Increasing Economic Security for People of Color Benefits the Whole Community
By Celeste Collins, Executive Director of OnTrack Financial Education & Counseling
OnTrack Financial Education & Counseling envisions a community with a vibrant middle class and economic opportunity for all people. This is why we are participating in “Stand Against Racism” day on Friday, April 29th (coordinated by the YWCA, whose mission is “eliminating racism, empowering women”).
The economic recession we have endured and the glimpses of recovery we are seeing have made it even clearer than before that, when it comes to economic well-being, we are all in this together. Our community will thrive only when everyone has economic security and the opportunity to move forward.
Unfortunately, despite real progress, there is a persistent racial gap in economic security and mobility that must be addressed if we’re to move the nation’s—and western NC’s—economy forward. Nationally, the gap in economic security between white and African American families has more than quadrupled over the course of a generation (the last 23 years), from $20,000 to $95,000. In North Carolina, the median net worth for white households is $95,538 while that of households of color is only $6,694. Put another way, a household of color owns 7 cents for every dollar owned by a white household.
“Asset poverty” means a household cannot support itself with savings or available assets at the Federal Poverty Level for three months if the household loses earned income. In NC, African-American households are more than twice as likely as white households to live in asset poverty while Latino households are three times as likely as white households!
The good news is that we can strengthen economic opportunities for all through asset-building policies. Assets are household resources that generate a financial return, such as a savings account, a college education, a home, retirement savings, or a small business. Our nation has long recognized the importance of asset-building as a way to strengthen families and communities, and we have created incentives and subsidies for asset-building activities. For example, tax deductions for home mortgages, retirement accounts, and college savings have been in place for decades.
However, the incentives and subsidies now in place disproportionately benefit households that already have greater wealth. At the same time, evidence demonstrates the powerful role of persistent discrimination in the housing, credit, and labor markets. For example, African-American and Latino families are less likely to receive sustainable home loans (even after controlling for factors such as income and credit scores), they pay more for the mortgages they do get, and they are more likely to experience foreclosure. As a result, the gap in homeownership between white families and families of color is rapidly growing wider.
There are practical, proven steps that we can take now to address this challenge. For example, the Saver’s Tax Credit could be simplified and expanded by providing a 50% refundable credit to households earning less than $65,000 who save up to $1,000 in a 529 College Savings Account, Coverdell, qualified Savings Bond and IDAs, in addition to retirement accounts. States could eliminate asset limits from public benefit programs. Personal savings and assets are precisely the kind of resources that allow families to move off of public benefit programs and into economic security. By strengthening disclosure requirements and monitoring the terms and conditions under which they are offered, we could curb high cost income tax refund anticipation loans (36% to 700% APR) which disproportionately affect communities of color.
We all benefit, and our community flourishes, when we all have sufficient assets to help us get through tough economic times, plan for the future, and pass on some of our resources to our children. We still have a long way to go to ensure that everyone in our community, especially those who have not shared in the gains of the past, can achieve economic security, but we can and should put policies in place that will help us reach our goals. As we Stand Against Racism in our community this Friday and each day, let’s remind our policy makers of their responsibility to create just and equal conditions for all of us to pursue and enjoy economic security and opportunity.