Visionary Opposition: Thomas Shapiro on the Growing Racial Wealth Gap and How to Reduce It

As the United States moves closer to becoming a majority people-of-color nation, wealth and income inequality and racial economic inequities are not only persisting, they are getting worse. What could these trends mean for our future economic prosperity, and what kind of innovative policy solutions would it take to turn the tide? PolicyLink President Michael McAfee recently spoke with Thomas Shapiro, author of Toxic Inequality: How America’s Wealth Gap Destroys Mobility, Deepens the Racial Divide, and Threatens Our Future, to discuss why the racial wealth gap continues to grow — and what we can do about it.

Can you describe the genesis of your new book, Toxic Inequality? Why did you write it, and how would you characterize the state of toxic inequality today?

In 1998–1999, I and a team of researchers conducted a series of interviews with about 200 families with children in the Boston, St. Louis, and Los Angeles areas to learn about how their different wealth resources affect their opportunities, decisions, and outcomes. We reconnected with many of them again in 2011–2012 to see how they were doing. About two-thirds of the way through that time we went through the Great Recession, and when we followed up with these families I felt that the United States had entered a different and dangerous time — and I wanted to work through why the situation was so different. Today we are dealing with a combination of racial inequities and wealth disparities that I call “toxic inequality,” which is characterized by several factors.

First, the United States is experiencing historically high levels of both wealth and income inequality, going back as far as the data will take us, which is to the 1920s. No matter how you measure it, inequality is at historic highs.

Second, this increasing level of inequality is made even worse by the fact that it is taking place in the context of stagnating or declining wages and economic mobility for many families, starting in the 1970s. As a society, we can more readily manage inequality if things are also generally getting better at the same time, but that isn’t the case today. Inequality is going up while living standards are going down for many people.

Third, we have a vastly widening racial wealth gap. A large, nationally representative study following the same set of families from 1984 to 2013 found that the racial wealth gap among them grew from $85,000 in 1984 (adjusted for inflation) to nearly $240,000 by 2009. The racial wealth gap basically tripled in less than 30 years. Something very profound, deeply structural, and bent by the arc of state and federal policy is responsible for that.

Fourth is the issue of changing demographics. By 2044, no racial group will be a statistical majority in the United States. Our institutions are not prepared for this change and have done a terrible job of getting ready for it.

Fifth, and the work of Joseph Stiglitz is critical here, corporate power and lobbying on the part of very wealthy individuals and corporations has expanded the rule of the marketplace. For instance, who writes into the regulations that federal agencies cannot negotiate over the cost of pharmaceuticals? It would seem that they should be able to, but the rules say they can’t — because of pharmaceutical companies’ corporate lobbying power and policy influence.

Finally, pandering to racial anxieties — and fears of immigrants and immigration — has become more pronounced in American society in recent years, even before the last election.

Let’s talk more about the consequences of this situation and how the connections between wealth and opportunity affect outcomes related to jobs, homeownership, and other wealth-building strategies. Can you describe the differences between earning income and building wealth? How has the changing character of work and jobs affected the development of the racial wealth gap?

We live in an uber-capitalist society where money buys merit. It is totally inconsistent to have a system where some people have very large inheritances and to say we offer equal opportunity — but we pretend that we have both.

In many ways, financial assets and wealth give some people the opportunity to purchase further opportunities, which isn’t an option for other people. People with wealth and assets can literally buy second, third, and fourth chances for their children. For others, if you make a mistake with your first chance or if you have a life crisis like a layoff, illness, or death in the family, you have no way to get back on track. As john powell has said, “wealth is excess security.”

Jobs are an important piece. In 1970, General Motors (GM) was the largest employer in the United States, employing about half a million people. Most workers there were represented by unions; wages were rising faster than inflation; and living standards were improving. In 2013, the largest employer in the United States was Walmart, with 1.3 million jobs — very few of which offer the wages, job security, and benefits that had been accessible to union workers at GM.

In the 1970s, the connection between work and wealth was much stronger, institutionally and in policy. But in this transition from GM to Walmart, the connection between work and wealth was broken. It exists for far fewer workers in the United States today, and where it does still exist it maps on to the legacy of occupational segregation. For example, 62 percent of White workers work for an employer who provides access to retirement savings, compared to 54 percent of African American workers and about 38 percent of Latino workers.

Take the example of two families we met in St. Louis: the Ackermans, a White family who lived in a predominantly White suburb, and the Medinas, a Black family who lived about 20 miles away. Even though both sets of parents had similar education and skillsets, the Ackerman family earned about $20,000 more per year — and that was just the beginning of the story. Because of the jobs and institutions they were able to access, the Ackermans gained not only more income but also significantly more employer-funded retirement savings, health-care coverage, and college tuition benefits for their children — in total, more than $30,000 a year in additional compensation on top of earnings.

So when we followed up with them in 2010, the Ackermans had accumulated about $350,000 in retirement savings and their son was enrolled at the University of Missouri with his tuition covered. The Medinas had about $12,000 in retirement savings and their daughter was not college bound. When their children were young, these parents’ aspirations and hopes for their kids were equal. But their outcomes were not.

As more people continue to move to access career opportunities, does this change the equation in terms of pursuing homeownership as a key to wealth building?

That’s a great question. For some people, moving represents advancement in a career path, so the question of whether to pursue homeownership is a consideration. But when we followed up with the families in our study after 12 years, I was shocked by how few of them had moved. I expected many of them to have relocated, but only three families had moved more than about 50 miles away from where they started. People do move around a lot, but it tends to be within a given region — and many of them are renters.

The issue of homeownership is a very local thing. But it’s important to remember that for people in the 20th to 80th percentile of income earners, two-thirds of wealth is in home equity. Homeownership is deeply entrenched in policy regulations and mediated by mortgage lenders and real estate brokers and other interests — so access to home equity as a source of wealth is not simply the result of personal responsibility or thrift. Homeownership produces lesser returns for people of color than for Whites, but if you move every five years, buying a condo or a house could still make sense, because you’d otherwise be spending that money on rent.

Clearly the racial wealth gap, in aggregate, is not going to be eliminated by homeownership. But at the individual level, it is still very important. Families aren’t thinking about closing the racial wealth gap. They’re thinking about their security and their family’s needs: stable communities, safe streets, good schools.

Given the situation you describe, what are the innovative ideas and policies that you think have the potential to make a real difference? How do we keep moving forward?

There is a misleading narrative that has grown around the notion of universal solutions — for example, free college tuition in New York state. What should be universal is the outcome, as in the goal of universal college education. That doesn’t mean the policy solutions need to be universal. The solutions should be targeted, based on the different needs that exist, to get everyone to that universal goal.

The good news is that there are success stories of African American families experiencing economic mobility. Aggregate wealth of African Americans is growing — just nowhere near the pace of White family wealth. Some existing strategies are helpful, like HUD’s Family Self Sufficiency program, which allows people living in subsidized housing to save in escrow accounts the money they would otherwise spend on rent increases. A family in our study who was living in subsidized housing used this program to buy their first home; it’s a proven solution but it isn’t operating anywhere close to scale.

There is an emerging strategy that people are calling “visionary opposition”: not shying away from resisting the harms that are being done, but focusing on continuing to build the agenda we have been working on. We need to keep pushing forward to rewrite the rules, regulations, and policies that produced and perpetuate this state of toxic inequality; and the only way that happens is by advocating and winning reforms that simultaneously build political power with new constituencies and loosen the structures that hold power together. That’s where we need to move ahead — however that is defined at the local level and however it plays out nationally as well.

New Data Profile Supports City of New Orleans Equity Strategy

April 20 marked an historic moment for New Orleans. After a year of community engagement and analysis, the City officially launched its Equity Strategy, laying out how local government will do its part to build a stronger, more inclusive city by advancing equity through its operations and decision-making. With this strategy launch, New Orleans joins the growing movement of city and county governments that are tackling structural racism and advancing equity through citywide initiatives. New Orleans is the first southern city to embrace such an approach.

“In the new New Orleans, having an equitable government is a top priority,” Landrieu said in launching the strategy. “We understand the power of equity and view it as a growth strategy that will lead us to creating a stronger and more prosperous city for all our residents.”

The Equity Strategy commits the city government to establish an equity office responsible for promoting equity in all its operations; make equity a central consideration in budgeting; create plans, with accountability measures, for all departments; conduct racial equity training for all employees and members of boards and commissions; and advance equity in hiring and workforce development.

At the event, PolicyLink and the Program for Environmental and Regional Equity at the University of Southern California (PERE) released an equity profile of New Orleans, the first of a series of 10 new equity profiles produced with the support of the W. K. Kellogg Foundation. According to this analysis, the New Orleans regional economy could be $18 billion stronger if racial gaps in income were closed. These profiles are developed to support local community groups, elected officials, planners, business leaders, funders, and others working to build stronger and more equitable cities, regions, and states.

PolicyLink has been working with the Office of Mayor Landrieu to provide assistance with developing its equity strategy for the past year through its All-In Cities initiative, and Senior Director Sarah Treuhaft participated on the panel at the launch event and then held a session to share the findings of the equity profile.

The New Path of Shared Prosperity in Fresno

Advancing Health Equity and Inclusive Growth in Fresno County, released on Monday, highlights persistent inequities in income, wealth, health, and opportunity. The profile and accompanying policy brief were developed by PolicyLink and the Program for Environmental and Regional Equity (PERE) at USC, in partnership with the Leadership Counsel for Justice and Accountability, and with support from the Robert Wood Johnson Foundation.
 
“These findings confirm what community residents and advocates have long known—racial and place-based inequities continue to dramatically impact residents’ access to economic opportunity, housing, health, and well-being in the Fresno County region,” says Ashley Werner, senior attorney at the Leadership Counsel for Justice and Accountability. “We must continue to work together and strengthen our efforts to demand that our elected officials do not remain complicit but actively and strategically work to create opportunity for all.”
 
Key findings in the report include:

  • Fresno has the 12th highest renter housing burden among the largest 150 metro areas in the country. The county’s Black and Latino renters are more likely to be burdened: 68 percent of Black renter households and 60 percent of Latino renter households are cost-burdened.
     
  • Very low-income Black and Latino residents are extremely reliant on the regional transportation system and limited numbers have access to automobiles. 12 percent of Black workers who earn an annual income of less than $15,000 use public transit compared with 1 percent of White workers.
     
  • The average Fresno resident is exposed to more air pollution than 70 percent of neighborhoods nationwide, but Black and Asian or Pacific Islander residents have the highest rates of exposure.
     
  • Latinos are nearly three times as likely as whites to be working full time with a family income less than 200 percent of the poverty level.
     
  • At nearly all levels of education, Latino workers earn $4 dollars less an hour than Whites.

Since 2011, PolicyLink and PERE have engaged in a formal partnership to amplify the message that equity—just and fair inclusion—is both a moral imperative and the key to our nation’s economic prosperity. Advancing Health Equity and Inclusive Growth in Fresno County incorporates indicators that undergird policy solutions to advance health equity, inclusive growth, and a culture of health. 
 
The profile provides unique data and actionable solutions for residents, advocates, funders, business leaders, and policymakers seeking to reduce racial inequities and build a stronger Fresno. This engagement with Fresno advocates is also a part of the All-In Cities initiative at PolicyLink. Through this initiative, PolicyLink equips city leaders with policy ideas, data, and strategies to advance racial economic inclusion and equitable growth.

The Half Trillion Dollar Tax Program That’s Driving Income Inequality

This tax season, as partisan debate continues to dominate Capitol Hill, the U.S. federal government will quietly spend over half a trillion dollars on tax programs to help American households build wealth. Indeed, these annual investments will promote wealth — for those who already have it.

This is one of the great — and often overlooked — tragedies of our tax code: Congress spends billions of dollars each year on a tax program that is making wealth inequality worse.

According to research by the Corporation for Enterprise Development (CFED), every year the federal government spends more than $660 billion on tax credits, deductions, reduced tax rates, and other measures intended to promote wealth-building activities, such as buying a home, saving for retirement, or investing in higher education. In practice, however, these wealth-building “tax expenditures” — as they are called – grossly favor America’s richest households, ensuring that those with wealth can maintain and grow their assets, while the vast majority of Americans receive next to nothing.

Read the full op-ed in Next City>>>

Meet the Entrepreneurs Creating an Arts and Culture-Based Economy in Post-Coal Appalachia

Last November, voters in Kentucky expressed confidence that President Trump could deliver on his promise to revive the coal industry, and he carried the state with 62 percent of votes. But in the heart of Appalachia, there's a strong network of businesses and nonprofits that are looking beyond coal, and embracing equity-focused regional economic development for marginalized communities — creating employment opportunities in technology and innovation, and arts and culture, as even more promising growth industries for the region. 

In rural Letcher County, Kentucky — population 23,000 — just 12 percent of adults age 25 or older have a bachelor's degree, and 33 percent of residents live below the federal poverty level. But Letcher County is also home to creative entrepreneurs and artists working to cultivate a more equitable economy. "We're thinking about ways to move forward in a post-coal economy," said Jeremy McQueen, CEO and co-founder of Mountain Tech Media, which provides technology and digital design services out of its base in Whitesburg. "Companies like ours are really offering solutions for workers and communities that used to rely on coal to be able to participate in an economy that's thriving." 

The 12-person company provides a wide variety of branding, marketing, and strategizing services to both small and large businesses in the region, including video and audio productions, web design, app development, graphic design and illustration, and social media management. "I think we are helping folks in our region find the branding and the reach that they're looking for without trying to hire some ad agency in a larger city," which, as McQueen explained, "is usually out of their price range and out of their comfort zone as well." 

An upstart "doing cool things"

McQueen doesn't see Mountain Tech Media as the vehicle for Appalachia to skip-step its way to become the next Silicon Valley. He said that businesses in the region have basic, behind-the-times tech needs to be addressed. The company could work on just websites and promotional videos for the next five to 10 years and still not meet demand. But the goal of Mountain Tech Media is to empower local businesses to think beyond their existing horizons and to provide professional development opportunities for their workers. 

Mountain Tech Media has a worker cooperative model, giving team members equity in the company and involving them in the governance of the business. "I really was interested in the worker co-op model from the very beginning, but I had never heard of it done in a tech or a digital design company," said McQueen. "I think everyone involved now does not have a doubt that it was the right move. We've seen such a sense of pride and self-worth in all of our team members owning a piece of the company and making decisions about what we do next." 

So far, Mountain Tech Media has contracted with 34 organizations and contributed an estimated $200,000 to the regional economy through their work. Founded in 2015, it surpassed its first-year projections in just the first six months of 2016 and surpassed its three-year projections in the span of a single year. The group is well on its way to exceeding its projections for 2017. 

After being profiled in the New York Times, the organization was contacted by the City University of New York to work on a few projects. According to McQueen, "They wanted to get something out quick and decided to reach out to an upstart company like ours that was doing cool things in Appalachia." Nonprofit clients are quick to mention their relationships with Mountain Tech Media in grant applications, a sign that they see investments in their organizations as investments in Mountain Tech Media, and vice versa. 

The culture hub at the heart of Appalachia

Mountain Tech Media took shape and has grown with the help of Appalshop, a grassroots arts and culture organization based in Letcher County since 1969. In 2014, Appalshop's leadership partnered with Lafayette College's Economic Empowerment and Global Learning Project (EEGLP) and researchers from Imagining America: Artists and Scholars in Public Life (IA) to launch the pilot program for a national initiative for community revitalization and economic development based in creative placemaking and placekeeping. Through this partnership, Appalshop has formalized its role as the anchor of the Letcher County Culture Hub. In addition to Mountain Tech Media, several other projects radiate from Appalshop's core efforts: a radio station, a youth media institute, a theater company, a regional archive, a downtown retail association, and much more. In order to create a college-to-career pipeline of workers to fill the needs of startups like Mountain Tech Media, Appalshop has also started a tech and media certificate program in conjunction with Southeast Kentucky Community and Technical College.

For years, Appalshop has been training youth in media production and other community development initiatives, and now that pipeline can also connect young people in the region to employment opportunities with businesses like Mountain Tech Media. This summer, the company will employ four media interns to help produce "Upload Appalachia," a youth-driven film series about social entrepreneurship in the region.

"Appalshop is one of the largest cultural anchors in Appalachia and has produced a wealth of creative content over the last 50 years," said McQueen. "They incubated us as a company and gave us access to a lot of networks and resources and equipment. We were able to save a lot of overhead costs right away. We've had so many meetings and conversations with new partners who really dig what we are doing because we are affiliated with Appalshop." 

Cultivating an arts and culture-based economy

Peg & Awl Public House (formerly known as Village Trough) is a worker-owned local and organic food vendor and event production business based in Berea, Kentucky. "We have a mission to reconnect people with local food and local producers and hosting and encouraging community events," said co-founder and owner Ali Blair. Along with Berea Tourism, Peg & Awl Pub began sponsoring First Friday Berea in 2014, a monthly block party bringing together local artisans, food vendors, and musical acts to activate and revitalize the Old Town neighborhood. Peg & Awl's long-term goals include lifting up and connecting artists and small arts-and-culture-based businesses in the region and helping artists turn side incomes into sole incomes. 

Peg & Awl Pub was introduced to Mountain Tech Media as a fellow worker cooperative early on and contracted with them to produce merchandise — first for the food business, then for First Friday Berea. "The work that they're producing is really top-notch and kind of makes us feel like we have a leg up with them doing the design work for our tee shirts, posters, and marketing materials, which are really pieces of art," said Blair. "We want people to collect those things." 

This year, the Berea Arts Council won $25,000 from the Mortimer and Mimi Levitt Foundation to allow them to expand their programming to produce a 10-week music series, Levitt AMP Berea. Mountain Tech Media not only designed marketing pieces for the series and supported social media outreach, but also became a sponsor as a way to support local creative placemaking efforts. 

While there is plenty for supporters of an arts and culture-based Appalachian economy to celebrate right now, there are also looming threats on the horizon. "With a lot of federal arts funding facing budget cuts, I think there are a lot of people asking what we are going to do," said Blair. "What we see on a national level is definitely being reflected in our backyards." 

But Blair also maintained that no matter what locals might think is the best way to focus economic development efforts — reviving coal jobs versus teaching out-of-work miners computer skills or encouraging people to start their own small businesses — the solutions have to be homegrown. "We don't want to be reliant on other people coming in to fix our problems," she said. "There's a lot of pride in us trying to do that ourselves." 

"There are very differing opinions about what counts as positive economic growth," she continued. "A lot of people don't value art and think artists should get a 'real' job. We really feel that arts are absolutely needed to create thriving places for us to live and raise our families." 

To learn more about Appalshop's youth-focused job training, as well as other equity-focused arts and culture policies, check out "Creating Change through Arts, Culture, and Equitable Development: A Policy and Practice Primer," a new PolicyLink report highlighting how arts and culture strategies are being embraced to help create equitable communities of opportunity.

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