By 2044, America will be a majority-minority country, meaning that whites will only make up 49.7% of the population. Current minorities like Latinos, African Americans, Native Americans and Asians will soon make up a majority of the American populace.
And yet, the racial wealth gap is at its worst ever. And it won’t improve anytime soon.
According to a new report by the Corporation for Enterprise Development (CFED), a nonprofit for low-income families and communities in the US, black and Latino families won’t match white wealth for centuries.
The report finds that over the past 30 years, the average wealth of white families grew by 84%, which is 1.2 times faster than the average rate of growth for Latinos, and three times the rate of growth for blacks. By 2044, when America becomes a majority-minority country, the wealth gap between white families and black families will double.
It will take black families around 228 years, and Latino families 84 years, the report estimates, to achieve the same average wealth white families have today.
“If we keep going down this path of racial wealth inequality growing for minority populations, we are going to have an American economy that no longer has financial security but financial insecurity in exchange for wealth and inequality,” says Dedrick Asante-Muhammad, primary author of the CFED report. “And I don’t think that’s what America wants. That’s not good for anyone—not for the people on top and definitely not for the people in the middle and bottom.”
What created this minority wealth gap in the first place?
Harry Holzer, public policy professor at Georgetown University, tells Yahoo Finance, “We know that income inequality has grown, and we know how badly the bursting of the housing bubble hurt minorities, who were more likely to have home predatory loans, and whose rates of homeownership went up the most during the bubble years. If you put those two facts together, it’s not a huge surprise. Having said that, the numbers are very very stark. The numbers kind of slap you in the face, just how big these gaps have become. It’s troubling.”
Homeownership is still the one of the biggest sources of American wealth. The report finds that 41% of black households and 45% of Hispanic households own their homes, while 71% of white households own their homes. On top of that, the report finds that blacks and Latinos built less wealth through homeownership than white homeowners did.
Even though housing is the biggest driver widening the racial wealth divide, the report cites other contributing factors: greater rates of unemployment; lower returns on income earned; lower entrepreneurship rates; and non-existent retirement savings, among others.
The average household wealth gap between white households and black or Latino households was $500,000 in 2013. Without significant change, the average gap could reach $1 million by 2044. The report predicts white household wealth would continue to rise, and top out around $1.2 million, while Latino households would only reach an average $165,000 in that time and black households only $107,000.
“We are headed towards a more and more divided country by race and economics and I think we are on track for these divisions to become deeper,” Asante-Muhammad says. “And I think that’s something troubling and it needs to be discussed.”
What might help reduce the gap? Reforming the tax code, Asante-Muhammad argues, and fixing what he calls “upside-down tax incentives.”
Along with this policy intervention, the report also suggests “an evidence-based, government-wide audit of federal policies to understand the role current policies play.” Such an audit might require the appointment of a special federal advisor whose entire role would be to focus on reducing the racial wealth divide.
Because of the current political divide in Congress, many are not exactly optimistic that change will come. “Unless the two parties say, ‘Now is the time for a really big tax reform,’ where everything is on the table, corporate rates and individual rates,” says Holzer, “otherwise it’s gonna be pretty tough.”
Minyoung Park is a reporter at Yahoo Finance.