The Debt Millenium

Wealth inequality is only getting worse among young people of color, because their families can't help them out.  Even worse, for a lot of black and Hispanic families, younger people are expected to help their parents instead of the other way around.  Generations of wealth inequality have left people of color out in the cold for decades now, but it's never been as bad as it is now, as Mel Jones at The Atlantic details.

Wealth inequality can’t be discussed without talking about race; within the American context, they are inseparable. So the fact that Millennials of color feel the impact of a precarious financial foundation more acutely is not a surprise. For black Millennials in particular, studies point to a legacy of discrimination over several centuries that contributed to less inherited wealth passed down from previous generations. This financial disparity stems from continuous shortfalls in their parents’ net worth and low homeownership rates among blacks, which works to create an unlevel playing field.

As a result, the median wealth of white households is 13 times the median wealth of black households. In addition, the most recent housing bust is estimated to have wiped out half of the collective wealth of black families— a setback of two generations.

“It was just incredible,” Shapiro said. “It hit hardest those groups latest to becoming home buyers.” Homeownership makes up a large amount of black families’ wealth composition, accounting for over 50 percent of wealth for blacks, compared with just 39 percent for whites. Shapiro also pointed out that the people impacted by the housing crisis were likely to be the parents of Millennials.

Even with equal advances in income, education, and other factors, wealth grows at far lower rates for black households because they usually need to use financial gains for everyday needs rather than long-term savings and asset building. Each dollar in income increase yields $5.19 in wealth for white American households, but only 69 cents for black American households. In addition, while many Americans don’t have adequate savings, the rate is far higher for families of color: 95 percent of African American and 87 percent of Latino middle-class families do not have enough net assets to meet most of their essential living expenses for even three months if their source of income were to disappear. If Millennials of color aren’t getting as much financial help, it’s because there’s just not as much help for their families to give.

It’s more than just lack of “pocket money” from parents that impacts Millennials of color. The last significant stop on life’s journey is often an economically definitive one too, when parents and grandparents pass away and leave an inheritance.

According to the Institute on Assets and Social Policy, white Americans are five times more likely to inherit than black Americans (36 percent to 7 percent, respectively). And even when both groups received an inheritance, white Americans received about 10 times more. “It’s really a double whammy,” Shapiro said. On the flip side, black Millennials and other low-asset groups are much more likely to go into debt when a family member passes away. It’s not uncommon for some families to throw bake sales and engage in other fund-raising activities to bury their relatives.

A 2013 Washington Post article also noted that “black families rarely benefited from inheritances and gifts to help them make down payments on homes. The result was that black families typically bought homes eight years later than whites, giving them less time to build equity.”

“That’s an eight-year window of not paying rent and building equity,” Shapiro said.

And the life cycle of homeownership-related matters is an onerous one for black Americans to begin with. The researchers Kerwin Charles and Erik Hurst found that black mortgage applicants were almost twice as likely to be rejected for a loan in the first place, even when credit profile and household wealth were controlled for.

All that adds up to a nightmare, especially for black Millennials.  White families can pass on inheritances, gifts, and financial help to get started when times are tough.  Black and Hispanic families cannot.

The playing field has never been level in America, and it never will be in your lifetime. And now we have a generation of white politicians in the GOP making sure it never, ever happens, period.

The stage for this was set hundreds of years ago.  Every time black wealth was created, it was destroyed and moved up the ladder to whites.  America has been doing that for its entire existence.

Why would 2015 be any different?