WASHINGTON Â The wealth gap between white and black households with children in the United States nearly doubled to $47,000 between 1994 and 2007, and at the end of the period the percentage of black households that had no net worth or were living in debt was on the rise, according to a report released today.
The report released by the Insight Center for Community Economic Development also found that in 2007 about 70 percent of Latino and black households with young children were income-poor and 40 percent had no financial assets Â more than twice the respective rates for white households.
The stark and widening racial gap in wealth Â what a family owns versus what it owes Â has significant consequences for the cognitive development and health of children of color, and that has broad implications for the future of U.S. economy with the country projected to become majority non-white by mid-century, the report said.
“The vastly changing demography, where the majority of children will no longer be white, can bring new energy and creativity to our nation,” according to the report, Diverging Pathways: How Wealth Shapes Opportunity for Children, released at the Insight Center’s 2011 Color of Wealth Policy Summit in Washington. “Yet, right now, many racial and ethnic groups find themselves living in the same country but inhabiting completely different economic landscapes, both literally and figuratively.
“Enduring racial wealth gaps pose a serious threat to the nation’s long-term economic viability. Our future is dependent on the leadership steps taken today to enact policies that radically bolster the wealth of children at birth and create sustained wealth over their life course,” said the report written by Dr. Trina Shanks of the University of Michigan, a member of the Insight Center’s Experts of Color Network.
To counter current trends, the Insight Center’s Closing the Racial Wealth Gap Initiative and its Experts Network support policies that provide lifelong opportunities for all households to build assets.
“Our quality of life and ability to secure a strong common economic and social future depends upon our commitment to invest wisely in our children now,” said Meizhu Lui, director of the Closing the Racial Wealth Gap Initiative. “If we don’t act to improve the resources available to children of color making it difficult for them to ever catch up and do well in adulthood, we are choosing to squander the capabilities of the majority of Americans.”
Several findings in the report demonstrate the extreme disparities in financial resources available to families with children before the start of the Great Recession, which hit families of color particularly hard and almost certainly widened the wealth gap. According to the report:
The median wealth of white households with children grew 63 percent from $34,218 in 1994 to $55,614 in 2007 in constant dollars. During the same period, median wealth for black households fell by 6 percent from $9,506 to $8,946.
In the years leading up to the recession, the financial stability of black households was declining. The percentage of black households with zero or negative net worth rose from 35 to 39 percent from 2005 to 2007, while the rate for white households was constant at 15 percent.
In 2007, black households with children held only 4 percent of the wealth of white households.
Half of white households with young children are economically stable. They have incomes over 185 percent of the federal poverty level and multiple assets, compared to only 14 percent of black and Latino households. American Indian and Native Alaskan children live in households that are overwhelmingly low-income, though many do own assets.
Black households with children that are economically stable have assets of less value than their white counterparts. White households with children are worth $57,000 on average, compared to $38,000 for the 8 percent of black households similarly situated.
Maternal education matters but alone cannot eliminate racial wealth disparities. For every dollar of wealth owned by a white mother with a bachelor’s degree or higher in 1994 a black mother owned 64 cents. By 2007, that had fallen to 13 cents. This represents a fivefold increase in the racial wealth gap.
Household wealth is important because it allows a family to weather a lost job or a health crisis, send a child to college or leave an inheritance. Beyond the economic consequences, the report said, wealth disparities can affect a child’s cognitive development and health.
The report found that all children start out with fairly similar scores on a standard child development test but that by age 2 racial disparities emerge, with the most economically vulnerable children beginning to lag behind. Those early differences become even more pronounced by kindergarten. Earlier research found that racial disparities in educational attainment disappeared when wealth was held constant.
The report also notes that black, native Hawaiian, Pacific Islander and Filipino children tend to have higher rates of asthma as early as age 2, leading to higher health costs, hospitalization and lost school days.
“These results are important to help connect the dots between household wealth and early disparities, especially since these indicators are known to influence later education and economic outcomes,” the report said. “Because children born today represent our country’s future, the task of narrowing racial wealth gaps takes on great meaning and urgency because it is the communities of color Â with their younger median age amidst a white community that will reach retirement age in considerably large numbers Â that will bear the burden of supporting the nation’s infrastructure. Our economy will rely on their talent, labor and consumer dollars for sustainability and prosperity.”
The Insight Center for Community Economic Development is a 41-year-old national research, consulting and legal organization dedicated to helping people and communities become, and remain, economically secure.