What open ended questions do you have from reading this.

What contributes to the wealth inequality between African Americans and white Americans more, past events or factors of today?

Hypothesis: Past events have created a wealth inequality that cannot be repaired with time due to the factors of today

The question and hypothesis presented aims to show that there are 2 factors contributing to the wealth inequality between African Americans and white Americans; past events and future factors. Past events refer to events where African Americans were by law not considered equal to their white peers such as slavery and discrimination. Factors of today include those such as the status of health, home, and the 25% of explained inequality. The hypothesis is that past events have created a wealth inequality that cannot be repaired with time due to the factors of today. This means that things are still not 100% equal, and even if they were the past events are too severe to have time alone close this gap. In order to test the hypothesis, looking at reparations and the argument for it can help.

There are undeniable inequalities between African Americans and white Americans. One that is particularly interesting is the wealth inequality. The average wealth of a black household is only equal to 22.7% of total wealth, and is only worth 20% of the average the average wealth of a white household. (Menchik & Nancy, 1997) Black household income in 1989 averaged to be only 63% of white household income, yet that ratio has been persistent for the past 20 years. (Wolff, 2002) How and why could there be such a gap between the wealth of white Americans and black Americans? Menchik & Nancy researched studies from various articles and authors such as Wolff to find that 25% of the wealth differential is due to economic variables such as household income, location, and demographic factors, while the remaining 75% of the gap is unexplained. This has brought me to my research topic and the question that I will be exploring: What contributes to the wealth inequality between African Americans and white Americans more, past events such as slavery and segregation or factors of today?

One major factor that contributes to the wealth inequality and may explain part of the 75% is health. Gaskin, (2006) found that on average, African Americans have lower life expectancies and have higher death rates due to chronic diseases compared to non-Hispanic white households. He also found a strong positive correlation between health and wealth. Those who are healthy have 2.5 times the household income and 5 times the household wealth of those who are in poor health. They are also more likely to have a pension versus having to be on social welfare. (Gaskin, 2006) Therefore, if African Americans generally have poorer health than comparable white Americans, they will also have less wealth.

Housing inequality is another important factor in understanding the wealth gap. It is important because it can help explain part of the 75%. Housing and mortgage markets contribute to segregation by "funneling demand toward racially homogeneous neighborhoods" and contributes to "racial disparities in household wealth, since home equity is a major source of wealth accumulation." (Lincoln & Lee, 2020) For years African Americans were discriminated against while buying homes. The Fair Housing Act was a crucial step toward reducing racial discrimination in the US housing sector. Yet even with this law passed, Blacks and Latinos on average continue to live in much poorer neighborhoods than comparable white Americans, suggesting that discrimination in housing and mortgage remain significant. (Lincoln & Lee, 2020) When there is discrimination in where African Americans can buy homes or what mortgages they can take out, they are forced into lower income neighborhoods that are majority black. African Americans are still three times more likely to live in poverty. (Gaskin, 2006)

Reparation payments refer to the "repairing of damage through the payment of money or through other methods employed by the offending party." (Richards, 2019) Reparations have been paid in the past - for example, Germany paid reparations after World War I. However, there have not been reparations ever paid for slavery in the United States. Reparations could be a key step in closing the wealth inequality between African Americans and white Americans as generation models of human capital formation have concluded that time alone will not repair or replenish the reduction in wealth inflicted on African Americans. (Gaskin, 2006) In order to close the gap, some form of reparation needs to be paid. In the past, the arguments against a formal payment of reparations were due to the assumption that slavery and past discrimination only affect the generations that lived during those time periods. Since we have seen a linkage to the wealth inequality and past events that has become multi generational, specifically with health and housing, slavery and past discrimination have legacy effects that persist across generations. (Gaskin, 2006)