Disappointed Again

I was pretty disappointed with the proposals of Josh Hoxie in his piece at MarketWath, “10 practical steps to bridge the racial wealth divide”:

The median black family today owns $3,600 — just 2% of the $147,000 of wealth the median white family owns. The median Latinx family has assets worth $6,600 — just 4% as much as the median white family. (These figures exclude cars, which are a poor store of wealth because they depreciate.)

Put another way, the median white family is 22 times wealthier than their Latinx counterparts — and 41 times wealthier than the typical black family.

Here’s what he proposes:

1 Baby Bonds
2 Guaranteed Employment and a Significantly Higher Minimum Wage
3 Affordable Housing
4 Medicare for All
5 Postal Banking
6 Higher Taxes for the Ultra-Wealthy
7 Fixes to Upside-Down Tax Expenditures
8 A Congressional Committee on Reparations
9 Data Collection on Race and Wealth
10 A Racial Wealth Analysis

The reason I was disappointed should be obvious. Even if all ten were implemented, they would have very little effect for a simple reason. The savings rates of blacks and Hispanics are lower at every income level than those of whites. See this report for more. Try as they might, torturing the data all the way to avoid it, it’s the inescapable conclusion from the data the authors present.

And that doesn’t even take into account another reality: the differences among whites are enormous, too. The Mr. Hoxie tells us nothing about the standard deviation.

7 comments… add one
  • steve Link

    1) She uses HRS data which samples households with at least one person age 50 and older. Other studies show that savings rates for younger people are fairly equal among different racial groups.

    2) I think that she says in the following statement that blacks are putting aside the same amount of money (as a percentage) as whites, but they arent realizing gains on their savings. Am I misreading her>

    “African Americans also present a gap in unconditional and conditional means and medians. But this is purely reflecting the effect of lower capital gains during the period considered for the analysis. Including S.S. and pensions, the gap in savings remains for Mexican American households, but disappears for Black households after controlling for income.”

    3) I actually find it difficult to find good data on this topic. Some studies claim savings rates are the same, some different, and when I look at the methods of these studies they often seem kind of iffy to me, but then while I read a lot of studies I am not really an expert on these kinds of economic studies.


  • I thought she was reaching with her methodology, attempting to groom the data and definitions sufficiently to arrive at the preferred conclusion but didn’t quite get there.

    For one thing I have a problem with aggregates. We all know that a rather small percentage of people, overwhelmingly white, are getting very wealthy. Even when you discount them the white savings rate is still higher.

    Look, I think there’s an argument to be made that decades of redlining has resulted in a lower effective black savings rate. Claiming that there’s no difference in the savings rate without pointing that out isn’t particularly helpful. You start defining consumption as saving.

    Other studies show that savings rates for younger people are fairly equal among different racial groups.

    There are also some pretty good studies that show the time of life during which most entrepeneurship takes place is in one’s 40s and 50s. Said another way, I don’t care if young people of all races save at the same rate. I care what happens throughout life.

    And then while SSRI is income, FICA isn’t savings or, said another way, if FICA is savings then so is income tax, sales tax, property tax, etc. But they aren’t. They show up in a different place in the balance sheet.

  • bob sykes Link

    All of the problems of Africans are due to African genetics. Of course, about 20 generations of severe selection pressure, selection for White behavior and abilities, could change that. However, selection means preventing the reproduction of Africans with IQ’s less than, say, 100, and with a proclivity to violence. The fraction of Africans who would be prevented from reproduction is around 5/6.

    The evolutionary change is quite doable. The ancestors of Whites and Asians were black Africans who migrated into Eurasia and had to confront a radically diffrent environment. How many of them died without reproducing?

    PS. The 20 generation estimate is based on the Russian experiments to domesticate foxes.

    If you are not willing to evolve Africans forcibly, then you must transport them back to Africa.

  • Guarneri Link

    “There are also some pretty good studies that show the time of life during which most entrepeneurship takes place is in one’s 40s and 50s.”

    I’m glad you pointed that out. As I observe continually, our obsession with the Gates, Jobs, Zuckerberg crowd as young drivers of entrepreneurship, and wealth, is misplaced. They are a tiny subset, even though they are highly visible. But it’s the 40-50 year olds that really provide the bulk of enltreprenuereal activity, for obvious reasons. And instead of flashes of brilliance, it’s really just dogged blocking and tackling in pursuit of a business insight……and a willingness to take the risks. It’s rare, but it drives growth in the US economy.

  • steve Link

    Sure, but the question at hand was savings rates. Looking at racial groups with equal incomes, do their savings rates differ? There may be good data out there, but the only stuff I can find doesn’t give a definite answer. Just looking at the cited paper, it would suggest that blacks do save the same percentage, but they get a lower rate of return on their savings.


  • Now take the next step in reasoning. For most Americans the primary investment is in their homes. IMO it shouldn’t be thought of as an investment but, due to a web of policies and circumstances, it is. Also IMO a reasonble hypothesis is that the homes owned by blacks aren’t appreciating in value at the rates that those of whites are. That’s why I brought up redlining.

    Then look at the list of “practical steps” proposed by the authors of the article cited originally in this post. I do not see how, even if implemented in their totality which will not happen, they will “close the gap”. The only way to close the gap is if blacks engage in substantially higher levels of savings than whites and there’s nothing in the list that encourages that to happen.

  • Andy Link

    I don’t really have anything to add except that saving rates seem to be, IMO, crap for almost everyone. Most families seem to have systematically replaced savings with credit.

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