The Color of Money

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The health pandemic has exposed economic racial disparities and systemic racism. While the government handed out an estimated three trillion dollars in relief to restore and support the economy, because of the structural barriers deeply rooted in our history of racial inequality, there is still a cost to being black. Pandemics, catastrophes and financial crisis only widens the wealth gap between black and white families in America. Here are some of the costs of being black.

FICO Score and Home Ownership

The African American unemployment rate has spiked as a result of the COVID lockdown. Mortgage lending standards usually tighten after a crisis which only widens the wealth gap making it increasingly more difficult for blacks to own homes. What’s the cost of being black? The average borrower FICO score at origination is 730. Due to high unemployment among blacks due to the virus, African Americans will have even lower FICO scores which will result in a severe decline in home ownership thereby expanding the wealth gap.

Assets and Income

During times of economic hardship or depression African Americans lose more wealth than their white counterparts. The median income gap between white and black families also widens during an economic downturn leading to blacks having less resources to draw on when things get really difficult. What’s the cost of being black? The cost is that when the economic downturn is over and the economy begins to grow, people of color are in a weakened economic condition and cannot benefit from the post recession economy and asset appreciation.

Tax and Savings

The U.S. tax code prioritizes savings in certain assets over other savings. Retirement savings accounts such as 401(k) plans and individual retirement accounts (IRAs), as well as mortgage borrowing to finance a primary residence, receive preferential treatment under the tax code. Yet blacks are less likely to work in jobs that carry benefits such as retirement savings due to historical occupational segregation. What’s the cost of being black? These obstacles translate into fewer tax advantages and fewer chances to benefit from recent stock and housing market gains, resulting in significantly less wealth for blacks when compared to white Americans.

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