06 March 2013

What Explains The Racial Wealth Gap?

White families build wealth faster than black households, a phenomenon economists call the “racial wealth gap.” What explains this growing divide?
The biggest drivers, new research shows, are home ownership and income levels. Tracking 1,700 working-age households from 1984 to 2009, researchers at Brandeis University’s Institute on Assets and Social Policy found that, among households whose wealth grew over the period, the number of years owning a home accounted for nearly 30% of the difference in the relative growth in wealth between white and black families.
Family income accounted for another 20% of the widening gulf in wealth. Other factors include college education, inheritances and unemployment. All told, these five factors accounted for 65% of the increasing wealth gap, researchers said.

The explanations proposed above are simple misdirects, as they merely beg the question of why black households have lower home ownership levels and income levels, etc.  Really, the problem with the “explanation” is that it is actually a description.  Saying that blacks are less wealthy because their home ownership rate is lower is simply the post hoc fallacy.  Sure, the assertion is tautologically true, but the assertion is ultimately circular because the lower home ownership rate is the definition of being less wealthy.  The “explanation” merely begs the question of why the black home ownership rate is lower than that of whites.  Answering this question gets us to the real heart of the issue.

What’s astounding about the question and the attempt made at answering it is that it basically ignores race as an explanation.  If you’re astute enough to discern between races and then ask whether there is a difference in wealth levels by race, then surely it has to occur to you that if a) race can stand as marker for differing wealth levels, then b) wealth can also stand as a marker for the behaviors, abilities, drives, and accomplishments that affect wealth levels.  Thus, the one who poses the question of what affects the variance in wealth levels across races is stuck in the ludicrous position of ignoring the most obvious factor: race.

My point is not that race means everything, and that racial differences account for every last variance between wealth levels.  My point is simply that if you’re going to measure average wealth levels by race, then surely you would have to think that race plays some sort of role in explaining the wealth gap.