Why Blacks and Hispanics Are Poorer

Hello All,

Todays posting tackles a difficult topic – the role of race in attaining wealth.

Race is the classic American problem. In many ways the reality of race differentials in American society illustrate an ongoing discrepancy between our enlightenment ideals and socioeconomic reality. From the civil rights era to current debates surrounding the Obama candidacy and immigration policy, racial differences have demonstrated that they still matter.

More importantly, race matters for wealth building. Generally speaking African Americans and Hispanic families have lower overall levels of net-worth. Relative to other groups, they are less likely to inherit, own homes or stocks. Its an uncomfortable fact, but nonetheless a fact.

Why might this be? There are a number of explanations. Among these are discrimination and culture. The discrimination hypothesis argues that people don’t like minorities and therefore choose not to employ them or let them into prestigeous univerisities, etc. The culture argument says that normative standards in minority communities discourage wealth accumulation via reciprocal ethics – e.g. when anyone has any money they are expected to give it away, therefore nobody can get rich.

The alternatives are more compelling. According to Lisa A Keister, three major factors impact patterns of wealth building among minority families. These are education, family disruption and fertility. Consider this, if families don’t have educated parents, then lifetime wages are lower. As anyone who has been divorced can tell you, family disruption interrupts processes of child’s learning and dilutes resources. And finally, families with more children have fewer resources to go around. All of these are more prevalent in minority families.

So, it seems that lower wealth in African-American and Hispanic families has less to do with discrimination and culture, and more to do with family dynamics and educational attainment.

Best,

James