Racism has cost African Americans $70 billion since slavery began: Here's how those costs are broken down (2023)

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  • Shawn Rochester, author of The Black Tax, put the cost of racism in the United States at $70 billion since slavery began.
  • He spoke to Business Insider about how he got that number, citing government-sponsored wealth-building programs like the Homestead Act and VA loans.
  • Today, he says, the Black Tax is perpetuated through discrimination: Black people are hired less often, paid less, and have less access to wealth-building tools like affordable mortgages.
  • He developed his "PHD" (buy, rent, deposit) framework to close the racial wealth gap.
  • This article is part of Business Insider's Inside the Racial Wealth Gap series. View more information »

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(Video) Racial Segregation and Concentrated Poverty: The History of Housing in Black America

African Americans face a stunning wealth gap. the latestThis is shown by statistics from 2016, a typical middle-class white family in the US had $149,703 in accumulated wealth, while a middle-class black family had only $13,024, meaning black families own 8.6% of white family wealth.

According to Shawn Rochester, author of "The Black Tax: The Cost of Being Black in America“, the cause of this gap can be traced back to slavery.

In his book, Rochester describes how racism and discrimination have cost Black Americans trillions of dollars ($70 trillion according to Rochester estimates) over several generations and how discrimination has created the tremendousracial wealth gapthere is today

The "black tax" begins with slavery

Rochester told Business Insider that he uses the term "black tax" to describe the financial cost of discriminating against black Americans.

Rochester, a graduate of the University of Chicago Booth School of Business, wrote his book to analyze research he read about discrimination against black people. He noted that most researchers were writing about the morality and injustice of discrimination, but he wanted to connect the dots and examine the financial costs to black Americans.

The wealth gap between black and white America was first created by 250 years of unpaid work. While the exact cost of slave labor is difficult to quantify, Rochester says economists have estimated that between 1619 and 1865, enslaved Africans lost between $24 trillion and $97 trillion in labor, so he uses an average figure of $50 billion in their calculations. And even though black people built this country with free labour,I was not on the receiving end of America's wealth..

“In terms of the fraction of the black population that actually owns some of the economy, there isn't. It's only based on the legacy of slavery and colonialism. In the United States, blacks own only about 2% of the wealth "...in the United States," Rochester said.

African Americans have been denied access to government-sponsored wealth-building tools.

For centuries were black Americansexcluded from government programsdesigned to help citizens build wealth.

In 1863, black Americans were denied entryfamily law, which promised citizens 160 acres of land for a small fee and five years of land cultivation. Over 70 years, 1.6 millionpredominantly white settlersclaimed 270 million acres, about 10% of US land, valued at $1.6 trillion.

Many black Americans were, tooexempt from the Social Security ActFarm and domestic workers were banned in 1935, resulting in a $143 billion loss to the community. Through a payroll tax, the Social Security Act granted unemployment and financial benefits to retirees aged 65 and over. And the GI Bill of 1944, theeffectively ruled out black veterans- Provided funding for college education, housing, and unemployment insurance, costing black Americans an additional $45 billion.

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Black businesses were never allowed to prosper

Each of these government programs designed to help Americans build wealth were denied to blacks, causing each generation to fall further behind. But even when black people have attempted to create their own businesses and networks to create wealth, their progress has been blocked or dismantled, often by force.

In the 1920s, Tulsa, Oklahoma was home to Greenwood's thriving black community. was calledSchwarze Wallstreetdue to its black-owned businesses, which included luxury hotels, bars, cinemas, and clothing stores.But in 1921, a mob of white men enraged by the trial of a black man accused of sexually assaulting a white woman, invaded Greenwood, burning down businesses and killing residents. Millions of dollars in damage were done and the city never fully recovered.

Rochester said: "Throughout history we have had massive and deliberate disruptions to the growth and development of black businesses. There was also a massive lack of [black] customers until the mid-20th century, when blacks were relegated to the lowest-paying jobs in the country that have nothing to do with skills or abilities, so withdraw customers and resources now, and it is very difficult for business to thrive.

To arrive at the $70 billion estimate, Rochester added up the billions lost during the Jim Crow and civil rights eras, noting that from the 1870s through the 1960s blacks were racially and economically segregated and from the Participation in the US economy as citizens were barred. .

The "Black Tax" today

Today Rochester says that the "Black Tax" is perpetuated by conscious and unconscious prejudice against black people and is present in almost every walk of life.

Blacks face discrimination when hired and face a pay gap when hired.A study foundWhite applicants are 50% more likely to receive a job recall based on their name alone. Regarding salaries,Black employees with bachelor's degreesthey earn an average of $50,108 compared to $61,176 for their white counterparts.

When they borrow, black people tend to pay more.This was the result of a study by the University of California at BerkeleyBlack mortgage borrowers pay an average of 0.08% more interest than white borrowers of comparable creditworthiness, costing borrowers more than $760 million more each year.

Black Americans who can afford to own their own home still face discrimination in the path to wealth creation. Abena and Alex Horton, an interracial couple from Jacksonville, FloridaThey appraised their house at $330.00, surprising homeowners who live in a mostly white neighborhood where homes range in value from $350,000 to $550,000. When Abena, who is black, removed all traces of black art and photos from her home, leaving her white husband home alone for the second appraisal, her home was valued at $465,000.

Rochester said: "The data is very clear and the point is that we need a new set of actions, but a new set of actions has to follow new thinking. The first step is how do you change paradigms? And that's the information that's in the book. First of all, I want to help people understand how we got here. Because if you believe that this problem is fundamentally the problem of black people or the problem of the black individual, why should you assume it? Your way of doing something Then of course you have to have some context for how this happened and usually from that context people start to see how they can now be part of the solution.

Rochester's Proposed Solution to the Racial Wealth Gap

The solution to the wealth gap, Rochester says, is to do business with black-owned companies, bring more blacks onto the payroll, especially in highly competitive areas, and invest capital in black-owned banks so the banks can recover. and lend without discrimination.

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“In the book and in my talks, I talk about this economic framework called PHD, which stands for Buy, Rent, and Deposit in a way that builds and grows businesses and provides capital to the black community. So what I advocate are stocks, plans and policies that favor job creation and business development."

Without intervention, the wealth gap will continue to widen. But Rochester wants people to know that while the black wealth gap problem may seem insurmountable, it can be solved.

“Others have a historical advantage of favoritism and availability of capital for hundreds of years. So you can't compare apples to apples at all. There is no magic bullet and there are no measures to reverse this. But that is timely and solvable. You can have dramatic changes if you involve people from an economic point of view. And then overlap that with politics. The idea is whenever possible and whenever possible to direct your resources to black market business because it creates jobs and attracts capital. And that's not just good for the black community, it's good for the whole country."

Mariette Williams

Mariette Williams is a freelance writer specializing in travel, finance and culture. Mariette teaches high school journalism and lives in South Florida with her husband and two children. You can follow her on Twitter @mariettewrites. Learn more about how our team of experts test and rate products for Insider here.

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