Closing the gap in wealth
Closing the gap in wealth
With this issue, the Bay State Banner launches a new monthly section called “BannerBiz.” Its editorial objective is to inform readers of the importance of entrepreneurship, professional success in the business world and relevant economic issues.
There is an economic disparity between blacks and whites in America. When considering this issue, the tendency is to focus on the personal income gap – and for good reason. According to the U.S. Census Bureau, in 2007 almost one-fourth of blacks (24.7 percent) lived below the national poverty level of $22,050 for a family of four. This was true of only 8.2 percent of whites.
It is expected, then, that there would be a big gap in the median household income. The level for whites in 2006 was $50,673 compared to only $31,969 for blacks. In other words, the median household income for blacks was only 63.1 percent of the income of whites.
However, this income gap is mild when compared with the racial wealth gap. CFED, a Washington, D.C. 501(c)(3) developed a 2009-2010 Assets and Opportunities Scorecard based on 2006 data which showed that the median household net worth of minorities in Massachusetts was insignificant when compared with that of whites. The minority net worth was only $6,694 compared with $213,755 for whites. The difference is a factor of 31.9. This is one of the greatest gaps in the country.
Net worth is derived by adding the value of all one’s assets such as bank accounts, real estate, investments and business equity and subtracting the amount of debt such as mortgages owed, credit card balances, and education loans. The balance is net worth.
Government policy enabled many Americans to begin to build assets. Social Security was established in 1935 to provide financial resources to elderly workers who had retired. However, for more than 20 years agricultural and service workers were not covered. After World War II, the GI bill provided veterans with education grants and VA home mortgages. However, since many colleges discriminated against black applicants, those grants were of little value. Also, red lining by banks limited the usefulness of VA home loans to blacks.
African Americans must pursue an ethnic policy of developing business growth. This will require individuals to establish both personal economic plans as well as a desire to support black businesses. Without such an approach there is little likelihood that the racial economic disparity will diminish.
No institution is more important for developing black wealth than a solid black bank. For this reason, OneUnited Bank has been featured as the first business in BannerBiz. OneUnited, which is a Massachusetts bank, is the largest black owned and managed bank in the country. The article on OneUnited in BannerBiz will provide more information about the bank.
It is important to understand how a bank can play an important role in creating ethnic wealth. Asians have significantly narrowed the wealth gap. East West Bank is their major financial institution with assets of $11.8 billion. There are only 13.1 million Asians in the United States, just 4.4 percent of the total population.
African Americans constitute 13.5 percent of the population, three times greater than the number of Asians, but their major bank is 21.5 times larger than OneUnited. Just think what could be accomplished if African Americans adopted Barack Obama’s campaign theme, “Yes we can!” and developed the discipline and commitment for greatness.
BannerBiz will bring inspiring stories of success to the readers every month.