Economics of Race in the United States

Economics of Race in the United States. The American population is categorized by race. The categories include the White Americans, Black Americans, and the Hispanics. The categorizations of racial groups have a relationship with economic disparity in that the racial categorizations appear to be a causal factor in the disproportionate representation of non-White Americans in economically compromised circumstances. The major and seemingly persistent challenges facing the economy as a result of the racial disparities include economic inequality, alleviation of poverty levels among Black Americans and Hispanics and the widening of the racial wealth gap. The problems are interrelated in that one challenge leads to another. For instance, the racial wealth gap causes economic inequality and poverty among the Blacks and the Hispanics. Therefore, in developing public policies, the federal government should strive to handle all the problems collectively. However, what has been the case has often been most aligned to ad hoc or siloed programs that have not integrated either long-term strategy or continuous improvement focused re-evaluation of implemented policies. For instance, the government has implemented policies directed to eliminating discrimination in the workplace without addressing the disparities in homeownership, the rate of college attainment and the median employment income in the labor market. This paper justifies the implementation of holistic public policies that would address the provision of present opportunities focused on wealth attainment in conjunction with adjustments for prevailing wealth gaps.

Keywords: racial disparities, the racial wealth gap, public policy, economic stability, median household income, level of unemployment and homeownership.

Introduction
The historical concept of race has been accepted to be an arbitrary creation. However, the legacy of the racial categorization references division of a population-specific to differences in physical appearance and skin color. In the United States, the racial groupings groups include; White Americans, Black Americans, and Hispanics. White Americans comprise the largest segment of the population (Colander, Prasch, & Sheth, 2007).
White Americans are the standard group by which all other racial groupings are compared specifically to wealth and income indicators. In viewing these indicators, it is evident given the disproportionality of some racial groupings in lower wealth and income groupings that race remains a significant problem in the United States economy. The issues range from levels of employment, quality of healthcare services, level of education, and housing to wealth and levels of crime among the racial groups. In spite of these observed dissimilarities, there remains an inconsistency concerning the approach to race and racial attribution to lower socioeconomic status. Various economists argue for and against the effects of racial problems to the economic position of the country. This paper will explore the role of race and whether the categorization provides a significant tool in developing the economic and public policy.
Defining Race and Economics in the United States
White Americans comprise the majority of the United States population. The Black American and Hispanics are, therefore, referred to as the minority groups. As at 2016, the total population of Africans was 46.8 million people. The value entails the combination of both the Blacks only and the blend of Blacks and other races. However, Blacks excluding the latter grouping were equal to a population size of 43 million or 13.3%, of the total population. The 2015 census provides that the total population of the Latinos in the United States amounts to 56.6 million bringing to 17.6% of the total population in the US.
Over the years, racial differences have posed a significant threat to the economic performance in the United States. According to Brendan O’Flaherty, as cited in Hall (1995), racial problems are a vital tool in analyzing the economic equilibrium and optimization in the country. Therefore, the government strives to mitigate and eliminate the racial differences in order to promote the economy of the country. In most cases, the techniques concentrate on reducing discrimination in the working environment and advocating for creating a diverse workforce in the organizations. However, in Hall (1995), Brendan O’Flaherty also suggests that focusing on the single area may not generate productive results. All the problems areas including levels of employment, quality of healthcare services, and level of education, housing, and wealth are interconnected. Eliminating discrimination in the working environment does not equalize the other problem areas. For instance, removing discrimination in the workplace does not create equality as long as the educational attainment is based on race or racially-tied geographic segregation. Effective economic policies should accommodate all the problem areas in order to generate positive results.
Effects of Racial Problems to the Economy of United States
The persistent occurrences of the racial differences create various challenges to the economy of the country. The problems vary from economic inequality, alleviation of poverty levels and widening of the racial wealth gap.
Economic Inequality
Economic inequality refers to the situation where there is a difference the appropriation of the economic measures among the population. It entails aspects such as income, wealth, education and resources. The racial disparities are primary causes of economic inequality in the United States. The United States population is characterized by the unequal distribution of income between the White Americans and the Blacks and Hispanics (Thompson, & Suarez, 2017). In the economic perspective, the economic inequality in the US occurs in the following measures;
Level of unemployment: the high levels of unemployment level among the Blacks and the Latinos create the income inequality among the US population. As long as there is discrimination in the labor market by race, the Minority households end up securing high paying jobs. Besides, the Blacks and the Latinos acquire low-quality jobs with less or no employment benefits as compared to their White Americans counter5parts creating an unequal distribution of income. In cases where the job opportunities are based on education levels, the Blacks and Latinos fail to secure more opportunities as the White irrespective of similar qualifications (Colander, Prasch, & Sheth, 2007). Few of the Blacks and Latinos have the high educational qualifications, and this explains the reason most of them are unemployed. However, developing public policies that promote the achievement of the Blacks and the Latinos can help reduce the economic inequality boosting the economic stability in the US.
Wealth gaps: it refers to the difference in the wealth that the American households have. Wealth refers to the total amount of assets that the families possess including other investments such as bonds and stocks. There is an unequal distribution of wealth among the Whites, Blacks, and Latinos (Herring, & Henderson, 2016). The White Americans hold a more substantial portion of the wealth attributed to the state as compared to the other minority counterparts. The Blacks and Latinos have fewer chances to own an asset such as homes, and they receive low employment incomes affecting their savings and reinvestment. In the long run, the minority group households deplete their assets reducing their wealth. Development of public policies that fuel the racial disparities continues to widen the racial wealth gap and thus posing a threat to the American economy. The aspect of racial wealth gap is analyzed in an in-depth manner below.
The Racial Wealth Gap
The racial wealth gap refers to the absolute difference in the wealth that each of the racial groups holds. In the United States population, the racial wealth gap outlines that the White Americans hold multiple times of wealth as compared to the other minority groups. As per Herring, & Henderson, (2016) the estimated median wealth of the White Americans is $111, 146, the Black Americans are $7, 113 and the Latinos hold $8, 348. Relatively, the Black households own only 6% of the wealth that the White Americans hold translating to a total wealth gap amounting to $104, 033. The Latinos own only 8% of the same rendering to an overall wealth gap amounting to $102,798 as shown in the figure below.

Source: Thompson, J., & Suarez, G. (2017). Updating the Racial Wealth Gap. Finance And Economics Discussion Series, 2015(076r1). http://dx.doi.org/10.17016/feds.2015.076r1
Today, the United States is becoming more diverse as globalization engulfs the economy. In the American history, the past few decades indicate a rapid increase in the wealth inequality among the population. In assessing the proportion of the country’s wealth accumulated in the past few decades by racial grouping, Black Americans and Hispanics possess only 6%, and 8% of the wealth White Americans respectively. The consistent wealth disparities are a result of the historical injustices that have been carried forward to the subsequent periods due to the formulation of economic policies that fail to repair the trend of inequality. The economists often acknowledge the rapid growth of the wealth gap which has an adverse effect on the growth and stability of the economy. Therefore, in an attempt to solve the wealth gap problems, the government should embark on restructuring the racial inequalities that exist in the American population. In order to guarantee more equality in the future, it is not only essential to address the growing the wealth gap but also to confront the public and economic policies that recur and accelerate the carrying on the problem to subsequent periods.
In order to create effective public policies, it is essential to understand the various factors that contribute to the widening of the racial wealth gap. The main aspects include; homeownership, education levels, labor market policy and median household income. The analysis will look at the effects of the public policies in the above aspects and how they determine the distribution of wealth among the racial groups (Thompson, & Suarez, 2017).
Homeownership and the wealth gap
In most of the United States families, home ownership equity marks the most extensive section of the wealth portfolio. However, the homeownership is unequally distributed among the various racial groups therein. The White Americans hold home equity amounting to $86,800 translating to 73% of the total wealth. The Black Americans hold home equity amounting to $46,300 bringing to 45% of the total wealth. The Latinos hold home equity amounting to $48,000 translating to 47% of the total wealth. The figure below illustrates the homeownership rates among the US population.

Source: Thompson, J., & Suarez, G. (2017). Updating the Racial Wealth Gap. Finance And Economics Discussion Series, 2015(076r1). http://dx.doi.org/10.17016/feds.2015.076r1
Homeownership Policy and the wealth gap
The low homeownership rates among the Black Americans and the Latinos are as a result of the past old policies that deter them from accessing the ownership of real estate. The National Housing Act of the US marks the household in these areas as having poor credit rating making it difficult to obtain mortgages from the lending institutions. Consequently, if the black and the Latino households got a chance to gain the mortgages, the lenders would often underwrite higher interest rate as compared to the White families (Chiteji, 2010). It thus discourages the minority groups from having a chance to own homes. Although the homeownership forms the primary section on the total wealth in the US, the country’s public policy has consistently deterred the Blacks and the Latinos from building their housing wealth. Currently, the Blacks and the Latinos have fewer chances to own home and thus translating to a lower median wealth as compared to the Whites.
Equalizing the homeownership rates can help to reduce the wealth gap among the racial households. For instance, upon balancing the rates, the median wealth of the Black Americans rises from $7, 113 to $39,226 indicating $32,113 increase in the total wealth and 31% decrease in the wealth gap. Subsequently, the Latinos’ median wealth shifts from $8, 348 to $37, 561 indicating a $29,213 increase in wealth and 31% decrease in the wealth gap as shown in the figure below.

Source: Thompson, J., & Suarez, G. (2017). Updating the Racial Wealth Gap. Finance And Economics Discussion Series, 2015(076r1). http://dx.doi.org/10.17016/feds.2015.076r1The Homeownership Policies to Reduce the Wealth Gap
Implementation of strict housing non-discrimination laws: Typically, the major reason why the Blacks and the Latinos fail to benefit from the homeownership returns is that of the segregation of the residential areas. It means that the residential homes are divided such that some regions predominantly belong to the Blacks and the Latinos while other areas belong to the whites only (Thompson, & Suarez, 2017). Usually, the residential areas belonging to the minority groups accrue less value leading to a lower wealth rate. Further, the Blacks and the Latinos experience barriers to the acquisition of mortgages and purchase of homes to the White residential areas which accrue higher value. Implementation of the anti-discrimination laws in the US housing laws will increase the potential the Blacks and Latinos have to purchase homes in the residential areas that accrue higher value. As a result, it will boost their median wealth reducing the racial wealth gaps among the groups.
Standardizing the mortgage interest rates; In the analysis above, the high-interest rate on the mortgage is another primary reason that contributes to the low homeownership wealth. The Blacks and the Latinos are subjected to higher rates discouraging them from seeking the mortgages (Chiteji, 2010). Standardizing the mortgage interest rates will motivate the minority group households to request the loan and thus acquire more homes. It will boost the median wealth reducing the racial wealth gap.
Level of Education and the Racial Wealth Gap
Acquiring a college education degree plays a very significant role in boosting the households’ ability to thrive in the labor market, achieve financial stability and further create more wealth. Today, there is an increase in the number of college students enrolling for studies in the United States. The increase is also evident among the Blacks and the Latino population. However, the barriers to completing the college four-year session are increasing among the minority groups as compared to the White American households. The restrictions are increasing due to the increased education costs in which some of the Blacks and the Latinos may fail to afford due to the low wealth proportion. According to Hamilton, & Darity, (2017), an estimate of 34% of the Whites, 20% of the Blacks and 13% Latinos complete the college session. The figure below shows the unequal distribution of the education levels among the racial groups.

Source: Thompson, J., & Suarez, G. (2017). Updating the Racial Wealth Gap. Finance And Economics Discussion Series, 2015(076r1). http://dx.doi.org/10.17016/feds.2015.076r1
The Education Policy and the Wealth Gap
Understanding the public policies decisions is essential in determining the low level of Blacks and Latinos likely to complete the four-year college duration. It is as a result of the past old policies that prohibited slaves from learning and accessing the educational facilities. As a result, it makes the color households fail to have adequate information and the opportunity to prepare their students for college admission (Hamilton, & Darity, 2017). The older generation from the minority group in the US, did not access the adequate education in their time. Usually, the education level and the income of parent play a very significant role in determining the future success of the children education. Since the black and Latinos lack adequate information, it acts as a barrier to the future educational success of the offspring. The residential segregation also deters the Black and the Latinos household from accessing the high-quality education facilities. In earlier times, the Whites attended education facilities that accommodated the white only, while the Blacks and the Latinos attended their color education facilities. The Blacks and the Latinos reside in the less value creating residential areas, and therefore, as the college tuition fees increases, it is difficult to afford to make the students drop before graduation. The situation widens the wealth gap as the Whites have a better chance to achieve a college degree making them thrive in the labor market, gain financial stability and create more wealth.
Equalizing the college graduation rates can help to reduce the wealth gap among the racial households. For instance, upon balancing the rates, the median wealth of the Black Americans rises from $7, 113 to $8,426 indicating $1,313 increase in the total wealth and 18% decrease in the wealth gap. Subsequently, the Latinos’ median wealth shifts from $8, 348 to $11, 876 indicating a $3,528 increase in wealth and 42% decrease in the wealth gap as shown in the figure below.

Source: Thompson, J., & Suarez, G. (2017). Updating the Racial Wealth Gap. Finance And Economics Discussion Series, 2015(076r1). http://dx.doi.org/10.17016/feds.2015.076r1The Education Policies to Reduce the Wealth Gap
The disparity in attaining college education among the racial groups contributes a slight margin to the racial wealth gap. Increasing the rate to which the Blacks and the Latinos attain and a complete college degree can help in reducing the racial wealth gap by improving the median wealth of the households therein. In order to achieve this, some education policies can be implemented. Although the education policies may not eliminate the wealth gap ultimately, they can help in reducing the wealth gap gradually. They include the following;
Establishing affordable college education system: The state should dedicate a significant part of the investment in financing the higher education expenses in the public education facilities. It thus enhances the possibility of the Latinos and Blacks attending college without any tendencies of experiencing a financial problem or seeking debts to finance the education. Moreover, when the college costs are lower, it increases the chances of the Blacks and the Latino households to enroll for the program (Hall, 1995). Therefore, the federal government should encourage the states to dedicate a significant part of their revenue in investing in the higher education for the population. In this case, the federal government should offer higher education grants to the states that strive to maintain the minimum education cost per student as much as possible. Additionally, the federal government should provide education grants for the countries that also offer debt-free higher education to the households with moderate low and low-income levels.
Establishing universal, affordable and high-quality preschool facilities; Most of the Black and Latino children lack a good education foundation leading to inadequate preparation to join the higher education system. The children fail to access the early childhood education facilities as they appear to be very expensive and thus difficult to afford. The available services are of poor quality. Establishing universal, affordable and high-quality preschool facilities helps the children from the minority groups to access the early childhood experience making them more prepared to learn. As a result, it helps reduce the racial wealth gap therein (Kuebler, 2013).
Developing racially integrated education facilities: The segregation of the residential homes among the racial groups also makes the children attend segregated education facilities. As a result, the color students end up attending the low-quality education facilities. Education policies that promote desegregation and boosting racial integration in the education facilities help to reduce the racial disparities. Following the implementation of the standardized quality of education, all the children have equal chances to attain the college education reducing the racial wealth gap.
Making the funding of the education system more equitable; Since the Black and the Latinos have lower wealth appropriation as compared to the Whites, they end up accessing the poor resourced education facilities. The schools have inadequate resources, less experienced facilitators, and few or no more advanced courses as compared to the education facilities that the White children attend (Hamilton, & Darity, 2017). The poor quality education leaves them inadequately prepared for the higher education program. The federal government should create education policies that create and equitable funding system to all the population in the United States. It establishes education benefits to the Blacks and the Latinos reducing the racial wealth gap.
Labor Markets and the Racial Wealth Gap
The American population generates a significant proportion of their wealth and economic stability from the labor market. It entails the basic income and the additional benefit such as employer health coverage, pension retirement schemes, and paid leave among others. The income earned gives the household an opportunity to build more wealth. In this case, the chance to create wealth is defined by the ability of the family to spend and retain some amount for savings and reinvestment (Kuebler, 2013). However, only the families with the employment opportunities have the chance to enjoy the benefits. For instance, if an employer provides affordable health insurance coverage, the employee ends up spending less money on health care that it would be the case if the employee had to acquire a private insurance cover. The type of the insurance coverage that the employer provides contributes directly to the household wealth and the racial gap as well. Additionally, unemployment also contributes to the racial wealth gap because lack of employment income makes the households to exhaust their assets contributing to the widening of the racial wealth gap.
Furthermore, the inequality in the labor market occurs as a result of various instances such as employment discrimination, different social capital, an inability to access a job in some geographical regions. In the American population, the Black and the Latinos had lower median employment incomes and compared to the White counterparts. According to Kuebler, (2013), Blacks make $32,028 annually; Latinos earn $36,840 annually and the Whites $50,400 annually as shown in the figure below.

Source: Thompson, J., & Suarez, G. (2017). Updating the Racial Wealth Gap. Finance And Economics Discussion Series, 2015(076r1). http://dx.doi.org/10.17016/feds.2015.076r1
The Labor Market Policy and the Wealth Gap
The racial inequality in the US labor markets is as a result of the carrying forward of the old labor laws that promote discrimination in the workplace. However, the federal law developed the Civil Right Act that forbids the employment discrimination based on race, gender, color, and level of education among other aspects. Nevertheless, the public policy decisions that aim at maintaining fair labor standards and the immigration laws prohibit employees from exercising their full rights in the workplaces (Williams, 2011). The segregation of the job categories persists in the United States job market creating a disadvantage to the Blacks and the Latinos. It explains the reason the Blacks and Latinos have lower employment income as compared to the White Americans. Not only do the Blacks and the Latinos receive lower median employment income, but also they tend to access jobs that fail to provide the critical employment benefits such as health insurance, paid leave and pension retirement plans. The benefits are a necessity and thus the household and up spending a significant portion of their income in financing the essentials leaving less income for savings and reinvestment. The blacks and the Latinos could opt to seek better jobs with higher benefits, but their low college education levels prohibit the chances. The persistent employment discrimination makes the Whites earn more income than the Latinos and the Blacks irrespective of similar academic qualifications. The central element that fuels the persistent bias is the failure of implementing effective public policies in the labor market. The existence of labor market disparities in the US market continues to widen the racial wealth gap (Kuebler, 2013).
Equalizing the median employment income reduces the disparities that exist among the racial groups and thus can help to reduce the wealth gap among the ethnic households. For instance, upon equalizing income levels, the median wealth of the Black Americans rises from $7, 113 to $18,601 indicating $11,488 increase in the total wealth and 11% decrease in the wealth gap. Subsequently, the Latinos’ median wealth shifts from $8, 348 to $17, 113 indicating an $8,765 increase in wealth and 9% decrease in the wealth gap as shown in the figure below.

Source: Thompson, J., & Suarez, G. (2017). Updating the Racial Wealth Gap. Finance And Economics Discussion Series, 2015(076r1). http://dx.doi.org/10.17016/feds.2015.076r1
The Labor Market Policies to Reduce the Wealth Gap
The disparities in the United States labor market widen the racial wealth gap. Instead of rushing to implement policies that aim at reducing the levels of unemployment among the Black and the Latino households, the federal governments can derive policies that improve the wage rates, boost the benefits and o provision of career development opportunities can help to increase the median employment income of the households therein. Implementation of the following public policies can help to diminish the racial wealth gap that exists.
Establishing the minimum wage rate: Most of the Black and Latino households have limited chances to get jobs in firms offering either the minimum wage or higher. Sometimes, they end up not receiving some of the critical employment benefits. Establishing a standardized minimum wage rate can help boost the income of the lowest paid black and Latino workers. It helps in reducing the racial wealth gap (Williams, 2011). Furthermore, advocating for the mandatory provision of employment benefits to all workers across the state can create an advantage for the Black and Latino workers who fail to receive the said benefits.
Developing federal job creation programs: Although the United States economy appears to have a positive outlook, the levels of unemployment among the Blacks and the Latinos remain high. Notably, most of the teenagers and youths in the households are unemployed. Developing direct federal job creation programs can help create job opportunities for the Blacks and Latinos. The new job opportunities can be useful in delivering essential services to the public including the development of infrastructure, provision of child care, caring for the elderly and upgrading the culture of the state. The federal hiring programs should focus on the areas where the levels of unemployment are very high surpassing the national unemployment average. As a result, it helps minimize the levels of unemployment among the Blacks and the Latinos and thus shrinking the racial wealth gap as a consequence.
Allowing formation of workers unions: Over the decades, the labor unions are dominated by the White workers who often prohibit the Black and Latino workers from securing high-quality jobs. Besides, the rates to form and join a union are higher for the Black and the Latino employees than the White worker. It thus discourages them color household from seeking the union services. The worker’s unions are essential in advocating for better employment salaries and increase the chances of accessing the critical employment benefits such as health insurance coverage and better pension retirement programs. Making a public policy that allows the worker irrespective of the racial group to form unions can help to boost the employment income of the lowly paid Blacks and Latinos. As a result, it diminishes the racial wealth gap in the process (Williams, 2011).
Discussion and Conclusion
The economic and public policies play a very significant role in confronting the racial wealth gap. The recommended public policies to reduce the wealth gap aim at increasing the achievement of the Blacks and Hispanics in homeownership, college attainment, and employment income. Although the procedures do not eliminate the wealth gap, it helps in minimizing the disparities that face the population in the United States. As the wealth gap widens, it creates a threat to the economic stability of the nation. Besides, unequal distribution of resources among the population of any particular state indicates a weak economic position (Williams, 2011). In making the public policies, the policymakers should not only concentrate on eliminating the racial disparities but also remove the old policies that fuel the misappropriations and create advantages to the Whites only. The findings suggest that the policymakers should dwell on the policies that address the inequality in homeownership and employment income in order to efficiently reduce the racial wealth gap.
From the above analysis, the concept of race plays a very vital role in developing economic and public policies. Racial problems and disparities create significant challenges to the economy of the United States. The main issues being economic inequality, alleviation of the poverty level and widening of the racial wealth gap are indicators of a weak economic position. Although the challenges are interrelated, the racial wealth gap is the primary element that leads to the rise of the other problems.
Recommendations
Therefore, the policymakers should concentrate on addressing the widening racial wealth gap in order to make easier to deal with other problems. Moreover, in addressing the wealth, it is essential to focus on all elements including homeownership, college education and income in the labor market collectively rather than concentrating on the one aspect; discrimination in the workplace as it has been the case.

References
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