Kylie Patterson, Senior Policy Manager, CFED

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Give overview of CFED and RWDI.

Present the report – there are copies for you to take home. This was featured in multiple news outlets including VOX, the New Yorker, Salon, NPR and the Wall Street Journal.

The trends for median wealth among Black, Latino and White families clearly show that we aren’t on a path to reach racial wealth equality any time soon, if at all. If we continue at similar rates, even after an infinite number of years into the future, the racial wealth gap won’t close. If we do nothing, the racial wealth divide will just keep getting worse.

The other day I met a young black woman who was born in the year 2000. I almost chocked. You see, I was born in the late great 20th century, but it pains me to consider that she can live, work and save a lifetime and still not achieve the same level as her white peers. The wait is so long that for blacks, the amount of time it will take to reach white wealth is just 17 years shy of the time African Americans spent in bondage and slavery.

This is looking at median wealth – which better depicts what the average American has as far as wealth Later slides will include averages – which includes those at the far end of the wealth spectrums.

For White households, repeating the past 30 years would mean an average wealth increase of $18,368 a year— topping out at $1.2 million. Were Latino households to repeat the past three decades, they would see their wealth increase by only $2,254 a year, for a total of about $165,000. When it comes to Black households, their wealth would only increase by $765 per year, reaching over $107,000 by 2043. By then, the racial wealth divide between White households and Black and Latino households will stand at over a million dollars

Now we are talking about median , what the average person has instead of averaging in billionaires. Black and Latino wealth will actually decrease, while white wealth will Increase by 2043.

You’ll notice as you review this slide that black and white wealth has decline and continues to decline, while white wealth has increased since 1983.

Although a number of wealth-building policies over the years have favored the wealthy over typical wage earners, the largest and most powerful of these programs flow through the U.S. tax code. These federal tax programs overwhelmingly favor building the wealth of those at the top, contributing to the extreme rise in overall wealth inequality over the past several decades.

In the past twenty years, the federal government has spent more than $8 trillion through tax programs to help families build long-term wealth by helping them save for retirement, purchase a home, start a business or access higher education.

Since 1994, the federal government’s massive wealth-building spending has more than tripled, going from a little over $200 billion48 to $660 billion in 2015. 49 Unfortunately, the result of this spending today is that the typical millionaire receives about $145,000 in public tax benefits to grow their wealth, while working families get a grand total of $174 on average.

One way to address this disparity, is to look at changing our federal tax policies right side up, instead of continuing to support the wealth building of the super wealthy.

How can states mimic or support these interventions? (Jill Winsor asked)
Oregon retirement savings plan
Tax incentives

When looking to affect the racial wealth gap, it is important to investigate its ability to achieve your aim. Meaning, will this intervention have the intended benefit, beyond my gut feelings.

People often assume that progressive polices will help address the racial wealth divide, however that is not the case.

This does not work – although it is a very progressive and popular policy proposal.

In 2013, the Median Net Worth of Young Adult Households was:
15,100 (White)
9,000 (Latino)
1,400 (Black)

With a $7,500 CSA investment, the wealth gap would persist, however the gap would narrow for latino’s by 23% and for blacks by 28%

This would close the gap for latino’s by 78% and for blacks by 84%!

The return on investment in college is much higher for whites than for blacks and Hispanics: A white family at the median sees a return of $55,869 from completing a four-year degree. A black family sees $4,846 and an Hispanic family $4,191.”

According to a Demos-Institute on Assets and Social Policy at Brandeis University report, “ The Racial Wealth Gap – Why Policy Matters” we find that when homeownership is equalized the racial wealth gap is reduced by as much as 31%!

“Using a similar model to estimate the wealth effects of homeownership on Black households, we find that the wealth returns to homeownership for Black households amount to $71,715—just 75 percent of the returns that accrue to White households. This difference of $24,533 means that for every $1 in wealth that a Black family builds as a result of homeownership, White families accrue $1.34.14 Meanwhile, the wealth returns to homeownership for Latino households amount to $62,647—just 65 percent of the returns that accrue to White households. This difference of $33,601 means that for every $1 in wealth that accrues to Latino families as a result of homeownership, White families accrue $1.54.

The Racial Wealth Divide recently released two racial wealth inequality profiles looking at New Orleans and Miami. We will release similar profiles for Baltimore and Chicago in the coming months. We find that wealth inequality looks different in each state. Still we find that wealth inequality in cities is worse than national averages, as white people in cities often have more wealth and communities of color in cities have less wealth.

Recognizing the importance of local data – we have some Oregon data to present today. It should be noted that given Oregon’s demographics, in some cases we were not able to locate racialized data due to sample size issues.

The racial wealth divide nationally and in Oregon is primarily driven by homeownership, employment and income/savings. To a lesser degree, it is also driven by education and entrepreneurship.

You need a shovel to dig a hole. Simply put, you need a job if you endeavor to acquire wealth. However, in Oregon the unemployment rate is consistently higher for black and latinos, 2 times and 1.5 times greater.

This type of persistent unemployment among within communities of color coupled with the types of jobs people of color most often attain, we find that what income is earned while employed goes toward emergency expenses. As opposed to having an employer with paid health benefits and retirement savings programs.

This data comes from our 2016 cfed scorecard and therefore the employment numbers are actually from 2015. However, looking at the most recent unemployment numbers – the rate of disparity has remained essentially constant.

It should be noted that education alone does not close the racial wealth divide (as discussed previously), that is a person of color with a BA still has far less wealth than a White person with a high school degree.

Also, students color often have more debt than white students.

Homeownership is the greatest contributor to wealth building for the average American. On average, nearly 65% of white families own their homes, compared to just 30% of black families.

Lower rates of homeownership are largely due to historical federal and private policies that prohibited families of color from securing loans to purchase homes. 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.

In fact, people of color were 2 times more likely to be sold sup-prime loans prior to the recession that whites, further exasperating the rate of foreclosure within minority communities, including Oregon’s.

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.”

These are general asset building policies CFED recommends for Oregon:

Racial audit – progress policies in and of themselves, that are not targeted to support minority communities, do not strengthen minorities
As discussed earlier- the goal for CSA’s is to reach a level of 7,500.

We know supporting homeownership and closing the gap will

Overall, Oregon has one of the highest policy ranks on our Scorecard, however, of the 69 policies identified by CFED as progressive in supporting low-income families achieve financial security, Oregon has adopted 37 of them.
One policy that CFED proposed is that the state’s EITC, or earned income tax credit be at least 15% of federal EITC.
Another is tax fairness, the state’s effective tax rate for the bottom 20% of earners is higher than the top 1% of earners.
State offer direct lending programs to first-time homebuyers.

CFED’s Racial Wealth Divide’s flagship project is building high impact nonprofits of color project in which we – assist, build, establish, improve relationships and equip organizations to have greater impact in their communities to deliver asset building services and help address the racial wealth divide.

In Miami and New Orleans we are working with a total of 10 organizations, serving the African American, Haitian, Latino and Vietnamese communities. These organizations that are both led primarily by people of color and serving people of color work in their communities to build wealth and advocate for policies and practices to close the racial wealth divide.

Give overview of CFED and RWDI.

Kylie Patterson, Senior Policy Manager, CFED – Closing the Racial Wealth Divide

NeighborhoodPartnerships

Kylie Patterson, Senior Policy Manager, CFED – Closing the Racial Wealth Divide