A conversation on race, ethnicity, and disparities in wealth
by Dr. Douglas Scarboro
Twice a year, the Memphis Branch of the Federal Reserve Bank of St. Louis hosts “Dialogue with the Fed,” a popular evening discussion series designed to spark conversations about the important issues facing our economy today. Recently, I had the pleasure of hosting a particularly thoughtful and engaging discussion on the topic of racial and ethnic wealth gaps. While this session focused on Memphis’ Latino community, we had a diverse background of participants join us to discuss the stark and persistent differences in the financial opportunities, choices, and outcomes facing our country’s major racial and ethnic groups, and most importantly, what can be done to close these gaps.
Bill Emmons, the senior economic adviser for the St. Louis Fed’s Center for Household Financial Stability, was our guest speaker for the program. His presentation, “Race, Ethnicity, and Wealth: Closing the Gaps,” covered the basics and the sources of the racial and ethnic wealth gaps, as well as some strategies and the outlook for narrowing them. Using data from the Federal Reserve’s “Survey of Consumer Finances,” and analyzed and published by the Center in its Demographics of Wealth series, Emmons highlighted research on more than 40,000 American families that showed that black-white gaps and Hispanic-white gaps in median income and wealth remain large; in effect, these gaps have not budged in 25 years. Meanwhile, white and Asian families continue to be more than twice as likely as Hispanic and black families to have above-median wealth. In fact, the Center’s research shows that Asian Americans have made great strides in increasing their wealth and income levels, and are on track to surpass whites’ levels in the near future.
After his presentation, Emmons took questions from the audience and was then joined by Mauricio Calvo, executive director of Latino Memphis, for a panel discussion that also included Dr. Patricia Toarmina, special education director with Shelby County Schools; and Maria Munoz-Blanco, director of the Parks and Neighborhoods Division with the City of Memphis.
While the evening was filled with a great deal of valuable stats and data, three main points resonated with the group and were fodder for the majority of the conversation:
1. Both race/ethnicity and education are important determinants of wealth. Despite gains in expected wealth, every level of education translates into a lower relative level of wealth for black and Hispanic families.
2. Even at the highest education levels, there are large racial disparities in income. Higher levels of education generally are associated with smaller (shallower) increases in wealth for Hispanic and black families. (For a deeper look at the wealth effects of education across race and ethnicity, see “Unequal Degrees of Affluence: Racial and Ethnic Wealth Differences across Education Levels,” an article written by Emmons and his colleague, Lowell Ricketts, and published in the October 2016 edition of Regional Economist magazine.)
3. At all income levels, there is a need for strong family balance sheets with adequate liquidity, broad asset diversification, and manageable debt.
Emmons discussed some possible explanations for large racial and ethnic wealth gaps, including structural and systematic factors that may exert large influences on wealth accumulation across generations. The data and conversation helped highlight the continued need for programs focused on increasing the high school and college graduation rates for Memphis and Shelby County, continued skill diversification for our workforce, and financial planning for families.
Events like “Dialogue with the Fed” and others that we hold throughout the year are part of the St. Louis Fed’s commitment to increased transparency and communication with all constituents, and we have more planned for 2017. To keep posted about our Memphis branch news and events, visit stlouisfed.org/memphis, or send me an email at Douglas.G.Scarboro@stls.frb.org. Let’s keep the dialogue going!
Dr. Douglas Scarboro is regional executive/VP of the Memphis branch of the St. Louis Federal Reserve Bank.
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