As African American History month comes to a close, it’s important to reflect not only on progress made toward equality, but also the persistent barriers to racial equity that continue to impact individuals and communities of color. The impact of long-term institutional and social discrimination can result in a myriad of negative outcomes that often work to support and even solidify the barriers to equality we wish to break down.

The racial wealth gap is an example of how structural discrimination and limited opportunities for education and employment advancement result in very negative economic consequences for marginalized communities. In a new report published this week by the Institute on Assets and Social Policy (IASP), Director Tom Shapiro examines and explains the concerning economic divide between black and white families – a phenomenon known as the racial wealth gap.

This groundbreaking report looks at the same set of households over a 25-year period, and finds that the total wealth gap between white and African-American families nearly triples during that time. The wealth gap in 1984 totaled $85,000, whereas this gap reached an astounding $236,500 in 2009. This extreme wealth inequality is not just detrimental to individuals and families, but has far-reaching negative impacts on our communities and the general economic health of our country.

To understand the forces behind this huge wealth gap, IASP examined several possible explanations, including family, employment, and wealth characteristics. The results showed five major factors driving the growing racial wealth gap: years of homeownership, household income, unemployment, college education, and inheritance, financial supports from friends and families, and/or preexisting family wealth.

This problem can and must be addressed with thoughtful public policy and increased access to economic opportunities. Here in Illinois, IABG and our partners are advocating for two pieces of legislation that would work to close the racial wealth gap.

• The first is an Automatic IRA bill (SB2400 / HB2461) that would create a statewide infrastructure to provide retirement accounts to the 2.5 million Illinois private-sector workers who are not currently offered this opportunity. Auto-IRAs will give people the tools they need to save for retirement and help prevent vulnerable workers from falling into poverty later in life.
• The second piece is a bill that removes asset limits for TANF eligibility (SB2319 / HB2262). As the law currently stands, families are deemed ineligible for public assistance if they own more than $2,000 in assets. This problematic policy punishes families for accumulating savings and incentivizes them to spend down retirement or college savings in order to remain eligible for aid. Eliminating the asset test would allow families to continue to build their savings while remaining eligible for much needed assistance.

Organizations or businesses interested in signing on in support of these issues should contact Lucy Mullany.

“I cannot express enough how many people come to me admitting to having a spending addiction or an unbalanced budget who want to change and just need a little direction. It’s inspiring.”

-Megan Schmitz, Case Manager with Catholic Charities

Catholic Charities of the Archdiocese of Chicago (in Cook and Lake County) sees asset building as a core component of their mission of charity and has created the Family Self Sufficiency program, a new Individual Development Accounts (IDA) pilot program, and numerous other programs in their ongoing work to strengthen and support individuals, families, and communities based on the value and dignity of human life. Without assets such as employment, a degree, a car, and a savings account, their clients find themselves severely behind. They believe asset building includes changing their clients’ attitudes about money, talking about regular spending habits, and encouraging behaviors that demonstrate good spending practices.

Catholic Charities understands that asset building takes place in stages and has designed their programs so clients can graduate to greater asset security and access. The only program of its kind in the Midwest, the Family Self Sufficiency Program based in Lake County serves single parents and aids them in becoming economically self-sufficient through case management and employment services. Case Managers work with these clients on their education, financial and employment goals by providing support, direction, and referrals. Additionally, all clients in the Family Self Sufficiency program are eligible to participate in their new IDA program.

Megan Schmitz, a Case Manager and Financial Literacy Counselor at Catholic Charities “enjoy[s] this work because with financial education and asset based programs you can see real results – the client who reduces her debt through strategies discussed in appointments, the people who open first time checking and savings accounts, the clients who have an emergency fund and therefore can avoid payday loans and predatory lenders.”

Real results include 28 year old single parent, Maria Garcia (name changed for confidentiality) who entered the program doing odd jobs to make ends meet. Maria and her case manager met regularly to review her goals and finances. Her goals involved obtaining her GED, securing stable employment, and being more financial stable. Through this intensive case management and a lot of determination on the Maria’s part, she now has her GED and a stable full-time job. At her case manager’s suggestion, Maria opened her first ever checking and savings accounts and was able to obtain a personal loan from a credit union for a family crisis that occurred.

With the success of the program, Catholic Charities hopes to expand it – allowing more families to access these important savings tools.

The Corporation for Enterprise Development (CFED) released their 2013 Assets & Opportunity Scorecard last week. The Scorecard offers a comprehensive look at American’s ability to save and build wealth, fend off poverty, and create a more prosperous future. Illinois ranks 33rd in the country overall in the ability of residents to achieve financial security. Our state was evaluated across 53 measures in the areas of Housing & Homeownership, Business and Jobs, Healthcare, Education, and Financial Assets & Income.

The key findings include:

• 55% of Illinois consumers have subprime credit
• 42% of Illinois households live in liquid asset poverty. This means that many households do not have enough savings to live above the federal poverty line for more than 3 months if faced with loss of income.
• Almost 70% of Illinois households of color are liquid asset poor
• 15.3% of households are underbanked or unbanked
• Average college graduate debt is $26,470
• Average credit card debt is $11,505

The release of the Scorecard coincides with the recent release of the Illinois Poverty Report from the Social IMPACT Research Center at Heartland Alliance, which found that 33% of Illinois residents are living in or near poverty. The Scorecard & the Illinois Poverty Report each provide a number of policy recommendations to help Illinois residents build financially secure futures. Recommendations include:

1. Preserve and Expand Homeownership: To reduce the high housing cost burden for homeowners and foreclosure rate, and help maintain homeownership as a route to the middle class, Illinois should offer programs to transition low-income renters to homeowners and enact foreclosure prevention and protection policies.
2. Remove Barriers to Savings: To help families save and become more financially secure, Illinois should remove the disincentive to save for very low income families by lifting asset limits on the Temporary Assistance for Needy Families (TANF) program.
3. Help Families Pay for College: To reduce the high level of educational debt and student loan default rate, Illinois should help families save for college by promoting utilization of the 529 college savings plan through targeted outreach, expanded access, and improved savings incentives.
4. Expand Retirement Savings Opportunities: To address growing retirement insecurity, Illinois should create an automatic retirement account program for Illinois workers that utilizes employer payroll systems and gives workers the option of depositing a portion of earned wages into approved retirement accounts.

As we begin the new legislative session, IABG & Heartland Alliance will be leading efforts to remove the asset limits on TANF and create an opportunity for workers to save for retirement.