Why do you believe the income gap by race has increased tremendously in the past decade?
The racial wealth gap in America is not new. There is a longer history that is crucial to understanding recent economic trends. However, it is true that the wealth gap by race has worsened since 2008. Though just about everyone saw their net worth plummet during the last recession, the wealth of whites has recovered more quickly than that of racial minorities. One reason is that whites own more financial assets such as stocks and bonds, which have recovered since 2009. For racial minorities, one of their biggest assets is their homes, which have not recovered as quickly in value.
The larger point is that when we talk about the racial wealth gap, we should try to understand it in historical context. Economists and others sometimes imply that the racial wealth gap has resulted from natural market forces. The truth is that historical circumstances in this country have deeply shaped the way that wealth can be accumulated in the first place. In fact, the entire story of African Americans in this country could be told as one in which wealth accumulation has been made difficult or impossible through a variety of official and unofficial means. We need to acknowledge this history when trying to understand the causes of the growing wealth gap in the United States and its racial dimensions.
Can entrepreneurship programs for minorities help alleviate the wealth gap?
Yes, but it isn’t the only answer. There has been a decline in entrepreneurship since the recession. That means many people—minority communities especially—are increasingly dependent on the low-wage, temporary job market for their security. And racial minorities are much less likely to have the start-up capital needed to start their own businesses. Programs that make it possible for them to start their own businesses could help to alleviate this gap.
However, I don’t think programs that encourage or enable entrepreneurship can stand alone as a solution. These programs would need to be alongside other policies that bring down the concentration of wealth at the top and level the playing field of opportunity by investing in public education, making preschool and child care affordable and accessible, paying workers a living wage, and closing tax loopholes that are siphoning money away from public investments.
Should public policy focus more on racial income inequality or opportunity inequality (regardless of racial mix)?
We really need both in our policy agenda—a focus on reducing inequality and increasing opportunity. Equality of opportunity has to be linked to bringing down wealth concentration at the top. Far too many policy discussions ignore wealth concentration while emphasizing education or job training. We have to look at how extreme wealth concentration decreases opportunity for just about everyone else. For example, we need to link tax loopholes for the super wealthy to missing revenues that could be channeled into public investments like education and infrastructure. These are the types of investments that have the power to level the playing field of opportunity.
What types of programs and initiatives should public policy officials focus on to curb inequality?
We need a range of initiatives that address both the top and bottom of the rising wealth gap in America. To begin with, all working people deserve to make a living wage. That so many Americans working full-time are living in poverty at the current minimum wage is totally unacceptable. It’s also important to note that 66 percent of low-wage employers are large, wealthy corporations in the service industry with soaring profits and executives who are paid extravagantly. These companies spend millions lobbying against wage increases for their workers. Thus the minimum wage issue is deeply connected to the problem of concentrated wealth.
Another area that should be a priority is curbing excessive CEO pay. For instance, we need to close the so-called “performance pay” loophole. Under current law, companies are allowed to deduct unlimited amounts of executive pay from their income taxes as long as this pay is based on “performance.” In the way of loopholes, we also need to close the “billionaire loophole” that has essentially rendered the estate tax voluntary at the federal level and in most states.
As the rich have gotten richer, they have gained more political influence enabling them to block progressive legislation on everything from taxes to labor. Corporate lobbying is at an all-time high, and the Supreme Court is handing down decisions like Citizens United that enshrine the political clout of the wealthy. So in any policy discussions about inequality, we have to focus on protecting our democracy from corporate takeover. Public officials concerned about inequality, for instance, should support amending the Constitution to establish that money is not speech, and that corporations are not people.