IF
you are black, you’re far more likely to see your electricity cut, more
likely to be sued over a debt, and more likely to land in jail because
of a parking ticket.
It
is not unreasonable to attribute these perils to discrimination. But
there’s no question that the main reason small financial problems can
have such a disproportionate effect on black families is that, for
largely historical reasons rooted in racism, they have far smaller
financial reserves to fall back on than white families.
The
most recent federal survey in 2013 put the difference in net worth
between the typical white and black family at $131,000. That’s a big
number, but here’s an even more troubling statistic: About one-quarter
of African-American families had less than $5 in reserve. Low-income whites had about $375.
Any
setback, from a medical emergency to the unexpected loss of hours at
work, can be devastating. It means that harsh punishments for the
failure to pay small debts harm black families inordinately. Sometimes,
the consequence is jail. Other times, electricity is cut, or wages
garnished.
The
modern roots of the racial wealth gap can be traced back to the
post-World War II housing boom, when federal agencies blocked loans to
black Americans, locking them out of the greatest wealth accumulation
this country has ever experienced. More recently, the bursting of the
housing bubble and subsequent recession slammed minorities. In 2013, the
median wealth of white households was 13 times the median wealth of black households, the widest gap since 1989.
Earlier
this year, my colleague Annie Waldman and I took a close look at
debt-collection lawsuits in three major American cities. We expected to
see a pattern driven by income, with collectors and credit card lenders
suing people most often in lower-income areas.
But income was just half the story. Even accounting for income, the rate of court judgments from these lawsuits was twice as high in mostly black communities as it was in mostly white ones.
In some neighborhoods in Newark and St. Louis, we found more than one
judgment for every four residents over a five-year period. Many were
families who, knocked off their feet by medical bills or job loss or
other problems, had simply been unable to recover.
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