Racism's Impact on Black Wealth, Income, and Healthcare

Introduction: Racism and the African American Community

The last few years have highlighted many of the damaging and long-standing policies that have plagued American society for generations. Prevailing wisdom throughout the country had proclaimed that issues such as racism, gender equality, and equal pay were at or near resolution. Some pundits argue that racism does not exist and is instead a vestige of antiquated thinking (Petree, 2020). Still others persist in believing that racism is a tool used to distract the general population from more pressing issues facing society (Gerald, 2019). Unfortunately, the facts tell a different story as it relates to racism and its impact on the future of the African American community.

The first — and arguably most important — element concerns the ownership and control of assets. Minorities in general have been significant laggards when it comes to asset ownership in America. Outside of the home, African Americans are less likely to own stocks, bonds, and other forms of income-producing assets. Incomes within the community also continue to lag those of comparable peers. Finally, criminal justice policies have only increased incarceration rates and broken up families, further contributing to the difficulties faced by the African American community. Although the African American community must accept some accountability, the racist and often inhumane policies born of systemic racism have substantially shaped its current condition.

Asset Ownership and the Racial Wealth Gap

The system of capitalism is predicated on owning, controlling, and influencing assets. Assets are items expected to provide future economic benefits to their holder over a specified period. These can include stocks, bonds, mutual funds, real estate, farms, timberland, and more. To prosper and ultimately effect change in society, individuals must own or influence assets. African Americans have historically not been large owners of American businesses and enterprises. As of 2019, only 33% of African Americans owned stock — a figure nearly half that of white households, which stands at 61% (Choe, 2020). This disparity is particularly troubling because stocks represent ownership claims on a company's earnings.

Stocks are equity investments in a business. As such, equity investors are entitled to a portion of a company's profits. Management typically distributes these profits in the form of dividends issued quarterly, or through share repurchases that enhance the ownership stake of existing shareholders. Share ownership therefore provides future economic benefits to those who hold it. Unfortunately, only 33% of African Americans are participating in this wealth-creation mechanism, while nearly 60% of white America is. This imbalance will widen over time: as more white Americans own income-producing assets, their personal income, wealth, and economic influence grow at a much faster rate. Over time, more and more of these assets will be controlled by the white community, and companies will increasingly reflect the values and priorities of their predominant shareholders.

This is not inherently negative — shareholders who value environmental responsibility, for example, have pushed for eco-conscious policies during shareholder meetings and conference calls. Many shareholders have also advocated for African American causes, including workplace diversity, improved police training, and support for historically Black colleges and universities. Many stood behind the African American community during the George Floyd protests across America. Although these initiatives reflect genuine corporate social responsibility, the African American community should be spearheading them as a strong ownership bloc within corporations. Ownership ensures that certain policies remain at the forefront of executive decision-making and gives African Americans the ability to vote on issues they deem important. As it stands, the African American community is relying on others to advocate on its behalf. What should occur is the exact opposite: the African American community should pursue business ownership and leverage its own economic power to drive change in society.

Historical Roots of Black Underinvestment

Why aren't more African Americans owning stocks or other income-producing assets? If these assets are so valuable to a community's earning potential and wealth creation, why aren't more African Americans participating? One reason, experts say, is a longstanding preference among many Black investors for safer places to put their money — a residual legacy of decades of discrimination and fear (Choe, 2020). Historically, Black-owned businesses were often the primary store of wealth during the civil rights era. Business ownership during this period was relatively high, as racial segregation required African American communities to produce their own products, goods, and services. African American communities slowly began to accumulate wealth as they supported one another economically; profits were reinvested into the community, creating better goods and services over time. Eventually, African American businesses began making inroads into competitive markets — their products became comparable in price and quality to those of white-owned enterprises.

To combat this economic development, certain destructive activities began to occur. The Ku Klux Klan raided and burned African American businesses. This violence, combined with a broader history of racist policy, produced a series of events that made the African American community considerably more cautious and conservative with its money. The African American community endured the congressional mismanagement of the Freedman's Savings Bank, which left 61,144 depositors with losses of nearly $3 million in 1874. They endured the violent massacre that decimated Tulsa's Greenwood District in 1921 — a thriving community of 10,000 people, commonly known as "Black Wall Street," whose residents were killed, beaten, or had their livelihoods destroyed. They also endured the discriminatory policies of the Jim Crow era, including "Black Codes" that strictly limited opportunity across many southern states.

The scars of this history persist today. With so few discretionary resources to invest, African American participation in equity markets dwindled. The long-term consequences are severe: for decades, wealth created by rising stock values sent children to elite colleges, underwrote small-business start-ups, and secured comfortable retirements for American families — but much of that progress bypassed the African American community. As of 2020, the net worth of a typical white family is nearly ten times greater than that of a Black family, which stands at $17,150 (McIntosh, 2020).

Conclusion

African Americans face a long and uphill battle as it relates to equality. They must contend with lower wealth, lower incomes, and serious consequences as it relates to healthcare. Although significant strides have been made, much more remains to be done. The roots of these disparities lie in a documented history of racist policy and violence that stripped African American communities of assets, suppressed their wages, and excluded them from the wealth-building mechanisms available to white Americans. Addressing these inequities requires acknowledging that history and committing to structural changes that extend genuine economic opportunity to the African American community.

References

Choe, Stan. "Stocks Are Soaring, and Most Black People Are Missing Out." ABC News, ABC News Network, 12 Oct. 2020, abcnews.go.com/Business/wireStory/stocks-soaring-black-people-missing-73567655.

Gerald, Dean. "Racism, Coded Language and the 'Politics of Distraction' in U.S. History." PBS, Public Broadcasting Service, 18 June 2019, www.pbs.org/newshour/extra/daily-videos/racist-coded-language-and-the-politics-of-distraction-in-u-s-history/.

Gruver, Jackson. "Racial Wage Gap for Men — Compensation Research." PayScale, 17 June 2020, www.payscale.com/data/racial-wage-gap-for-men.

McIntosh, Kriston, et al. "Examining the Black-White Wealth Gap." Brookings, Brookings Institute, 27 Feb. 2020, www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/.

Petree, F.D. "Systemic Racism Does Not Exist." The Journal, 22 Aug. 2020, www.journal-news.net/journal-news/systemic-racism-does-not-exist/article_f629bfb3-a967-5b83-b027-1a0461cf0c03.html.