Laura Sullivan, Tatjana Meschede, Thomas Shapiro, Dedrick Asante

Laura Sullivan, Tatjana Meschede, Thomas Shapiro,

Dedrick Asante-Muhammed, Emanuel Nieves

, Senior Research Associate for the Institute on Assets and Social Policy (IASP),

conducts research on the economic security of U.S. households and factors leading to long-

term financial well-being and vulnerabilities. Dr. Sullivan is an experienced policy researcher

and has co-authored and led the quantitative analysis of national survey data for a number of

IASP publications, including analyses of racial wealth disparities and the development of

multi-factor measures of economic security for the middle class and seniors. Dr. Sullivan

holds a Master of Public Affairs from the LBJ School of Public Affairs and a PhD in Social

Policy from the Heller School for Social Policy and Management at Brandeis University.

, Research Director for the Institute on Assets and Social Policy, manages

IASP’s project on financial well-being and risk of diverse U.S. population groups with a

specific focus on racial wealth disparities. She is the lead or co-lead author on many IASP

publications, such as reports in the “Leveraging Mobility”, "Living Longer on Less", and "By

a Thread" series, and has presented on economic well-being with a specific focus on

racial/ethnic disparities at many conferences and events. More recently, Dr. Meschede was

selected as Visiting Scholar at the Boston Federal Reserve Bank where she is analyzing new

data on local race and ethnic wealth holdings, the National Assets Score Card of

Communities of Color (NASCC) data set.

, Director, Institute on Assets and Social Policy and the Pokross Professor of

Law and Social Policy at The Heller School for Social Policy and Management, Brandeis

University. Professor Shapiro's primary interest is in racial inequality and public policy. He is

a leader in the asset field with a particular focus on closing the racial wealth gap. His book,

The Hidden Cost of Being African American: How Wealth Perpetuates Inequality (2004), was

widely reviewed. With Dr. Melvin Oliver, he wrote the award-winning Black Wealth/White

Wealth, which received the 1997 Distinguished Scholarly Publication Award from the

American Sociological Association. Dr. Shapiro’s widely anticipated new book Toxic

Inequality will be launched in 2017. In 2011 he was awarded a Fulbright Scholarship to study

the wealth gap in South Africa.

, Director of the Racial Wealth Divide Initiative at CFED, works

to build on CFED’s outreach and partnership with communities of color, as well as

strengthen the racial wealth divide analysis in CFED’s work. CFED's Racial Wealth Divide

Initiative leads wealth-building projects that establish best practices and policy

recommendations to address racial economic inequality. Prior to CFED, Dedrick was Senior

Director of the Economic Department and Executive Director of the Financial Freedom

Center at NAACP.

, Government Affairs Manager at CFED, works to inform and mobilize

advocates across the country to push for policy change at the federal level that expands

economic opportunity. He also co-leads CFED’s work on predatory lending and coordinates

the Assets Building Policy Network. Before joining CFED, he worked at the Local Initiatives

Support Corporation, where he coordinated LISC’s local office advocacy efforts in

Washington, DC, and provided support on an array of housing and community development

federal issues.

: The authors thank CFED staff and consultants—Roberto Arjona, Sandiel Grant, Jeremie

Greer, Ezra Levin, Sean Luechtefeld, David Meni, David Newville, Carl Rist and Amy Saltzman—for their

contributions to the report.

(www.iasp.brandeis.edu) is dedicated to advancing economic

opportunity, security and equity for individuals and families, particularly those left out of the economic

mainstream. Our work is premised on the understanding that assets provide the tangible resources that help

individuals move out of and stay out of poverty, as well as inspiring effective individual, community, state and

national actions through the belief that security, stability, and upward mobility are indeed possible. Working in

close partnership with constituencies, state and federal policy makers, grassroots advocates, private philanthropies,

and the media, IASP bridges the worlds of academic research, organizational practice, and government policy-

making.

(www.cfed.org) work makes it possible for millions of people to achieve financial security and

contribute to an opportunity economy. We scale innovative practical solutions that empower low- and

moderate-income people to build wealth. We drive responsive policy change at all levels of government. We

support the efforts of community leaders across the country to advance economic opportunity for all.

415 South Street (MS 035)

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781-736-8685

Website: www.iasp.brandeis.edu

Twitter: @IASP_Heller

Facebook: facebook.com/TheHellerSchool

Email: lauras@brandeis.edu, meschede@brandeis.edu

and tshapiro@brandeis.edu

1200 G Street NW,

Suite 400, Washington

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Website: www.cfed.org

Twitter: @CFED

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facebook.com/RacialWealthDivide

Email: dasantemuhamma[email protected] and

enieves@cfed.org

This report focuses on the role that policy design can have on closing the country’s unrelenting and unacceptable

racial wealth divide. We utilize a new framework—The Racial Wealth Audit

—launched jointly by the Institute on

Assets and Social Policy at Brandeis University (IASP) and Demos to show what impacts policy initiatives may have

on narrowing or widening the racial wealth gap, one of the most pressing dynamics of inequality facing the United

States today.

Specifically, this report examines education policies that affect financial outcomes in relation to:

 Children’s Savings for College and Asset Development

 Student Debt and College Affordability

 Education and Employment Outcomes

Although the Racial Wealth Audit framework can and should be applied to many other areas of policy design, our

focus on education comes at a point in which the issue has risen to the top of policy debates. Most recently, and

perhaps most notably, growing awareness of the crucial financial impacts of higher education was further elevated

by the recent presidential election, which featured numerous discussions on ways to reduce student debt and make

college more affordable. As these debates continue to move forward, policymakers and advocates should ensure

that proposals to improve education access and success—from kindergarten all the way through college—also

intentionally work to reduce the racial wealth gap, instead of exacerbating it further.

By focusing on the ways in which policy design in the area of education shapes the racial wealth gap, we seek to

foster a conversation about how policymakers can more effectively address pervasive and far-reaching inequality in

the United States through intentional, well-crafted policies that place racial economic equity at the forefront of

policy design considerations. Without such focus, our ability to reverse racial economic inequalities—which have

been fostered by public policy for years—will be greatly impeded.

 Incorporating the concept of targeted universalism—in which universal policies emphasize benefits based

on existing needs and barriers—in the design of public policies is a critically important way to reduce

economic inequities, particularly when it comes to the racial wealth gap. For example:

o A universal and progressive national Children Savings Account (CSA) program that provided

greater support to lower wealth households, with support incrementally declining for higher wealth

households, could close the racial wealth divide substantially, depending on the structure and

funding of the accounts.

o Universal policies to eliminate student debt could actually increase the racial wealth gap among

young adults by nearly 10%, while targeted policies such as providing relief to households making

$50,000 (roughly the U.S. median income) or less could reduce the racial wealth gap by 7%.

 Focusing on equalizing high school and college graduation rates alone would do little to close the wealth

gap because a college degree is associated with substantially more wealth for White households ($55,900)

than for Black and Latino households ($4,800 and $4,200, respectively). This disparity is due in part to the

low-wealth starting point of Black and Latino households, as well as other factors, including high levels of

student debt these communities take on and their adverse experiences within the labor market after

graduation. As a first step to addressing these challenges, policy efforts that focus on producing a more

equal wealth return, such as making public colleges and universities more affordable, particularly for low-

income and low-wealth households, would substantially reduce the racial wealth gap between college-

educated adults.

In recent years, much attention has been focused on the problem of growing income inequality in the US. This focus,

while important, masks a substantially greater problem: wealth disparities between White households and

households of color. When it comes to racial income inequality, median Latino and Black households have incomes

that are approximately $18,000 and $25,000 less per year, respectively, than the typical non-Hispanic White

household.

However, when it comes to racial wealth inequality this disparity in income pales in comparison as

median Latino and Black households own over $100,000 less in wealth than median White households.

Wealth is not only about accumulating money; it’s also about ensuring that current and future generations have

opportunities to get ahead. Those opportunities are made possible through the ownership of assets of every type—

such as a home, a business, a college education and retirement savings—that provide households the means to

thrive, rather than simply get by.

Right now, our country is in the midst of a demographic shift that will redefine the nation’s makeup, in which racial

minorities are projected to comprise a majority of the population by 2043.

Given where communities of color—

Black and Latino communities in particular—are today in terms of wealth and where the trends point in the future,

addressing the racial wealth divide is one of the greatest economic challenges before us. In fact, if nothing is done

about this divide, recent research by CFED and the Institute for Policy Studies projects that in just under 30 years

median Black and Latino households will own less than three-quarters of a percent ($425 and $1000, respectively) of

the wealth held by median White households ($131,980).

Although racial economic disparities have been persistent since the founding of this country, these challenges have

been further engrained and exacerbated by public policy decisions made throughout our history. Past policy choices

that created and have driven this wealth gap include the explicit exclusion of farmworkers and domestic workers—

Source: U.S. Census Bureau, Income and Poverty in the United States: 2014; Survey of Income and Program

Participation, 2008 Panel, Wave 10. Figures depicted above are median.

predominately people of color—from coverage under the Social Security Act of 1935; the unequal distribution of

G.I. benefits for Service Members of color; and the practice of redlining, in which communities of color—

particularly Black communities—were directly excluded from homeownership opportunities created through

Federal Housing Administration-backed loans.

These decisions, made by politicians and administrators all at levels of government, have resulted in a host of

systematic abuses and injustices that have deprived communities of color of wealth and equal economic

opportunity. Unfortunately, the United States’ long track record of enacting policies that explicitly or inadvertently

exclude low-wealth communities from gaining a piece of the economic pie, persists today. Although not as explicit

as in the past, current wealth-building policies continue to perpetuate inequality, particularly in the tax code.

Take, for example, two of the largest

homeownership tax programs: the Mortgage

Interest Deduction and the Property Tax

Deduction, which in 2015 cost the government

$90 billion.

Recent analysis by CFED found that

over the course of a year, the typical low-income

households gets about eight cents per month

from these two tax programs, while middle-

income households receive about twelve dollars.

When it comes to the typical multimillionaire in

the top 0.1%, these benefits add up to more $1,200

per month in homeownership support.

Even more regrettable, these tax programs not

only disproportionately benefit the already-

wealthy, they also often systematically exclude

households of color.

For example, despite the

fact that the Internal Revenue Service (IRS) does

not collect race or ethnicity data, recent research

has found that in zip codes with the highest

percentage of tax returns reporting mortgage

interest deductions—which cost the government

over $65 billion a year

—Whites made up 83% of

the residents in those zip codes. By comparison,

Black residents made up just six percent of

residents in those zip codes.

Thus, evidence

suggests that major financial policies which aim to

support economic security through tax and

homeownership incentives can and frequently do

exacerbate wealth inequalities, rather than alleviating them.

As with past transgressions that created and have widened the racial wealth gap to its current levels, the inequities

found in today’s tax code are further fueling this divide due to choices made by legislators and other policymakers;

choices that are directing massive investments in racial and overall economic inequality.

Fortunately, despite the detrimental choices policymakers have made and continue to make, as we highlight in this

paper, if policymakers decided to place racial economic equity at the forefront of policy design, research by IASP

and Demos shows that they can create intentional, well-crafted policies that can more effectively address pervasive

and far-reaching inequality in the United States.

Source: CFED analysis of Tax Policy Center (TPC) microsimulation models

estimates of tax benefits of the deductions for home mortgage interest and

property tax.

Research has made clear that past and present policies that did not examine the racial inclusiveness of their design

often ended up exacerbating racial wealth inequities, even when they aimed to promote opportunity and economic

security. In order to avoid the mistakes of the past, we should not only judge new policy investments on the face

value of their good intentions, but also on their implications for the racial wealth gap. Achieving this policymaking

shift will require that policymakers, advocates and others interested in promoting racial wealth equity incorporate

disparate impacts of policy by race and/or ethnicity into their policy development and decision-making processes,

as a means of undoing the current structures that make race and wealth important determinants of life chances.

The Racial Wealth Audit is one important resource for achieving this change, as it explicitly directs attention of

decision-makers and stakeholders to the ways in which policy proposals that affect household finances may alter

the racial wealth gap.

By bringing the effects of policy on racial disparities to the center of policy deliberations, this

framework provides a crucial but often missing perspective in policymaking. Moreover, the Racial Wealth Audit

engages multiple stakeholders to better inform policy decisions by offering policy analysis and design

recommendations that focus on equity.

Through analysis of several similar iterations of a policy, application of the Racial Wealth Audit

can help to improve policy design by better informing decision-makers about how changes and

modifications in policy design may improve or hinder progress towards reducing racial wealth

disparities. IASP and Demos’ analyses of policies using the Racial Wealth Audit has illustrated

how similar policy proposals with differing design features, such as eligibility thresholds or

program benefit levels, may have dissimilar outcomes in regards to impacts on racial wealth

disparities. Thus, careful analysis of and attention to the ways in which the design features of

policy proposals may impact the racial wealth gap are critical. The Racial Wealth Audit fills this

need.

Analysis using the Racial Wealth Audit involves conducting policy projections using key available

survey data to estimate changes in household wealth levels and the racial wealth gap that would

occur under the implementation of a new policy, or given differing social or economic conditions

that can be shaped by policy.

By comparing baseline racial wealth disparities seen today—as

measured by the racial wealth gap at the fiftieth percentile—with wealth outcomes and differences

by race and ethnicity given the implementation of innovative policies, application of the Racial

Wealth Audit framework serves to uncover projected changes in the racial wealth gap due to

policy intervention.

By incorporating the potential impacts of a proposal on the racial wealth gap in the prospective

evaluation of a new policy, application of the Racial Wealth Audit framework helps to identify the

best iterations of a policy proposal—ranging in scale from modest proposals to ambitious policy

overhauls—that can both achieve targeted goals, which may not explicitly focus on racial wealth

disparities, while simultaneously reducing the racial wealth gap.

Through several applications of the audit framework on policy proposals in the area of education policy, the

remainder of this paper provides an overview of how policy design can better promote equitable outcomes through

attention of forecasted policy impacts on the racial wealth gap.

While there is a clear need to reform the embedded inequalities in our nation’s public educational system—

including our schools and universities—policy changes that simply increase resources broadly are not enough to

promote equity, as the analyses below reveal. When designing policies, policymakers and stakeholders should not

assume that new investments and equity are necessarily aligned.

In fact, even when we have social consensus on overarching policy goals, like access to quality

education for all, policymakers must recognize that groups are situated differently and that to

promote a large, universal goal, the policy tools and instruments to achieve that objective need to

take current social structures into account. This approach of targeted universalism—that is,

universal policies which emphasize benefits based on existing needs and barriers—is an important

way to reduce inequities, particularly the racial wealth gap.

In this way, public policies can redirect the economic trajectories of all families towards prosperity. This is

particularly true when it comes to our education system, which is built on unequal structures; even the most well-

intentioned new policies often serve to reinforce the unequal structures that currently exist. Thus, in order to

promote equity, institutional reforms and new investments, promising policies must be consciously designed to

nurture all communities and widen opportunities. Only then can policies succeed in supporting the educational

development and personal growth of all young people, particularly young people of color.

The following analysis focuses on how three specific education policy areas—from childhood through higher

education—can be reformed to promote economic security for all and reduce wealth disparities by race and

ethnicity. As the examples highlighted below underscore, through the combination of both deliberate effort and

empirical analysis, purposeful public policy design can dramatically narrow the racial wealth gap and promote

equity.

Wealth inequality, even more than income inequality, is a result of the historic legacies of inequity in society, as

wealth is passed from one generation to the next. It is for this reason that leaders in the asset-building field have

increasingly drawn attention to policies and programs that provide an opportunity to restructure existing

inequalities in wealth.

One such opportunity has arisen through the growing movement for Children’s Savings Accounts (CSAs), which

are incentivized savings accounts for every child that help put our youngest generation on more equal footing when

it comes to opportunities for long-term wealth building.

CSAs are based on the simple idea that all families, given the right support, can save and invest in the potential and

aspirations of their children. CSAs are long-term asset-building accounts, established for children as early as birth,

which grow over their lifetime. Accounts are seeded with an initial deposit and built by contributions from family,

friends, and the children themselves. Often, CSAs are augmented by savings matches and/or other incentives, and

gain meaning as young accountholders and their families engage in age-appropriate financial education. At age 18,

the savings in CSAs are typically used to fund higher education, but in some programs, the savings can also be used

for other asset-building purposes, such as purchasing equipment to start a small business.

By providing every child with an account and an endowment at birth (or at a very young age, such as at

kindergarten), CSAs are designed to ensure that all youth have access to at least a modest wealth endowment as

they transition into adulthood and launch their early independent lives.

Empirical evidence gathered over the last several years documents the potential of CSAs to expand educational and

economic opportunity for low- and moderate-income families. Randomized controlled trials have found positive

impacts from CSAs and financial education targeted toward young students. The research shows that children’s

savings is associated with improved child development and academic performance, greater college expectations,

higher levels of college enrollment and graduation, and increased financial capability.

The best CSA programs are

both universal and progressive, meaning that a savings account is given to every child in the target region, and that

the program includes greater initial deposits and/or savings matches for youth from economically vulnerable

households. In other words, CSA programs apply the targeted universalism approach.

In the US, cities and states are currently taking the lead, with a number of programs currently in place or being

considered from San Francisco

to New England

and places in between. Supporters and advocates across the

country increasingly see CSAs as an important policy instrument to help to promote greater opportunities and

mobility for children from low-wealth households, which are disproportionately households of color.

Internationally, similar but more robust and larger-scale programs can be found in countries like Israel, which next

year will automatically provide every child under 18 with a savings account seeded with an initial deposit of 1,000

Israeli shekels (about $260 U.S. dollars). The account will then be augmented with monthly, automatic deposits of 50

shekels (about $13 U.S. dollars), all of which is in addition to any deposits made by the family of the child as well as

additional deposits of 500 shekels made by the National Insurance Institute when the child reaches 18 and 21 (the

second deposit of 500 shekels would only be granted if the child waits to withdraw funds until they’ve reached

21).

With momentum growing for CSAs, US policymakers have a significant opportunity to expand asset-building

opportunities and counteract policies which have created existing wealth divides by race. For many who would like

to see CSAs develop into a national program that reduces the racial wealth gap, children’s savings represents an

opportunity to counter the unequal advantages that have bolstered the wealth of many White households

substantially for generations. Thus, as policy and program designs are developed and debated, the potential

impacts of any new CSA proposals on racial wealth inequalities should be considered carefully by decision-makers.

Analysis by IASP using the Racial Wealth Audit framework has highlighted the importance of

policy design in shaping how a national CSA program would serve to close the racial wealth gap,

from eligibility criteria to the magnitude of public investment. The findings suggest that a large-

scale, national, universal and progressive CSA program could notably reduce the racial wealth gap

among young adults if public policy were to make substantial investments in the program.

Moreover, IASP’s analysis has also found that the structure of the program within those broad

parameters could make a sizable difference on the magnitude of reductions in the racial wealth

gap.

As policymakers determine how to structure the progressive features for CSAs, they should keep

in mind the important point supported by IASP’s analysis that if the design of a CSA policy were

based on household wealth, it would likely do a better job of reducing wealth disparities than if

eligibility were based on income. While this analysis explored the impacts of accounts of

substantial size and investment that constitute a broader scale of investment than typical CSA

programs—often called “baby bonds”—the analysis helps us to better understand the potential of

significant investments in children’s savings to increase asset security levels among young adult

households of color while reducing disparities.

Source: IASP analysis for Annie E. Casey Foundation, Investing in Tomorrow: Helping Families Build Savings and Assets, 2016.

For example, one iteration of the policy tested revealed that if a universal CSA program had been

established in 1979, and if that program had included as part of its design a progressive public

investment reaching $7,500 for low-wealth households with incremental declines to $1,250 for the

highest-wealth households,

median wealth holdings for younger Black and Latino households

today could have been significantly higher (by $7,450 and $6,100, respectively). Meanwhile, the

wealth gap between Black and White households for young adults would have decreased by 23%,

while the wealth gap between White and Latino households for young adults would have declined

by 28%.

Any national policy must incorporate design features that are administratively feasible and can garner national

support. IASP’s analysis suggests that careful consideration of eligibility criteria could serve to help potential

policies better counteract racial wealth disparities. With national CSA policy proposals being introduced in

Congress, such as the USAccounts Act

and the Save for Success Act,

it will be critical to consider how eligibility

and progressivity are designed and to ensure that proposals are evaluated though a racial equity lens.

For the purposes of this analysis, low-wealth households are those with less than $5,000 in net worth, while high-wealth households were defined

as having $25,000 in net worth. The analysis focused on young adult households, age 18-34, that would have benefited from these accounts.

In addition to providing early investments in the financial future of children, a renewed commitment to affordable

higher education for all should be a priority for policymakers and advocates interested in racial and economic

equity. Unfortunately, in recent years at the state and federal levels, particularly during periods of tight budgets,

policymakers have failed to prioritize investments in public higher education. Nationally, in 2014, 69% of students

who graduated from public and nonprofit private colleges and universities held student debt, averaging about

$29,000 per student, with borrowing levels growing notably in the last decade.

Since the 1980-1981 academic year, average tuition and fees at four-

year public schools have almost quadrupled in real dollars, from

$2,320 to $9,410.

Including room and board, average annual public

university expenses now stand at about $19,500, while average costs

at private nonprofit universities are more than double that level,

averaging approximately $43,900 annually.

These rising real costs make college increasingly unaffordable for

many families and have led to ever-rising levels of student debt, both

on the household level and nationally.

If we are to take the

important step of ensuring that increasing attendance in higher

education expands opportunity rather than bestowing additional

financial burdens, addressing growing student debt must be a top

priority for policymakers and advocates.

While ballooning student debt is increasingly on the minds of policymakers and the public, our frequent public

discussions of student debt often mask the reality that households of color are more likely to be disproportionately

affected by student debt. Though the escalating levels of student debt are an issue of growing importance

nationally, data highlight that Black households face particularly high student debt burdens as they seek out higher

education.

Recent data show that more than four out of five (81%) Black graduates leave school with student debt,

compared to fewer than three out of five White graduates.

Among young adult households (aged 25-40), over half

of Black households hold student debt (54%), compared to 39% of White households in the same cohort.

This statistic is especially alarming considering the lower graduation rates among Black households, who often face

greater financial and non-financial challenges to college completion and are thus more likely to accrue debt without

earning a degree.

These trends in student debt present particularly troubling implications for the racial wealth gap

given that student debt levels are associated with substantially lower lifetime wealth for debt holders. Recent

findings from Demos indicate that an average student debt burden for a college-educated household with two

adults ($53,000) would lead to a lifetime loss of wealth of over $200,000.

Research from IASP and Demos applying the Racial Wealth Audit framework exposes that

universal policies to reduce or eliminate student debt could actually increase the racial wealth gap

among young adults, while targeted policies—those which reduce the cost of college for low- and

moderate-income students—could substantially reduce the racial wealth gap, particularly among

lower-wealth households.

The analysis shows that among young adult households, full debt

forgiveness for all student loan holders would increase the wealth gap between White and Black

households at the median by nine percent, while a targeted policy that provided full debt relief to

households making $50,000 or less (roughly the U.S. median income) would decrease the same gap

by seven percent.

These findings highlight the fact that universal tuition- or debt-reduction policies that spread

resources without consideration of need can improperly direct resources to those with little

Source: Demos, The Debt Divide: Racial and Class Bias

Behind the “New Normal” of Student Borrowing, 2016.

financial need, thereby exacerbating the racial wealth gap. Again, within a broad policy agenda to

reduce student debt, specific policy design can change outcomes for wealth equity by

race/ethnicity; without appropriate attention to potential impacts on the racial wealth gap, policies

which aim to improve student financial outcomes can actually foster disparities.

The data suggest that rather than universal tuition reduction or forgiveness programs,

policymakers should consider targeted debt relief and tuition support through public investments

directed toward families with low to moderate financial resources. Thus, while higher education

funding needs to be expanded broadly given the widespread nature of the student debt problem,

policy approaches that apply the concept of targeted universalism by directing investments to

students with greater financial need will serve to both reshape the problem and promote equity.

Source: IASP, Demos, Less Debt, More Equity: Lowering Student Debt While Closing the Black-White Wealth Gap, 2016; Calculations for Households

Age 25-40, Analysis of 2013 Survey of Consumer Finances Data.

Though access to quality education for all is an ideal in this country, we are far from that ideal. While some students

have the opportunity to experience a smooth escalator to success, others are frequently faced with underfunded

schools, inexperienced teachers, and under-resourced neighborhoods, forcing them to tackle a number of intractable

obstacles to reach their educational goals. Adding to these disparities is the fact that despite the Brown vs. the Board

of Education ruling over 60 years ago, our schools today often are still highly segregated.

Recent research shows that the proportion of schools in which at least 75% of students come from low-income

households and at least 75% are Black or Latino households has grown since 2000.

Nationally, the outcomes of our

unequal public schools has led to lower high-school graduation rates among Black, Latino and Native-American

households compared to White households—with long-lasting consequences for career opportunities.

These

disparities in our school systems lead to reduced access for many households of color to quality jobs, which are

often the gateway to stable incomes and wealth-building benefits, such as pensions or employer-sponsored

retirement savings programs.

Despite these embedded inequities in our educational system, there are some

promising trends.

Though disparities in educational attainment remain as school quality continues to be tied to zip code, young

people of color are increasingly attending college, with substantial increases in attendance. Since 1980, substantial

gains (about 10 percentage points) have been made in the percentage of young Black and Latino students attending

college, with about one-third of Black and one-quarter of Latino youth aged 18-24 enrolled in 2008.

Although higher education is important to the economic well-being of communities of color, working people of

color with equal qualifications frequently face greater challenges to obtaining quality jobs. For example, in 2013,

newly minted Black college graduates aged 22-27 saw an unemployment rate twice as high as their college-educated

peers overall (12.4% versus 5.6%, respectively), with the Great Recession hitting recent Black graduates particularly

hard.

At every education level, Black workers face higher unemployment rates than their White peers with similar

Source: IASP, Demos, The Racial Wealth Gap: Why Policy Matters, 2016; Calculations for Households Age 25-40, Analysis of 2013

Survey of Consumer Finances Data.

levels of education, revealing that racial discrimination among employers continues to play a key role in the

financial security of households.

These figures point to the reality that returns on investments in education remain

highly unequal. Quite simply, education access alone will not be sufficient for demolishing current barriers to

economic equality.

In fact, analysis by IASP and Demos quantified the differences in the wealth returns on a college

education by race, revealing the reality that a college degree is associated with substantially more

wealth for White households ($55,900) than for Black and Latino households ($4,800 and $4,200,

respectively).

In part, this is due to the low-wealth starting point of many Black and Latino

households, as well as other factors, which often include high levels of student debt and disparate

experiences within the labor market after graduation.

In other words, although education provides greater opportunity in terms of income and

employment, it is insufficient to bridge racial wealth inequality. Controlling for other factors, a

college degree yields more than ten times the wealth at the median for White households than for

Black or Latino households. Overall, these findings reveal that equal accomplishments in higher

education are not equally rewarded.

In order to expand opportunity and close the racial wealth gap, policymakers should focus on

equalizing returns on educational investments, rather than just equalizing high school and college

graduation rates. To this point, if policy efforts were made to equalize wealth returns on

educational investments—through methods such as making public colleges and universities more

affordable for low-income and low-wealth households—it would substantially reduce the racial

wealth gap between college-educated adults. By contrast, efforts that solely focused on equalizing

college graduation rates among Black, Latino and White students would do little to close the racial

wealth gap between these groups.

Even as we see increasing rates of educational attainment among all groups, without policies that adequately

address the systemic imbalances in our schools and labor markets that produce ongoing post-education

employment disparities by race and ethnicity, we will not see substantial reductions in the racial wealth gap.

Equalizing financial returns associated with educational attainment by race/ethnicity will require policymakers to

commit to interventions that promote equality of opportunity for all students during their educational years and

beyond.

As noted previously, investments in public higher education are crucial for expanding educational access and

reducing college debt burdens for households of color, but consideration of financial need and equity must be built

into efforts to make college more affordable. With these facts at hand, it becomes clear that education policy

decisions can decrease the racial wealth gap, but only if policymakers take decisive action to ensure equitable

educational opportunities for all.

Today, numerous public policies that pave the educational and economic pathways for young people are inherently

unequal. From inequitable and inadequate public school funding in many communities across the country to

growing student debt, current policies are not moving us in the right direction. The importance of integrating

equity, particularly in regards to race and ethnicity, into our frameworks for understanding policy cannot be

understated. If we want a country characterized by equality, we need to ensure that opportunities are provided to

all, rather than just to the fortunate.

As we’ve highlighted in this report, achieving such a goal requires the careful consideration of policy proposals’

impacts on the racial wealth gap, so that they do not inadvertently widen wealth inequality. More specifically, in

order to ensure that future generations have equal opportunities to achieve security and stability, policymakers

must put equity at the forefront of policy design. Any prospective policy analysis should consider a number of

criteria, from administrative feasibility to overall effectiveness at a primary goal. We argue that impacts on racial

wealth inequality should not only be included among the core criteria, but that it be given significant weight

relative to the other criteria used to evaluate policy proposals.

The Racial Wealth Audit framework urges policymakers and analysts to embed equity in regards to wealth

outcomes by race/ethnicity explicitly into the design and evaluation of proposed policies. Without clear and explicit

attention to racial wealth inequality, new policies could reinforce the existing wealth gaps, which were erected in

eras when explicit exclusion by race was the norm. While policymakers today would not overtly design

exclusionary policies, the legacy of structural barriers from past eras still serve as a foundation for today’s wealth

distribution in the US. Thus, to reconfigure this foundation in an equitable way, it is not enough to simply support

social investments without a clear equity lens. Instead, policymakers can remodel our economic future toward

equity and inclusion by incorporating analysis of inequalities in wealth by race into the decision-making process for

all policies related to family savings and asset-building opportunities.

While education policy and asset development for youth are the focus of this report, the principles outlined in this

analysis can and should be applied to all policy areas. The examples and findings covered in this report reveal that

education is a crucial area in which investments and equity can be fostered jointly. As we move towards the start of

a new Administration and Congress, leaders and advocates in the education arena have several opportunities for

policy development and reforms. In order to ensure that these policy solutions are both successful in their targeted

goals and that they help to close the racial wealth gap, it will be crucial that policy leaders understand the ways in

which promising proposals can be improved to promote equity. Design features should account for how groups are

situated differently when it comes to existing barriers to and opportunities for getting ahead. Integrating the

principles of targeted universalism into policy development will be essential to advancing more equitable policies

and closing the unrelenting racial wealth divide.

Thomas Shapiro, Tatjana Meschede and Laura Sullivan, The Racial Wealth Audit™: Measuring How Policies Shape the Racial Wealth Gap (Waltham, MA: Institute on

Assets and Social Policy, Brandeis University, 2014).

Carmen DeNavas-Walt and Bernadette D. Proctor, Income and Poverty in the United States: 2014 (Washington, DC: U.S. Census Bureau, 2015), 25-29.

“Net Worth,” Assets & Opportunity Scorecard, January 2016, http://scorecard.assetsandopportunity.org/latest/measure/net-worth.

U.S. Census Bureau, “New Census Bureau Report Analyzes U.S. Population Projections,” March 3, 2015,

http://www.census.gov/newsroom/pressreleases/2015/cb15-tps16.html.

Dedrick Asante-Muhammad, Chuck Collins, Josh Hoxie and Emanuel Nieves, The Ever-Growing Gap: Without Change, African-American and Latino Families Won't

Match White Wealth for Centuries to Come (Washington, DC: CFED, 2016), 25.

Asante-Muhammad, Collins, Hoxie and Nieves, Ever-Growing Gap, 16.

Ezra Levin, Jeremie Greer and Ida Rademacher, From Upside Down to Right-Side Up: Redeploying $540 Billion in Federal Spending to Help All Families Save, Invest

and Build Wealth (Washington, DC: CFED, 2014)

Ezra Levin & David Meni, “The Biggest Beneficiaries of Housing Subsidies? The Wealthy,” TalkPoverty, June 30, 2016, https://talkpoverty.org/2016/06/30/biggest-

beneficiaries-housing-subsidies-wealthy/

Ibid.

Lewis Brown, Jr. and Heather McCulloch, Building an Equitable Tax Code: A Primer for Advocates (Oakland, CA: PolicyLink, 2015), 5-6.

Ezra Levin, Greer and Rademacher, From Upside Down to Right-Side Up, 13.

Benjamin H. Harris and Lucie Parker, The Mortgage Interest Deduction Across Zip Codes (Washington, DC: Urban-Brookings Tax Policy Center, December 2014), 5.

Laura Sullivan, Tatjana Meschede, Lars Dietrich, Thomas Shapiro, Amy Traub, Catherine Ruetschlin, and Tamara Draut, The Racial Wealth Gap: Why Policy Matters

(New York: Demos, 2015).

The Survey of Consumer Finances and the Survey of Income and Program Participation have been used by IASP and Demos to conduct racial wealth audit analyses,

given that these surveys typically have the best wealth data for U.S. households.

The racial wealth gap is typically measured at the median. Because of the skewed nature of the wealth distribution in the US, the median is a better representation

of a typical household’s wealth than the mean (average).

Children’s Savings Accounts and similar programs and proposals are also commonly called Baby Bonds, Child Trust Accounts and/or Child Trust Funds.

Ezra Levin and David Meni, Scholarly Research on Children's Savings Accounts (Washington, DC: CFED, 2016).

"About San Francisco Kindergarten to College Program,” City and County of San Francisco, September 16, 2016, http://www.sfgov.org/ofe/san-francisco-

kindergarten-college-program.

Melinda K. Lewis and William Elliott III, A Regional Approach to Children’s Savings Account Development: The Case of New England (Lawrence, KS: Center on Assets,

Education and Inclusion, University of Kansas, 2015).

Amiram Barkat, “The National Insurance Institute Will Deposit NIS 50 a Month for Each Child Until Age 18," Globes English, Israel Business News, June 22, 2016,

www.globes.co.il/en/article-govt-to-fund-childrens-long-term-savings-plans-1001134082.

“Investing in Tomorrow: Helping Families Build Savings and Assets,” Annie E. Casey Foundation, January 2016, www.aecf.org/resources/investing-in-tomorrow-

helping-families-build-savings-and-assets/.

Darrick Hamilton, "Race, Wealth and Intergenerational Poverty,” The American Prospect, August 14, 2009, http://prospect.org/article/race-wealth-and-

intergenerational-poverty.

“Investing in Tomorrow: Helping Families Build Savings and Assets,” Annie E. Casey Foundation, January 2016, www.aecf.org/resources/investing-in-tomorrow-

helping-families-build-savings-and-assets/.

For more information, see Crowley, Ellison Introduce Legislation to Help Every American Child Start Financial Future on Right Foot: https://crowley.house.gov/press-

release/crowley-ellison-introduce-legislation-help-every-american-child-start-financial-future

For more information, see Lujan Introduces Save for Success Act to Help Hard-Working Families Save for College: https://lujan.house.gov/press-releases/lujan-

introduces-save-for-success-act-to-help-hardworking-families-save-for-college/

Student Debt and the Class of 2014 (Oakland, CA: The Institute for College Access & Success, 2015).

“Table 2A:Average Tuition and Fees and Room and Board in 2015 Dollars, 1975-76 to 2015-16, Selected Years,” College Board, 2016,

https://trends.collegeboard.org/college-pricing/figures-tables/tuition-and-fees-and-room-and-board-over-time-1975-76-2015-16-selected-years.

Ibid.

Jesse Bricker, Meta Brown, Simona Hannon and Karen Pence, How Much Student Debt is Out There? (Washington, DC: Board of Governors of the Federal Reserve

System, 2015).

Mark Huelsman, The Debt Divide: Racial and Class Bias Behind the “New Normal” of Student Borrowing (New York: Demos, 2015); Addo, F.R., Houle, J.N. & Simon,

D. Race Soc Probl (2016) 8: 64. doi:10.1007/s12552-016-9162-0

http://link.springer.com/article/10.1007/s12552-016-9162-0?wt_mc=internal.event.1.SEM.ArticleAuthorOnlineFirst

Huelsman, The Debt Divide.

Laura Sullivan, Tatjana Meschede, Lars Dietrich, Thomas Shapiro, Mark Huelsman and Tamara Draut, Less Debt, More Equity: Lowering Student Debt While Closing

the Black-White Wealth Gap (New York: Demos, 2015), 2.

Ibid.

Robert Hiltonsmith, At What Cost? How Student Debt Reduces Lifetime Wealth (New York, NY: Demos, 2013), 10.

Sullivan, Meschede, Dietrich, Shapiro, Huelsman and Draut, Less Debt, More Equity.

Ibid.

K-12 EDUCATION: Better Use of Information Could Help Agencies Identify Disparities and Address Racial Discrimination (Washington, DC: U.S. Government

Accountability Office, 2016)

Public High School Graduation Rates (Washington, DC: National Center for Education Statistics, U.S Department of Education, 2016)

Barbara A. Butrica and Richard W. Johnson, Racial, Ethnic and Gender Differentials in Employer-Sponsored Pensions (Washington, DC: Urban Institute, 2010); Nari

Rhee, Race and Retirement Insecurity in the United States (Washington, DC: National Institute on Retirement Security, 2013).

Status and Trends in the Education of Racial and Ethnic Groups, (Washington, DC: National Center for Educational Statistics, 2010), 121.

Janelle Jones and John Schmitt, A College Degree is No Guarantee (Washington, DC: Center for Economic and Policy Research, 2014).

Valerie Wilson, "Black Unemployment is Significantly Higher than White Unemployment Regardless of Educational Attainment,” Economic Policy Institute,

December 17, 2015, www.epi.org/publication/black-unemployment-educational-attainment/.

Sullivan, Meschede, et al., The Racial Wealth Gap: Why Policy Matters (New York: Demos, 2015).