Since the passage of the Civil Rights Act of 1964, Title VII, politicians, socio-economic researchers and others have used income as a primary indicator of the economic progress of African-Americans. Although income tells part of the story, wealth is a more accurate predictor of economic progress.
In Black Wealth/White Wealth: New Perspectives on Racial Inequality, Melvin Oliver and Thomas Shapiro state, “Wealth is a more important indicator of economic status than current income because wealth brings power and independence.”
The earnings gap between blacks and whites has narrowed over the past decades—in 1989 an average black family earned 55 cents for every dollar earned by the average white family; by 2000 it reached an all-time high of 64 cents on the dollar. Yet the median African-American family held only $3,060 in financial assets in 1998. That is less than one-tenth of the financial assets held by the median white family.
So while decreasing disparities in earnings is a step in the right direction, African-American families remain at a distinct disadvantage since families that rely on income are often only a few paychecks away from poverty.
Wealth is the sum of all the important assets one owns including home equity, savings, pensions and investments. It provides the foundation for economic well-being and is a safety net against emergencies such as job loss and major medical expenses. Wealth allows one to live in communities with access to the best schools and education and it provides access to influence and public policy makers. Importantly, wealth gives one revenue to take advantage of investment opportunities.
In a policy paper titled “Black Wealth/White Wealth: An Issue for the South,” Scott Doron and Elaine Rideout Fisher wrote: “The most important goal of economic development is financial security and opportunity for all. But if this is our goal as Southerners, the South has a problem because of the lack of wealth among African-Americans.”
They conclude that the wealth gap has been under the policy radar and that efforts to close this gap are fragmented and limited. Efforts to address the wealth gap must focus on income, savings, inheritance and financial transfers.
Although there are many approaches to closing the wealth gap, raising the academic achievement levels of African-American children as an intervention strategy to increase the wealth of African-Americans is perhaps the most effective. Education is the tidal wave that lifts people from despair to prosperity. In order for the education strategy to be effective, it must be two-pronged: internal and external.
Internally, African-American parents along with the community must develop a zero tolerance for poor academic performance. Children must be taught that high expectations are the norm rather than the exception and that achievement matters. The community must be vigilant in advocating for equity in funding. Equity in funding is critical to attracting top-notch teachers and cutting-edge technology resources to give students a world-class education.
Beyond the African-American community, public policy makers must take appropriate action and supply sufficient funds to insure that all our schools enjoy equitable funding. We must ensure that no school or child will be left behind.
Education is the great equalizer. It is a proven key to economic success and a safety net. There is a direct correlation between education and homeownership; for many, homeownership is the beginning of wealth accumulation. Equity in a home can be used for investments, business opportunities, or other leveraging opportunities.
Education is a proven path for wealth creation. It can bring more people to wealth than any other method. We must accept nothing less than a high-quality education for all our children.
Mr. McLawhorn is president of the Columbia Urban League.