In Charleston County, nonwhite residents are twice as likely to have at least one debt in collections as their white counterparts, according to a recent Urban Institute study.
The driving force behind the data, updated in late December 2019, isn’t a wage gap between white and nonwhite, which has persisted nationwide, but rather the racial wealth gap. While wages measure short-term earnings, wealth is built over time through savings and investments, compounding stark wage gaps into even-more-striking disparities in accumulated wealth over time.
“Both sides of the wealth gap have been increasing, and that’s partly a function of incomes growing unequally,” says Calvin Blackwell, chair of the College of Charleston’s economics department. “One of the things that we know is that the more income you get, the more you’re able to save, so inequality in income is going to be translated into inequality in savings.”
Blackwell cautions that people should be careful to not measure the wealth gap as an absolute value rather than a rate of growth. Doing so can often lead to an overshadowing of the underlying cause of the difference in the first place.
Until relatively recently, it was thought that the lingering effects of slavery and Jim Crow were to blame for the racial wealth gap. That may have been true until the early 1960s, but research in the past five years has found that labor income disparities have enabled and exacerbated the wealth gap that persists today, long after the immediate impacts from institutionalized racism within the nation’s financial and legal system.
“It’s certainly an interesting phenomenon,” Blackwell says. “It does seem to differ substantially by where you are, but if you look at that map, the Corridor of Shame they call it, every one of those counties are in the highest level of debt. I don’t think that’s an accident.”
All of these factors have led to the numbers shown by the study, with Charleston County stacking up similarly to the state and national averages, albeit with much greater disparity between the communities.
Overall share of communities with any debt in collections, according to the report:
Charleston County – White communities: 28 percent. Communities of color: 58 percent.
South Carolina – White communities: 37 percent. Communities of color: 57 percent.
National – White communities: 26 percent. Communities of color: 42 percent.
The exact numbers fluctuate, but the pattern of inequality rings true in all three debt categories observed in the study: medical debt, student debt, and auto debt. In all cases, the gap between white and nonwhite communities in Charleston is higher than both state and national averages.
Tax policies that attempt to chip away at wage and wealth disparities have been shuffled through popular policy circles in recent years, from universal basic income to provide a more progressive base income, to Medicare for All or Green New Deal proposals that seek to eliminate one of the root causes of debt and inequality.
Regardless of the policy, Blackwell is quick to point out that a goal of simply closing the gap won’t be the silver bullet.
“I’m not so sure that focusing on the gaps is the most useful thing to do,” Blackwell explains. “The idea that if you’re growing at the same rate, but have a different base, the gaps are going to increase, implies that you need to slow the rate of growth for the upper level of the community and increase the bottom level. But, it really comes down to if we can raise the rate of growth of the folks at the lower end of the spectrum enough for them to catch up.”
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