State of the dream – An economic and personal finance perspective – MLK Day 1, 20, 25,
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The weather on August 23, 1963 was unusually mild, especially for the month of August. Dr. Martin Luther King delivered one of the most inspirational speeches in American history. A throng of over 250,000 people, some of them dangling their feet in the reflective pool that runs 2,028 feet East toward the Washington Monument, jammed the National Mall to hear Dr. King proclaim, “I have a dream”
.From that touchstone phrase, Dr. King, in the cadence of a Southern minister, unveiled a hopeful vision of the future. Perhaps the most remembered line from that speech is this one:“I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.”
Dr. King’s assessment of African Americans’ financial situation in 1963 did not match his dream. King stated that “One hundred years after the Emancipation Proclamation, the Negro still lives in poverty on an isolated island in the middle of a vast ocean material prosperity.” The economic and financial inequalities are the most dramatic. The promise of Dr. King’s dream has not been fulfilled for many Black Americans. According to the Federal Reserve (FED),
during the pandemic year of 2019-2022, the median household wealth grew by $51,800. The wealth gap between black and white households also increased by $49950. It hurts the economy of the entire country. It hurts the economy of the entire country.
The United States
economy lost $51 trillion in output as a result of racial and ethnic inequalities
from 1990 to 2021, according to a study by San Francisco Fed President Mary Daly and three co-authors.
Daly pointed to gaps in employment, education, and earnings between racial groups as the cause of the loss.
“The imperative for equity, for closing some of these gaps, is not only a moral one, but it’s also an economic one,” Daly said.
Citigroup determined that $21.3 trillion has been lost to the economy since 2000. This 2024 report is a revision of the
2020 research
.
Income InequalityOne reason for the widening wealth gap is the disparity in income
, according to Bureau of Labor Statistics (BLS) numbers. Black men in the third quarter 2023 earned $987 per week, or 76.4 percent less than the median income of white men ($1,184). Black women had a median income of $935 during the same period. Even with a degree in college, Blacks still earn less than their white counterparts. According to the National Center for Education Statistics (NCES), the median annual incomes break out like this:
Whites
Associate degree Bachelor’s degree Master’s degree$50,930 $70,250 $78,700African-AmericansAssociate degree Bachelor’s degree Master’s degree$46,950 $56,030 $68,970
Credit Inequality
Your credit score is the cornerstone of your access to lending. A high score can lead to a higher rate of interest and more money. Poor credit scores will result in your application being rejected or approved at a user rate. This information can therefore be manipulated. Laura Blattner is an assistant professor at Stanford University. She says, “We are working with data which has been distorted for a variety of reasons in the past.” She co-authored with Scott Nelson of University of Chicago a study about credit. If you defaulted on a loan several years ago, that may not tell much about the future. If you defaulted one time several years ago, that may not tell much about the future.”Black people had few options for obtaining credit at a fair rate until recently. In the past, Black neighborhoods were not served by banks and their hours (9 am to 2 pm) limited access. The Civil Rights Act of 1965 prohibited racial bias in many businesses. Banking was not included. The Federal Housing Finance Agency (FHFA)
conducted a study that covered data from 2000 to 2024. It found:
“Two periods stand out: the height of the subprime boom, 2004-2007, when disparities were especially high; and the most recent year of data in 2023, when disparities fell sharply breaking their longstanding pattern.”
Mortgage Bright Spot
An area of improvement in credit equity has been mortgage rates.
A
study by the Federal Housing Finance Agency (FHFA)
determined that after decades of Black and Hispanic families being charged higher mortgage rates – that trend ended in 2023.
Covering data from 2000 to 2024, the study noted:
“Two periods stand out: the height of the subprime boom, from 2004-2007, when disparities were especially high; and the most recent year of data, 2023, when disparities fell sharply, breaking their longstanding pattern.”
Cycle of Poverty
The wealth gap between white and Black Americans began with slavery. Unfortunately, the end of slavery did not end the financial captivity of African Americans.
Institutional racism kept most Blacks from getting the education and financial opportunities they needed to fully realize the American and Dr. King’s dream. As a result, a cycle of poverty is often handed down from one generation to the next.
Breaking the Cycle – Living the Dream
The keys to realizing Dr. King’s dream are to fight racism, invest in education, and promote financial literacy. These challenges are even greater at a time when many institutions are moving away from Diversity, Equity, and Inclusion standards. If we want to support Dr. King’s dream and that of our nation’s founding fathers, we have to work harder. Our national wealth is the American people, and the opportunities that this country has provided for success. As Dr. King stated in his speech, “When the architects of this republic wrote the Constitution and Declaration of Independence they signed a promissory notes to which all Americans were to fall heir. This note was a promise that all men — yes, Black men as well as white men — would be guaranteed the unalienable rights of life, liberty and the pursuit of happiness.
“It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned. We refuse to accept that America’s vaults of opportunity are empty. And so we’ve come to cash this check, a check that will give us upon demand the riches of freedom and the security of justice.”
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