how should we measure the racial wealth gap? relative vs. absolute gaps in the student debt forgiveness debate

The following is a guest post by Louise Seamster.

The 2020 Democratic presidential race has taken up the issue of the racial wealth gap, and several candidates have come up with proposals to address the gap with some amount of student debt forgiveness. The racial wealth gap is a way to operationalize the notion of racial justice: the wealth gap gives us something to measure and assess in search of genuine progress. But, like many assessments of racial progress, the wealth gap must be carefully conceptualized.

I was one of the sociologists, along with Raphaël Charron-Chénier, Laura Sullivan, and Thomas Shapiro, who evaluated Warren’s plan for debt forgiveness. Last week, Marshall Steinbaum published a working paper through the Jain Family Institute comparing the potential impact of Senators Warren and Sanders’ proposals for forgiving student debt. Marshall finds that “the difference between the two plans as measured by the reduction in the racial wealth gap is not large” and that “the Warren plan achieves the vast majority of the racial wealth equity gains that the Sanders plan achieves.” But Marshall observes that Sanders’s proposal to forgive all student debt does slightly more to reduce the racial wealth gap according to how Marshall measures it.

We thank Marshall for taking the time to engage with these ideas. Marshall has been integral to pushing racial justice into the discussion on student debt, and this paper allows for further policy thinking and development. He makes a forceful argument for how student debt represents an abdication of social obligation, and why forgiving it is a matter of racial justice. Here, I wanted to address just one difference between our analyses, because it gets to the heart of how we understand the racial wealth gap. It also explains why Marshall found that Warren’s plan may do less to “close the gap” as he measures it, but why we still think Warren’s plan will better accomplish the goal of racial equity.

In our own analysis, we compared multiple ways to measure the racial wealth gap. One looked at the Black/white wealth ratio (the resulting proportion of median Black wealth to median white wealth in a given forgiveness scenario). But we also looked at the absolute wealth increases across racial groups, because we were aware of the potential pitfalls of total debt forgiveness in exacerbating the wealth gap. Most importantly, we saw two storylines when we used different measurements: one storyline about the Black/white wealth ratio, and another looking at the absolute dollar amounts of Black and white wealth. Plenty of scenarios helped shrink the ratio—the proportion of Black to white wealth—while increasing the overall disparity in dollar amounts. This seemed to defeat the goal as we had defined it: increasing racial equity.

If this seems contradictory, let’s examine some numbers as an example. Let’s say median Black wealth is $20,000, and median white wealth is $200,000, reflecting a ten-to-one ratio of white to Black wealth. And say a total debt forgiveness policy resulted in median Black wealth of $40,000, and median white wealth of $250,000. Depending on how you measure it, this can sound like a good outcome or not. For instance, in this scenario, Black wealth has doubled, while white wealth has only increased by 25 percent. And the racial wealth ratio has increased from 10 percent to 16 percent ($40,000/$250,000, instead of $20,000/$200,000). You could say this means progress in closing the gap, if you are just looking at the ratio. This is what Marshall’s paper found: that Sanders’ plan, because it helped Black families modestly more than Warren’s plan, would do more to close the racial wealth gap. But full debt forgiveness would also help white families much more than in Warren’s plan—and this is not as clear when comparing the only the wealth ratio. Our concern with such a scenario is that this outcome would appear to move the initial numbers toward parity while making actual equity even harder to achieve. In this imaginary scenario, this means whites would receive two and a half times what Black households receive. Black and white wealth are currently so skewed that any substantive policy increasing Black wealth would look like a large percentage increase in Black wealth, and relative progress toward closing the gap—but could benefit white households much more than Black households.

There are reasons why either of these measures might make intuitive sense. After all, as Marshall points out, the wealth gap is experienced as relative disadvantage: scholars of inequality have long shown that having less than someone else is often more important than how much you have, in concrete terms. But comparing absolute gains also matters. Same with concrete amounts of wealth. And if white people keep pulling further ahead (especially through a policy that was supposed to redress economic harm to Black people)–if the goalposts keep moving upward–the relative progress in closing the wealth ratio through this one action is not sufficient for promoting equity.

Legal scholar Derrick Bell coined the concept of interest convergence to explain the Brown v Board decision. He argued that, in our existing social system, Black gains through civil rights would always require a difficult bargain: for any reform to hold, whites would need to benefit too. And often, they’d wind up getting even more than Black people did. In our post-Civil Rights moment, we hear a lot of conversation about progress toward equality, and equity, or closing the racial wealth gap, and any movement in “shrinking” the gap is seen as progress. Public efforts at closing the wealth gap are usually framed as helping Black families create more wealth. We hear much less talk about redistribution (although this is why talk about the racial wealth gap comes hand in hand with calls for reparations). We don’t hear about many solutions to the racial wealth gap that posit white wealth as static, or—dare I say it—decreasing. But without looking at both ends of the formula in the Black/white wealth ratio—without looking specifically at how white wealth is created, maintained and increased—we are never going to eliminate racial wealth inequality. In this moment in which the “racial wealth gap” is increasingly acknowledged as a major barrier to equity, we need to think about how we frame both problems and solutions.

Louise Seamster is Assistant Professor of Sociology and African American Studies at the University of Iowa. 

Author: Dan Hirschman

I am a sociologist interested in the use of numbers in organizations, markets, and policy. For more info, see here.

One thought on “how should we measure the racial wealth gap? relative vs. absolute gaps in the student debt forgiveness debate”

  1. Thanks to Louise Seamster for writing this. I’ve dealt with similar issues in examining racial disparities in incarceration. As the post says, it is always important to remember that different ways of measuring an outcome will give different results, and racial equity numbers are always affected by the values fr the majority as well as for the minority. In this instance, you are dealing with the particular problem that the same proportional increase is worth more in absolute dollars if you have more dollars to begin with. It is why, for example, gender inequities in salaries can persist for decades even thought departments have long been required to confirm that the average proportional increase n women’s salaries is at least as high as men’s. And why the White incarceration rate is a stronger predictor of racial disparity in incarceration than the Black rate is. Here the issues are two, both the absolute dollar amount of a benefit, and the question of whether inequality itself is harmful. For example, if plan provides an average benefit of $15,000 to Black families, does it matter to Blacks what the dollar amount of the benefit to Whites is?

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