How Wealth Inequality Shapes Life in the St. Louis Area

Over the past two years, many American families have lost their jobs, exhausted their savings, or been evicted from their homes. And yet others felt little or no disturbance at all.

Wealth inequality has a lot to do with it.

“Wealth, simply put, gives you the freedom to do a variety of things,” said Bill Rodgers, director of the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. “It allows you to not have to live paycheck to paycheck. This makes it possible to respond to emergencies.

To put it into perspective, half of Americans own just 2% of all the wealth in the country, while two-thirds are owned by the top 10% of households.

This unequal distribution of wealth is reaching historic levels and weighing heavily on communities of color. That’s why St. Louis Public Radio is taking the next year to explore how the gap between wealth and poverty affects our region and what is being done to address it.

Consider this Wealth Inequality 101 taught by experts from across the St. Louis area.

First, we’ll start with the basics. Next, we’ll look at the impact of the gap on all aspects of our daily lives, including housing, education, and health care.

What is Wealth?

To calculate your wealth, there is a simple equation.

First, count any saved income, meaning money, savings, and investments, like a 401K or a pension. Then add any other assets, such as a house or other property. Now subtract debt – for example, student, car or business loans and credit card balances. This final number is equivalent to wealth.

Selina Miller, a doctoral research assistant at the University of Washington’s Social Policy Institute, has studied the difference between who has wealth and who doesn’t.

“We’re seeing people at the bottom who have essentially no wealth, no stored assets, which makes them very vulnerable to an economic downturn or something like we’ve seen with COVID-19,” he said. she declared. “At the other end of the spectrum, we have people with lots of money who don’t have to worry about these issues and who have disproportionate power in society.”

Miller recently conducted a study on how having liquid assets — essentially access to cash — affected people entering the pandemic. She found that people with a financial cushion were in a much better position to weather the sudden financial crisis.

“When there’s a lot of wealth inequality, we have less stability and we have people exposed to these things like eviction and food insecurity that we don’t want anyone to have to go through.” she declared.

Wealth inequality worsens over time. Miller describes it as a cumulative advantage and a cumulative disadvantage.

“When you have disadvantages in the beginning, it’s really hard to recover from that,” she said.

As a result, the inequality of wealth is particularly glaring between black and brown communities and whites.

The Racial Wealth Gap and Housing

Last year, nationally, white families averaged $992,000 more than black families and $1,050,000 more than Hispanic families, according to St. Louis Fed data.

Rodgers of the Fed’s Institute for Economic Equity said the racial wealth gap is rooted in generations of discriminatory housing policieslike redlining.

Federal Reserve Bank of St. Louis

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Bill Rodgers is the director of the new Institute for Economic Equity at the Federal Reserve Bank of St. Louis.

“The neighborhoods deemed most at risk have been drawn in red. Therefore, borrowers from these neighborhoods were denied credit because of their racial makeup,” he said. “Here it is right there, there’s probably what you could say is the smoking gun.”

Rodgers is leading a team that will collect wealth data in the St. Louis area over the next few years. The goal is to explore how low-income communities and people of color are systematically prevented from participating in the economy and what potential solutions might help.

Preventing people of color from buying homes meant that fewer people were able to build up home equity and pass it on to their children. Rodgers said you can still see the disparities today if you look at homeownership rates in the St. Louis area.

Fed data shows that more than 80% of white people in St. Louis County own a home, while less than half of black residents in the county do. This disparity is also found in the city, where nearly 65% ​​of whites own a home, compared to 35% of blacks.

Even among homeowners, there is a big gap in home values. The median home value for a black family in the county is about $150,000 less than for a white family. In town, it’s about $100,000 less for a black family than for a white family.

All of these numbers are important because buying a home is the single most important way for Americans to build individual wealth.

Yung Chun, a housing expert at the University of Washington’s Social Policy Institute, said many people have a “somewhat naïve idea” of the American dream as it relates to wealth creation.

“That is to say, in the land of opportunity, people can achieve everything they can if they try their best,” he said.

But in reality, he said, the disparities in homeownership boil down to the fact that it is increasingly easier to build wealth and assets, like a house, once you already have wealth.

“Because money makes money, there is little room for individual effort and talent to make a fortune,” he said. “Instead, assets and wealth themselves create assets and wealth.”

Education

Charli Cooksey wants people to stop seeing education as the one-size-fits-all solution to poverty.

The CEO of local nonprofit WePower said a college degree is not a ticket to the middle class. On the one hand, black students have to take on a lot more debt.

“It almost seems counterproductive to pursue an education that someone should be entitled to and then have to pay a literal economic cost,” she said.

In fact, just a few years out of college, Black graduates have nearly $25,000 in extra debt than white graduates, according to the Brookings Institute.

Cooksey said people often ignore the history of systemic barriers, like those of housingand place too much emphasis on people of color educating themselves out of poverty.

“The problem with this mindset is that it falls on black people to solve a centuries-old problem by simply giving them access to financial literacy, when financial illiteracy is not what created the divide. race of wealth,” she said.

She wants to see more people reinventing how the economy works – and for whom it works.

Health care

Eighteen years is the difference in life expectancy at birth between someone living in a predominantly black, underfunded ZIP code in northern St. Louis and a whiter, more affluent person just 16 miles in suburban Clayton.

This statistic, from the University of Washington”For the good of all” project, published in 2016, remains in the mind of Alan Freeman when he thinks about how health care fits into the problem of wealth inequality in St. Louis.

Freeman is the CEO of Affinia Healthcare, which serves the region’s largest number of uninsured and low-income residents, many of whom are black.

“Tackling the social and economic drivers, this wealth gap, this inequality that exists is important to addressing the health differences that exist,” he said. “And where you live in St. Louis is a powerful indicator.”

He said wealth equality is the main driver of health disparities in the region. This plays a big part in why black and brown communities are more likely to suffer from chronic diseases, problems at birth and injuries due to violence. These communities were also hardest hit by COVID-19.

Wealth Barometer

Rodgers has a lot of ideas about what it will take to reduce wealth inequality. But he said it’s first important to understand how it actually affects people’s lives on a practical level.

Economists have a benchmark barometer for this. It revolves around an unexpected $400 bill.

Maybe it’s for a sick pet, a child’s broken arm, or an urgent car repair.

Rodgers wants people to think about what they would do with a $400 bill at different stages in life — for example, as a new parent or as a retiree living on Social Security.

Before the pandemic, he said, about a third of American households couldn’t pay.

“I hope this will open people’s eyes more to why everyone in the community has a strong ability to generate wealth – yes, it helps those individual families – but more importantly, it helps the community become resilient,” Rodgers said.

Things always happen, whether it’s a natural disaster, an economic downturn or a pandemic, and Rodgers said St. Louis would be better off if everyone was prepared to weather the storm.

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Follow Corinne on Twitter: @corinnesusan

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