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Study Finds Widening Wealth Gap in America

A new report shows the wealth gap is widening in America based on people's race. (Greg Stotelmyer)
A new report shows the wealth gap is widening in America based on people's race. (Greg Stotelmyer)
August 22, 2016

FRANKFORT, Ky. — According to a new report, if current trends continue, it will take the average African-American family 228 years to accumulate the wealth of the average white family today; it will take the average Latino family 84 years to do the same.

The "Ever-Growing Gap" report by the Corporation For Economic Development and the Institute for Policy Studies - or IPS - looked at trends in household wealth for families from 1983 to 2013. Josh Hoxie, director of the Project on Opportunity and Taxation at IPS, said widening racial gaps in home ownership and median income are part of the overall wealth gap.

"The story we're seeing around wealth is that this problem has been growing for decades and is going to continue for decades,” Hoxie said, "unless we take serious action."

In Kentucky, the median income for African Americans is 35 percent lower than for whites, according to a survey by the online research group WalletHub. The IPS report indicated the wealth gap is far worse, with median wealth for Hispanics and blacks about 90 percent lower than for whites nationwide.

Home ownership is one of the biggest ways families build wealth, Hoxie said, and minority families are far less likely to own homes after years of discriminatory housing policies. He said an "upside-down" tax system has also contributed to the disparity by putting money in the pockets of the disproportionate number of white homeowners.

"So, what we have is a system to incentivize wealth creation, which is a good thing,” Hoxie said. "However, the bad thing is that that system is currently benefiting people who are already wealthy, and contributing to the racial wealth divide."

The report said the minimum wage is another piece of the wealth puzzle. According to Hoxie, a low minimum wage can hurt families who are simply trying to stay above water.

"When we don't raise the minimum wage for a long time, it's not just that people aren't creating new wealth - they're not creating a safety net to fall back on in hard times,” he said. "They're also going further into debt just to cover their basic expenses."

While Lexington and Louisville have increased their minimum wage slightly, the statewide rate remains at $7.25 an hour. In early 2016, a House committee approved a gradual increase to $10.10 per hour, but the bill never came to a vote on the House floor.

Greg Stotelmyer , Public News Service - KY