Donan Cosme was only 15 when he found himself in the crosshairs of gang life, facing off against a member of a competing gang, guns raised. More than a decade later, these two men would meet again — not as rivals, but as colleagues and fellow apprentices in Boston’s Sprinkler Fitters Local Union 550.

“We’ve put our differences aside and we can work together like it never happened,” Cosme, 30, said. “This is what’s possible when you give people a second opportunity to make something of themselves.”

Cosme credits this second opportunity to Operation Exit, a program that provides formerly incarcerated and at-risk residents with the skills and support necessary to enter apprenticeships in building trades, culinary arts and the tech industry. The program has placed dozens of graduates into career-track apprentice opportunities that pay well above the city’s living wage.

Read the full article in Next City>>>

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.

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>>>

Writing in the New York Times this week, Sasha Blair-Goldensohn argues that equitable accessibility should be a top priority for municipal infrastructure and transit — and reminds readers that policies designed to aid vulnerable populations often produce a “curb-cut effect” that ends up benefiting everyone.

Read the full commentary>>>

Financial institutions have a long history of failing to meet the needs of low-income communities and communities of color — whether through discriminatory practices that strip wealth from neighborhoods of color or systematic disinvestment that has left too many struggling communities without access to affordable banking. 

Over the past few years, however, community advocates have been putting an established advocacy tool to new use to bring the voices and needs of underserved communities to the negotiating table with local banks. 

Community benefits agreements (CBAs) — contracts that have traditionally been used to ensure that local real estate development projects create opportunities for local workers and communities — are increasingly being applied to banks to increase access to financial services for disadvantaged communities. 

"Banks have an important role to play in our communities, and these community benefits agreements help ensure they fulfill that role for everyone, including low- and moderate-income communities and communities of color," said John Taylor, president and CEO of the National Community Reinvestment Coalition (NCRC), the driving force behind the recent proliferation of bank CBAs. In this incarnation of CBAs, banks team up with local community organizations to negotiate key services and resources targeted to communities traditionally underserved by banks. 

In 2016, NCRC worked with hundreds of local community organizations to negotiate three large merger-related CBAs with Huntington Bank, KeyBank, and Fifth Third Bank. Collectively, these three agreements will bring $62.6 billion in lending and investments targeted to low- and moderate-income communities and communities of color across 23 states. 

Reversing systematic disinvestment in low-income communities and communities of color 

Bank CBAs capitalize on the Community Reinvestment Act (CRA) — a longstanding federal policy designed to encourage banks to meet the needs of moderate- and low-income neighborhoods. The CRA was passed in 1977 in an attempt to combat redlining — a destructive and discriminatory lending practice that denied or severely restricted access to mortgages, credit, and other financial resources necessary to promote economic growth within communities of color. 

"The CRA has certain pressure points where communities have an opportunity to advocate for their needs," said Thomas Keily, consumer data and research coordinator at the Western New York Law Center, one of the grassroots NCRC members involved in the KeyBank CBA. Mergers, acquisitions, and CRA exams are intervention points where banks enter regulatory review and may be amenable to negotiations with community advocates. 

Because bank mergers often result in branch closings that cut jobs and can reduce access to banking in certain locations, the CRA encourages banks to commit resources to counteract negative community ramifications. Traditionally, however, banks have sought to meet their CRA requirements without ongoing engagement with community leaders. The recent spate of bank-merger CBAs represents an important departure from business as usual. 

Through a combination of in-person meetings, site visits, and conference calls, banks and representatives from several dozen community organizations negotiate the details of these agreements over the course of months. The resulting contracts include a wide range of commitments targeted to low-to-moderate income areas. 

For example, the hundred-plus community partners representing six cities that came to the table to negotiate the Huntington Bank CBA identified four key focus areas for investment: affordable housing, workforce development, small business development, and supportive services, including community needs not typically associated with financial products, such as social services. 

"The goal was to create a plan that was holistic and considered all the assets needed for a community to thrive and for individuals to reach their potential within that community," said Catherine Crosby, executive director of the City of Dayton's Human Relations Council, one of the organizations representing Dayton, Ohio, in the Huntington Bank negotiations. She is also a member of the NCRC board. 

The resulting community development plan committed $5.7 billion in funding for single-family mortgages in low- and moderate-income areas and to low- and moderate-income borrowers, $3.7 billion in community development lending and investment for affordable housing, $25 million in grants for housing and small business credit services, and 10 new branch locations in underserved areas, among other investments. As this plan is implemented at the local level, community advocates have the opportunity to specify particular service needs within their local areas, such as down-payment assistance, loan counseling, or diversity requirements in bank hiring. 

The CBA investments for KeyBank, announced in March 2016, contained similar measures, committing $16.5 billion in investments and lending over five years. The most recent CBA with Fifth Third Bancorp, announced in November 2016, represents the largest investment by a single bank in recent history — $30 billion invested across 10 states through 2020. 

"The impact of billions of dollars in community reinvestment that comes from bank agreements cannot be overstated — the resources have a real, tangible impact, creating jobs and expanding access to mortgages, small business lending, education opportunities, and access to other financial resources," Taylor said.

The changes these CBAs are intended to implement come at a crucial time for Fifth Third. Earlier this month, the Federal Reserve released an assessment of the bank's 2011-2013 operations that found evidence of discriminatory practices during that time. As a result, Fifth Third's CRA compliance rating was lowered to "needs to improve."

Leveraging CBAs for equitable growth 

Access to basic financial products and services — including bank accounts, mortgages, and retirement accounts — is a crucial component of building long-term financial security. Without these services, many families and individuals living paycheck to paycheck must turn to payday lenders and check-cashing centers that impose exorbitant interest rates and fees on those who can least afford it. According to a study conducted in California, payday lenders are nearly eight times as concentrated in primarily African American and Latino neighborhoods compared to White neighborhoods, draining nearly $247 million in fees from these communities each year. 

"In Buffalo, New York, we've seen a systematic flight of financial resources within low-income communities and communities of color, especially in the city's east side," said Keily. "East of Main Street there are seven bank branches, but to the west there are over 25, and we see huge racial disparities in who gets mortgages." 

On a community level, access to capital to purchase homes, start new businesses, or take on community development projects is a necessary ingredient for spurring economic growth, yet the majority of disinvested communities are still systematically underserved by the banks that could be providing these services. This persistent legacy of disinvestment perpetuates poverty and stymies the kind of growth that could revive local economies. 

Through the CBA negotiation process, however, communities have increased leverage to hold financial institutions accountable for providing them with the services and resources that will enable them to thrive. 

"This process gives community members back their voice and keeps their needs at the forefront of the process," said Keily. As part of negotiations with KeyBank, Western New York Law Center enlisted 100 residents to write about their experiences with financial institutions — testimonials that helped bring lived experience to the data and research presented during CBA meetings. The organization is also working to establish CBA agreements with smaller local banks and recently announced a $101.2 million agreement between the Northwest Savings Bank and Buffalo Niagara Community Reinvestment Coalition (BNCRC), a NCRC community-based coalition member. 

As these agreements become increasingly popular, more and more banks are recognizing the value of working in concert with community to increase services and facilities in underserved markets. 

"Some leaders of banks are stepping up and doing the work we also need to see from our political leadership — building collaborations between bank leaders, community group leaders like our members, and other stakeholders to ensure that communities have economic opportunity," Taylor said. 

Delivering community benefits through broad coalitions 

Negotiating the competing priorities of hundreds of community partners while attempting to influence large financial institutions that hold all the purse strings is no simple matter. 

"NCRC did yeoman's work to bring everyone together," said Crosby. "A negotiation with this many parties is a push-and-pull process, so you need to have people who are thinking of the highest and greatest good for the community — not just themselves or their particular organizations." 

But she felt the outcomes were well worth the laborious process. 

"Formerly, the Human Relations Council would meet with the CRA officers for the bank to negotiate community investments, but this process is far more comprehensive and more impactful," Crosby said. There is also a key level of accountability, because communities can report to CRA regulatory bodies if a bank fails to make good on the promises encoded in the CBA. 

Though it's too early in the implementation process to quantify the impact of these commitments, Crosby noted that the relationships formed and strengthened between the community partners that came together these past months have already been a huge win. Keily emphasized the power of the process for raising community awareness and empowerment. 

"This shows us — and the community — what's possible when their voices are heard," he said. "It will be an ongoing process to implement this locally, but we're committed to keeping community members at the forefront of this process."