us to help them in other ways in the future.

What I cannot help but wonder though is what cultural attitudes cause blacks to be less interested in home ownership, investing or passing on their wealth. The article I originally linked to indicates that even among more affluent minorities, there is less wealth accumulation that their white counterparts and there has to be cultural forces at work here. As of this writing I can only speculate. The solution? I keep going back to a marriage-friendly tax code and other governmental incentives towards savings. We know what happened when the government pushed house purchasing, but there are other forms of wealth creation with less potential for abuse by financial institutions. Education is also a component but caution must be exercised in luring everyone into college. Student loans can be crippling and I would rather see trade schools boom than campuses fill up with students borrowing against their futures.

The attainment of wealth is about as American as it gets. What we can clearly do much better though is in making this a goal of everyone and not just certain classes of people.

Mike Dwyer is a freelance writer in Louisville, KY. He writes about culture, the outdoors and whatever else strikes his fancy. His personal site can be found at www.mikedwyerwrites.com. He is also active on Facebook and Twitter. Mike is one of several Kentucky authors featured in the book This I Believe: Kentucky

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82 thoughts on “The Wealth Gap and Race

  1. I think the biggest answer to this is covered in the recent Coates piece on reparations. The simple answer is blacks at least have less wealth due to distant and recent discrimination. The Coates piece documents it pretty well but none of it is really a surprise or not fairly well known to those who have looked into it. The Community Reinvestment Act was only enacted in 1977. That attempt to stop some of the various methods of discriminating wasn’t all that long ago. Accumulating family wealth takes time for most people.

    Are there unhelpful adaptations poor people make to being poor. Yeah i would agree, but in my fairly wide experience that isn’t as much related to race as to poverty.

    This is surely a touchy subject and i hope the conversation doesn’t go straight into max heat. But without accounting for discrimination i don’t think we can even begin to answer this question.

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  2. I am going to sign on with Greg’s comments.

    As a warning talking about “culture” can be very dangerous. There are lots of dog whistles and it looks suspicious when people talk about the “culture” of urban poverty but never talk about how their might be “cultural” problems that keep rural people in poverty. I am a third generation college student. My great-grandparents were immigrants from Europe. 3/4ths of my grandparents went to college (two graduated and then got advanced degrees), my parents both had advanced degrees, I have advanced degrees, and so does my brother. I went to college with white people who bragged about how their families were in America since Colonial times or the time of the Early Republic. This was way before my family ever stepped foot in the United States. Yet these people still grew up poor/working class and were the first in their families to attend university. Is it wrong for me to wonder about what’s up with Scots-Irish culture that made this so? How could my great-grandparents (who never learned to speak English) figure out that a university education was important but the McClintocks (made up name) who settled in Kentucky when it was still a territory could not?

    There was another article I read recently about why white working class women are choosing to be single mothers and the answer turns out is that they see the guys who fathered their children as being generally economically useless and just another mouth to feed.

    An African-American women who grew up poor wrote about why expensive clothes were important to her mom. The expesive clothes helped her be treated more respectfully by various government officials and administrators including teachers and principals.

    I remember an interview interviewed an African-American woman and they asked why she spent so much money on activities and video games and other stuff for her son. Her answer was anything to keep him off the streets and out of the influence of gangs.

    It is easy for white and economically advantageous people to criticize the materialistic culture of hip hop a la Royals by Lorde. It is harder to do when you grow up poor and knowing want.

    TNC and others have also done a very good job of outlying how various laws were written to exclude African-Americans from mortgages* and redlining continues to keep African-Americans isolated. An African-American professional is likely to live in a poorer neighborhood than his or her white counterpoint even if salaries are similar or identical.

    *And the 30 year mortgage is one of the great pieces of indirect welfare.

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    • Another way in which poverty affects consumption decisions is that poverty is unpleasant and comforts like new tv sets and richer foods alleviate the grindingness of poverty. If a family is entrenched in poverty long enough over many generations, it may take some time for the family to adjust to a better paradigm when things do get better. That’s why when poor people in Indonesia get more money, they spend it on richer, but not necessarily more nutritious food or tv sets etc. Habits of the poor persist for some time even after the initial poverty (in which those habits made sense) is ameliorated.

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      • Somewhat akin to this there is common problem when working with long term homeless people. When you find decent housing they often struggle with it since they are not used several things: budgeting is different, it often feels uncomfortable to be tied down and responsible, there is anxiety that if they settle down in one place and a crisis comes they will have more to lose ending up even worse off and it is a big, even though good, change that takes time to adjust to.

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      • Yup!

        Here I will bring out my favorite quote from Orwell:

        “Would it not be better if they spent more money on wholesome things like oranges and wholemeal bread or if they even, like the writer of the letter to the New Statesman, saved on fuel and ate their carrots raw? Yes, it would, but the point is that no ordinary human being is ever going to do such a thing. The ordinary human being would sooner starve than live on brown bread and raw carrots. And the peculiar evil is this, that the less money you have, the less inclined you feel to spend it on wholesome food. A millionaire may enjoy breakfasting off orange juice and Ryvita biscuits; an unemployed man doesn’t. Here the tendency of which I spoke at the end of the last chapter comes into play. When you are unemployed, which is to say when you are underfed, harassed, bored, and miserable, you don’t want to eat dull wholesome food. You want something a little bit ‘tasty’. There is always some cheaply pleasant thing to tempt you.”-The Road To Wigan Pier.

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      • I grew up poor (rural WI poor, where my parents worked low wage jobs for years, often commuting very long ways because that was the job they could get). One thing I remember is the tendency to seek out quantity of goods of quality. Items were either second hand (read ‘old’), or they were new but of low quality, so there was a constant need to replace stuff. It’s better to have multiple crap TVs instead of one really good one. Or lots of cheap clothing, instead of a smaller supply of good stuff. The amount of stuff, and the appearance of wealth it provided, was more important than having less stuff but of higher quality. There is also the emotional kick you get when you get something new. So while the TV may fail more often, it also meant you got to go shopping for a new TV more often! WooHoo!

        Over the long term, the constant replacing of defective items eats away at the ability to save.

        I’ve said this before, but it took me YEARS to overcome those behaviors, and I still blanch at times to spending extra for something good, rather than less for something that is good enough. Luckily I married up & my wife checks that impulse for me.

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      • That might be something present overall to American consumerist culture. We tend to have more living space/houses than the average European and this causes us to have more space to fill. I’ve certainly heard many Americans say that they prefer cheaper stuff because it means they get newer stuff more often. There is also something hard about taking the hit and laying down a lot of money at once for a big-ticket item like a really well-made sofa.

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      • True, but it is even more pronounced as you go down the wealth/income scale.

        I grew up poor, and the bulk of my parents friends were poor. We all lived in relatively small, &/or very old houses, but still filled them with what is effectively junk.

        As I pulled away from that SES, and I gained friends who were from money, or had self-made wealth, the idea of spending more money on fewer items, but of higher quality became much more obvious.

        Still, you aren’t entirely wrong, as there are a lot of people who have recently climbed the SES ladder but have not lost the emotional need to acquire stuff for stuff’s sake. These are the people with large houses & garages full of crap, but little in the way of savings. I think it can take a generation or so before that attitude is lost.

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      • I definitely fall more in the quantity over quality category. Some of it may relate to how I was raised (by parents who grew up on the poor side). Some of it relates to habits I established when I was younger when I had limited disposable income. I would strategize that if I spent less on something, if and when it broke, I’d actually be able to replace it. Whereas owning something expensive was actually kind of stessful to me because I couldn’t replace it if it were lost or broken.

        I find it interesting to put “big house” in the “quantity” rather than “quality” category.

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      • A lot of the big houses, especially ‘affordable’ ones are not built with high quality. Otherwise fewer people could afford them.

        There’s always a trade-off, and if people value square footage higher than quality (which Americans, at least for the last decade, have) then they’ll go for “big and cheap” over “big and well built” because really, the first is the one they can get.

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      • I would argue that “big” is, in and of itself, a matter of quality. It’s not necessarily a quality that everybody wants, but it is a quality. The “quantity” is, I would assume, “quantity of space”… but we’re still dealing with one.

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      • I am inbetween when it comes to house/apartment sizes. As in, I look at McMansions and say “who needs that much house?” but I am also turned off by the radical minimizing side of things. I would just like a normal size colonial, rowhouse, or craftsmen.

        There are also times that I fail to exercise will power and buy something that I don’t need because I am practicing retail therapy or something like that.

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      • You’ve all heard the term “house poor”, right? Sometimes it’s because a person overpaid for a house & now the bulk of their income is going to pay for an asset that is depreciating, but it can also be because even if they paid a price they could easily afford, they failed to account for operational & upkeep costs. Not everyone thinks to check the history of utilities costs for a place before putting in an offer, or they fail to get a good home inspection.

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      • There is a difference between the occasional bit of retail therapy and an emotional need to accumulate stuff.

        It’s like the difference between a cake binge once in a while, and having cake everyday.

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      • By your own admission, you’ve never really been poor, so it might be a bit hard for you to understand the almost pathological need to signal that you are not poor by having as many of the trappings of wealth as you can manage, even if they are poor imitations of those trappings.

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      • “Sometimes it’s because a person overpaid for a house..” Let me just make a minor correction. The buyer didn’t “overpay” for the house. It was appraised, and the loan was valued correctly (assuming no financial schenanigans). That they purchased a house, and associated mortgage, that they may have difficulty servicing isn’t “overpaid”. “Bought too much house than they could reasonably afford” is more accurate.

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  3. I get that institutionalized racism is very hard to understand but things are not going to change until people who don’t understand insitutionalized racism understand it or are no longer in the majority.

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  4. Some reading:

    http://www.slate.com/articles/double_x/doublex/2014/04/white_working_class_women_should_stay_single_mothers_argue_the_authors_of.html

    From the article:

    “The economy has changed. A higher percentage of men today than 50 years ago have trouble finding steady employment, securing raises and promotions, or remaining sober and productive. Blue-collar men like Carl have lost ground while more highly educated men have gained. The unemployment rate for all men ages 20–24 is almost 13 percent, and those with only a high school education are more than twice as likely to be unemployed as those with a college degree. Moreover, many of the jobs that are available have become less reliable than they were for Carl’s dad. They don’t pay as well, last as long, or offer promotions or training. Carl has quit more than one job because he got fed up with his boss. More recently, he was laid off because construction work dried up during a particularly cold spell during the winter. After the layoff, he hung around with his friends, drinking and playing video games. Lily finally had enough when she found out that Carl had run up several hundred dollars in expenses on her credit card. Lily knows she will never be able to depend on him and, particularly now that she has a child, she doesn’t believe she can afford the risk. It is not surprising that marriage rates for men in the bottom quartile of earnings have fallen dramatically, from 86 percent in 1970 to 50 percent today.”

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  5. What greginak says. African-Americans have traditionally been excluded from accumulating assets like real estate and other forms of wealth by public policy and American do. Even if there was no law against them, businesses would refuse to do business with them. You can’t change centuries of racism with a change in policy and a few laws overnight. For all the laws that are designed to help reverse the harm caused by discrimination against African-Americans, you have plenty of policies that still do not help as James K pointed out. The war on drugs and our prison-industrial complex is the most important one. Many White-Americans are still deeply racist against African-Americans and support for the laws and policies that help African-Americans are often lukewarm at best among this group.

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    • It sure would be hard to keep making house payments when a breadwinner is disproportionately likely to be imprisoned at some point during the life of a mortgage…

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  6. I agree with the above comments. I would just add one other thing: it seems easier for black Americans to loose wealth they do accumulate. This is from the WAPO in 2010:

    While about 4.5 percent of white borrowers lost their homes to foreclosure during that period, black and Latino borrowers had 7.9 and 7.7 percent foreclosure rates, respectively. That means that blacks and Latinos were more than 70 percent more likely to lose their homes to foreclosure during that period, the study found.

    snip

    Housing experts have pointed to a variety of factors to explain the disparity, including higher unemployment rates in minority communities and traditionally fewer financial resources for black and Latino borrowers to fall back on.

    But the Center for Responsible Lending’s study found that the disparate foreclosure rates also apply to well-to-do homeowners. High-income black borrowers, for example, were 80 percent more likely to lose their homes to foreclosure than their white counterparts, while Latino borrowers were 90 percent more likely.

    Research has shown that minority borrowers were more likely to receive subprime loans during the housing boom even if they had credit scores, incomes and loan sizes similar to those of whites. Some housing experts say that minority borrowers received higher rates on subprime loans compared with similarly situated white borrowers, resulting in higher monthly payments and quicker defaults.

    source: http://www.washingtonpost.com/wp-dyn/content/article/2010/06/18/AR2010061802885.html

    Combining this with Coates piece, I’d also wonder if the investment in property reflects the neighborhoods — remember, high-income blacks tend to purchase homes in lower-income neighborhoods — so their investments might not gain as much value over time; I don’t know how to frisk that out of the numbers, however.

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  7. People who have just escaped poverty will also be much more likely to still have a large number of family and friends who are still quite poor, and often will spend their extra money helping them.

    I remember my parents having a disagreement when one of my dad’s brothers was arrested and asked for bail money. The money was significant for my family (something like $10,000), but my dad tried to scrape it together because that’s what you do for family, and he felt a particular responsibility for his brother. It took a lot of convincing on my mom’s part to get him to realize it wouldn’t be a good use of money or very helpful for my uncle.

    Given that African Americans are statistically more likely to be poorer and also to live in poorer neighborhoods, I think this way of thinking- which I would generally describe as laudable- can contribute to an inability to develop wealth.

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    • This is a key reason why saving behaviour is not rational when you are poor. Any money you do save cannot be withheld when your friends, family or neighbours come knocking as that would cause you to lose social capital (which one cannot afford to lose no matter how meagre said capital is when one is so close to insolvency), whereas merely not having money to lend is forgiven. Since you are unlikely to reap any future benefits by saving now, but have at least some present benefits to spending now, spending is often more rational when you are poor. Such habits are difficult to drop when one does move away and become rich.

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      • Also your circle of friends and family is less likely to help you out if you are being miserly and need help one day.

        This is not to say that wealthier people don’t help out their families but they might keep it to more immediate family and are able to help without destroying their wallet/savings.

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    • People in lower-income brackets often need to rely on a network of friends, families, and casual acquiantances to survive in a way that people in middle or upper income brackets do not. Its been this way forever but its especially severe in areas without good government. In NYC, you can get to work without a car because of the transit system. Most other places in the United States require a car and our transportation policy doesn’t permit the cheap alternatives to public transporation that exist in developing countries. Walking to work is usually not an option either. That means poor people need invest in a really shitty but still expensive car to get to work or rely on people they know with cars. If relying on the latter than they need to return the favor in some way.

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  8. Even to the extent that there are cultural differences, it might be revealing to explore the role of discrimination and its attendant reduction in opportunity and access, in creating and maintaining those differences.

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  9. All,

    The points made so far are 100% valid, however they seem to mostly focus on discrimination as the major cause. I am curious as to if there are any opinions on an aversion to saving and/or buying a home (traditionally the largest wealth-generator for the middle class)?

    I do think the points about helping out others are important, however is this only in times of desperate need? If family is thus inclined to help one another, why aren’t more parents helping their kids with a down-payment on a home or college costs?

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    • You want an explanation for why minorities choose not to have valuable assets that doesn’t involve discrimination, or the consequences of discrimination. Good luck with that. What part of “they don’t have any money because the wealth that was compounding in white families was stolen from black families over the course of hundreds of years” is insufficient here?

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      • I’ve heard that too but the problem is that people especially those on the lower end of the economic spectrum rely on friends and family to help with stuff while they are at work. This can be free-babysitting from grandma and grandpa because daycare is too expensive or the babysitter cancels at the last minute (my parents did this and they were professionals) or to loan a car if yours breaks down (my parents also did this). Having people move away from their support structures or need to build new support structures every 5-10 years is bad especially because I don’t see the US getting nice anytime soon with universal pre-K and other measures which will make this easier.

        Home ownership also helps prevent people from getting evicted when they are too old to work (assuming their mortgage is paid off).

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      • I’ve heard people argue that home ownership increases frictional unemployment by making people less mobile. I think the argument is at least defensible.

        That certainly seems sensible. Do you know of any research on how much the modern two-income household contributes to trouble relocating? I certainly can’t tell my wife, “Wife, we’re moving because I found a job in another state.” She has a master’s degree and works in exactly the same income tier as I do. Wherever we go, we have to find two white collar jobs with a reasonable commute radius. If I lose my job and we move so I can get another one, all we’ve managed to do is turn my job search into her job search.

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      • Generally speaking, a $700 rental unit should be bigger or in some way preferable to a home with a $700 mortgage. With two otherwise identical units, you should be able to rent for less than the mortgage would be and save the rest.

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    • What EB and Kid Charlamange said.

      If you want a different answer blacks were excluded from suburbs until fairly recently and tended to move into neighborhoods that were populated by Jews and other white ethnics as they headed to the suburbs. Brownsville in Brooklyn was a Jewish neighborhood that became a black neighborhood. The Italian parts of Harlem also switched.

      The problem with cities is that they were largely not designed for home-ownership. NYC did not get a condo law until the 1960s and it is only recently that more condo buildings are being built and only because upper-middle class white people in the 20-40 something range prefer the city over the suburbs or so it is said. Before condos, there was and still is the co-op. A co-op turns an apartment building into a kind of corporation where you essentially own stock in the building and this translates to a residence. The issue is that if someone in the building defaults on their loan, the rest of the residents are liable and need to pick up the slack. This means that everyone needs to be approved the co-op board. Co-op boards are dreaded and have a lot of requirements. There is probably a long history of co-op boards discriminating against African-Americans.

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    • On the radio this morning, one of the host complained about reading that so many “18 and 19 and 20 year olds” still lived at home, compared to even a decade ago. He’d read a recent report, indicating the post 18 crowd is increasingly living at home.

      He speculated they were lazy, coddled, spoiled, etc.

      His co-host pointed out that moving out on your own ASAP was pretty restricted to part of American culture. That others (the co-host’s father was a Greek immigrant) like her own tended to live together longer.

      And I wondered how come no one brought up the ridiculously poor job prospects of 20 and 22 year olds without a college degree. I thought “because they can’t afford to”.

      Which gets to your point: Maybe, to be blunt, they can’t afford to. People have no choice but to find money for emergencies, and doing so tends to screw their budgets for years.

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      • There is also the fact that student debt is causing a lot of people to live with parents because it is hard to afford rent and pay back student loans.

        There are a lot of cultures where intergenerational living is the norm. It seems largely to be a product of Anglo culture where people move out as soon as they turn 18 and not Anglo culture. My Australian friends lived at home for college and were fascinated by the concept of dorm rooms.

        When I was in college, I still thought of myself as living at home because it is where I returned between semesters. A lot of my friends said they moved out at 18 when what they did the same thing. Perceptions are interesting.

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      • Yeah, I’m *still* angry about student loans. I consolidated mine and my wife’s back in 2003ish — at something like 1.25%. She did graduate school in 2006, and they’re all at 6.25%.

        I can consolidate them, but the rate on the consolidation has to be exactly the same as the effective rate on the series of loans. (So if I have, say, 5 loans of 6 grand that boil down to 30 grand at 6.25%, I can consolidate into 30k for…6.25%).

        Student loans are backstopped by the government, both in enforcement and default. The 10 year t-bill rate is 2.44%. If this was 2003, I could consolidate that 30k for 2.5%. Which would be freaking space awesome as far as my budget went.

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    • Savings and building equity are things you do when the present is relatively stable and certain, at least in part to insure that the future is as well. Security is something significantly more difficult to come by if you have less access and more landmines to navigate.

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    • “I am curious as to if there are any opinions on an aversion to saving and/or buying a home (traditionally the largest wealth-generator for the middle class)?”

      As everyone more or less said, are we seeing an aversion? Or an *inability*? Even if all else is equal (and it’s not) people with less money will be less able to purchase a home than people with more money.

      Plus, something I don’t think has been mentioned is that the African American population is generally distributed between 1) major metroplexes 2) the rural South

      In (2) a lot of people are poor, African-Americans disproportionally, but housing is at the same time cheap and not a good store of value. So this is going to depress the ‘net worth’ aggregate statistics.

      In (1), as amply discussed, African Americans were formally or informally excluded from the ‘good’ neighborhoods during the early part of the price run-up. That trend has been ‘sticky’ to the present day as most demographic maps of major metroplexes illustrate.

      The two areas (that I am familiar with, there are likely others) that kinda split the difference are the DC and Atlanta metro areas, both of which have developed a sizable black suburban middle class. Yet those areas are significantly different from the ‘white’ areas when one looks at the economic stats. (Prince George’s County, Maryland median home prices lag most of the surrounding counties (and DC itself) by almost 200K or over 50%.

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  10. Posting here for the first time, but have been lurking and enjoying for a while. Since Mike Dwyer mentioned culture specifically, can I just point out that there are a few effects of Jim Crow/discrimination on culture too that should be taken into account:
    1. the connection between hard work and reward is severed for people.
    2. the idea of rule of law is dismantled because it doesn’t apply to you
    3. owning a home/putting down roots is risky because you can lose everything overnight
    4. marriage is less important in a context where men are underemployed and/or can be scraped up by the authorities for trivial reasons
    5. there is not likely to be redress available

    I am originally from Jamaica and have always felt that the unreported story in America is how well African Americans have actually done in this society – in spite of everything that has been visited on them until pretty recently.

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  11. Mike Dywer and all.

    Maybe different races have different time preferences? Maybe it’s a convention wherein the whites are raised with a long term time outlook and some minorities aren’t?

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    • I think this is heading in the right direction. As I mentioned in the OP, there are some subtle differences in language that imply impermanence among minorities. Kid Charlemagne makes a similar point above: “Owning a home/putting down roots is risky because you can lose everything overnight.” How many blacks have parents or grandparents that were pushed out of neighborhoods? A lot of southern blacks ended up in Chicago and saw this happen repeatedly. Surely that trickles down into cultural attitudes.

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      • 1) “I heard some black people use a phrase once” is a pretty weak basis for sweeping conclusions about black culture. You acknowledge that it’s anecdotal, but the onus is on you to provide actual evidence about racial attitudes towards saving, etc. The fact of differential saving rates isn’t enough, since it seems pretty likely that income is related to savings and overall black income is clearly lower than overall white income.

        2) What are “cultural attitudes?” You are describing a pretty clear relationship between a history of racial victimization and current behavior. This makes sense and matches what everyone else is saying above. What do you get by calling this ‘cultural attitudes’ vs ‘response to discrimination?’ It definitely puts the burden on the discriminated-against vs the discriminaters (-ors?)

        This whole line of thought (trying to explain racial differences without reference to discrimination) seems off to me. “What cultural attitudes account for the fact that rabbits seem to avoid places where foxes hang out?”

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      • And of course, this still goes on today. It’s hard to believe it’s worth saving when even the help you are supposed to get is diverted away from you and passed on to the more politically connected.

        From here:

        But records obtained through the Freedom of Information Act show the city spent money on buildings with luxury finishes in gentrifying areas while distressed properties in some of the city’s hardest hit neighborhoods were left to languish. In their grant proposal to the U.S. Department of Housing and Urban Development, city officials pledged to rehab 2,800 units, a combination of apartments, condos and single-family homes. Less than one-third were completed.

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    • I see the same results in populations of poor whites that have a significant probability of being jailed frequently without redress.

      There is no point in investing in the long term assets that can be quickly liquidated due to uncontrolled probabilities.

      The pursuit of life, liberty and property are only for those who can afford the justice of this nation. On whole the nation is supporting a false advertising campaign, foreign and domestic.

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    • I would urge people to stay away from the slippery slope that leads to this sort of race realism. I say this not out of any desire to be politically correct or because I fear that it may raise some ugly and inconvenient truths. Rather, I say this because it is a profoundly meaningless mode of trying to understand the world around us. It is phony empiricism and sophism.

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  12. ,

    I understand your reluctance to accept the explanations given And to a certain extent I agree with you. Social context exists, but it isn’t everything. People find ways of breaking out if it. Someone who grows up in a family that doesn’t value education can find a love of books and learning. Someone who grows up in a violent neighborhood can himself be shy and retiring. The history of racism and discrimination is a big part of the answer, but it’s not the only part.

    However, if you are going to start thinking about the other part, I suggest that you also do some thinking about these racial categories themselves. We have a constructed notion of whiteness that conveniently externalizes behavior that we tend to pathologize in other people. There is “white” and then there is “white trash.” And there is “black” and then there is “middle-class or hardworking blacks.”

    For instance, when you say that blacks are less interested in home ownership, I find that an odd contention and I am not really sure on what you are basing it.

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  13. Among the many factors to consider is the loss of steady employment in the inner cities. My wife is a public defender in Compton and sees a lot of dysfunction every day. But if you step back from the day-to-day disasters, one thing you see is that LA County used to have a tremendous amount of manufacturing, especially in tool-and-die shops supporting the aerospace industry. Compton was a solidly lower-middle to middle-class town, filled with people who had no college degree but had steady work as machinists and the like.

    All that work is gone now. But the people remain. Please excuse me for disbelieving that much of the fault with regard to the poverty and dysfunction in that community is due to the race of its occupants, except to the extent that it is an external force. (How often, for example, is it alleged that the wealth gap prevalent in rural West Virginia is due to the race of its occupants? Is rural white a race?)

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  14. I don’t know if any other African Americans have chimed in, but here’s my take. There are two things that I think supresses the African American wealth gap. One is cultural. The other is economic. While it is unpopular to say this, I do think the dearth of two parent families is a factor. That doesn’t mean it’s all our (African Americans) fault. Single parent families do make less and have less wealth than those who are married. Is racism a factor? Maybe. But there has to be some change in culture to make marriage and two parent families a viable option. That leads into the second factor and I can share this from lived experience. My husband a Norwegian/Swedish Lutheran from North Dakota. His mother’s side of the family has some substantial lands near Sioux Falls, South Dakota. The land has been split among his mother and her three other siblings. Both of Daniel’s parents are dead, so he and his brother and sister get a share of land as well. Every year, the family has a meeting about the income from the land. The wealth from the land has transferred from his mom to his dad and now to him. As long as there are tenant farmers making the land productive, he gets a portion of the profit made. Daniel also got a substantial inheritance from his Dad when he passed in 2007. On my side of the family, my parents have a nice pension from General Motors and a little bit of land in Louisiana that isn’t be used for anything. Very little wealth will transferring to me when they die.

    The reason that so many African Americans rent is because the don’t have enough money to have a downpayment, something that whites can do because some relative can give them the money.

    I think the solution to all of this is going to be a mix of liberal and conservative ideas. Yes, racism is a factor, but talking about what has been done in the past isn’t going to change things. Yes, culture is a factor, but maybe economic forces are pushing folks to make bad decisions.

    A few months ago I purchased some stock that wasn’t a 403b or IRA. Why? Because I want to try to accumulate some wealth. That said, other African Americans face bigger hurdles. We need to find out how to alleviate those barriers.

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    • The reason that so many African Americans rent is because the don’t have enough money to have a downpayment, something that whites can do because some relative can give them the money.

      I am beginning to feel ripped off. I didn’t have relatives give me a down payment for a house. I assumed, based on my experience, that my experience is common.

      Who out there had their parents (or other relative) give them the money for a down payment?

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      • My wife, for one. In fact, it’s so common I believe banks — theoretically — have rules regarding it, so that a one-time gift doesn’t distort the bank’s picture of someone’s income and cash-flow. (Rules ignored, of course, in the mortgage bubble).

        I know that when my wife got her house, since it was under the first-time buyer program (FHA maybe?) that the gift had to be documented thoroughly for exactly that reason.

        There’s also the more subtle stuff — I pay a lot of my kid’s bills. He’s about to head to college, and I will continue to do so. While he won’t get money from me to make a down payment on a house, he’ll get several years of direct and indirect financial support simply by virtue of the fact that I can afford to pay for his health care, car insurance, phone bill, and a few other things. (Contingent on his grades, of course).

        It’s not a down payment on his house, but it IS a large subsidy that’ll put him on a firmer financial footing.

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      • Jaybird,

        My in-laws helped in this department. They said they would rather see us spend the money now than get it when they were gone. We would have bought a house either way (we bought our first house without their help) but the money they gave us helped us buy a nicer house and more importantly a REALLY nice neighborhood.

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      • In NYC, landlords want you to have an annual income at least 40x the rent. Most recent college grads don’t reach that bar, so it is common practice to have a parent act as guarantor. That is a perfect example of how two people with the exact same level of education and income face a different set of choices. If you don’t have parents, or other relations, who make enough to be your guarantor, your choices of where to live are constrained.

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      • My parents helped us tremendously – not just with a generous gift directly toward the down payment on our house, but with all kinds of support leading up to the point of being able to buy a house – a university education, emergency brokeness insurance that let me risk shorter-term but higher-paying jobs, etc.

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      • I guess I shouldn’t have used the downpayment as a an answer. There are many reasons as to why African Americans buy homes at a lower rate, but I think the downpayment is one way that shuts African Americans out. I did some checking and came accross the HUD website. These are some of the factors:

        http://archives.hud.gov/reports/barriers.cfm

        As you can see downpayment and closing costs are a problem. Yes, there are white people who don’t have downpayments. But what I am talking about is the fact that a number of African Americans just don’t have 10K at hand to put a downpayment on house. Now that could be alleviated in recent years with loans that required no downpayment. However, because there is more restriction on loans, you have to wonder that these kind of loans are hard to use now. They may also not know there are programs by HUD that might help.

        I guess what I’m getting at that there are barriers for African Americans to buying a home that whites don’t often face. African Americans don’t have access cash in ways that white people do.

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    • I can’t help but suspect that the fact 1/3 of black men in the US are imprisoned at some point in their lives is a pretty significant factor.

      When we signed our mortgage, a contract that allows a bank to confiscate the bulk of my family’s capital resources should I become unable to earn an income, I didn’t put a whole lot of consideration into my imprisonment being the cause of such a confiscation. It is sobering to think that that for a lot of people, the odds of just that one cause of confiscation would be on the order of 25%.

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  15. We know there is also a marriage gap between whites and blacks (…) The solution? I keep going back to a marriage-friendly tax code and other governmental incentives towards savings

    Problem: Black people have considerably less wealth than white people.
    Observed: White people disproportionately have the following behaviours associated with wealth accumulation.
    Proposed solution: A tax code making the wealth accumulation behaviours favoured by white people even more effective. That’ll be sure to help black people.

    That’s a fairly cynical take, I realize, but I think it points to a real risk: that a tax code making marriage even more economically desirable would simply cause wealth to further accrue to already wealthy white people. Or at least, to the extent that it helps black people accumulate wealth, it will be by imposing aspects of white culture on black people, rather than by meeting them where they’re at.

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    • “…a tax code making marriage even more economically desirable would simply cause wealth to further accrue to already wealthy white people.”

      That’s not a problem unless this is a zero sum game. If blacks averaged $60K in savings and whites averaged $70K that article probably wouldn’t have been written. When the numbers are something more like $10K and $200? That’s a problem.

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    • “Or at least, to the extent that it helps black people accumulate wealth, it will be by imposing aspects of white culture on black people, rather than by meeting them where they’re at.”

      It’s interesting that when you think of marriage and child-rearing and savings, you think “white people culture”, as though it’s an act of shocking racism to expect fidelity or fiscal responsibility from black people.

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      • That’s a very fair point to raise. I don’t think I’m doing that, but I may be wrong. I’ll think more about that. I didn’t bring in child rearing, savings, or fidelity though – that was definitely you.

        Insofar as there is a real “marriage gap” and it arises from free choice, then marriage is apparently “white people culture”, whatever we want to make of that. If the gap is not from free choice, then there are apparently barriers to marriage that would need addressing, even if marriage didn’t produce wealth advantages.

        If, odd as it may seem, marriage is “white people culture”, and you want to help black people to have wealth, then is it more useful to encourage them to adopt white culture, or is it more useful to examine why the ability to accrue wealth is so tied to white people culture in North American society, and decouple the two where it makes sense?

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      • Or maybe getting married and saving money are things that would make *any* society successful and wealth-accumulating; and while there are historical reasons why American blacks have not done these things, those reasons are not due to some mythical concept of Black Culture as distinct from White Culture.

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      • You may be entirely right.

        One thing I am sure of: any benefit to the wealth of black Americans produced by tax incentives for marriage would be a rounding error on a pimple on the little toe of the benefits of not putting so horribly many black men in prison.

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