Institute on Assets and Social Policy

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Racial Wealth Audit™

IASP research has notably revealed the importance of policy as the biggest drivers of widening wealth inequalities by race, highlighting that policy can also both exacerbate and combat wealth disparities (Shapiro, Meschede et al. 2013), even when these policies did not have explicit intentions to impact wealth inequality by race. In fact, some well-intentioned policies have had unwittingly negative impacts on the racial wealth gap (Shapiro 2004). Frequently, policy impacts on the racial wealth gap are and have been unintended consequences of policy design, rather than explicitly part of policy efforts.

Currently, the best organizational tools and simulations with the capacity to project policy consequences focus on distribution by income. Thus, there is a clear need for a new tool which allows policymakers and analysts to focus policy deliberations on the direct impacts of policies on the racial wealth gap. Given the value of bringing a racial wealth analysis frame to policy deliberations, the Racial Wealth Audit™ is a new framework and empirical tool that assesses policies on disparities in wealth by race. This tool facilitates constituency, organizational, advocate, and policymaker equity-based engagement in the policy process and public debate. To avoid direct and negative impacts on the racial wealth gap, we need to assess potential impacts of current and proposed policies on the racial wealth gap as a normal feature of the policy process. 

The Racial Wealth Audit™ serves as a policy analysis tool to help better understand how a policy or program may impact the racial wealth gap. We have designed it for multiple audiences and uses that: 1) assesses policy proposals; 2) analyzes current policy; 3) assists policy design by locating the ‘sweet spot’ features that close the gap; 4) examines institutional reforms; and 5) interrogates narratives that purport to explain the main causes of racial inequality, such as personal responsibility, marriage, child-bearing, and conspicuous consumption. By providing an instrument for assessment of policies’ impacts on the racial wealth gap, the Audit helps to bring to the forefront how policy affects disparities in wealth by race, a much needed but thus far, often overlooked equity perspective.

The Racial Wealth Audit™ involves a few analytical steps. The baseline is representative data that provide an empirical understanding of wealth for different groups and the major determinants of wealth accumulation. From this real starting position, changes to wealth are predicted for a proposed policy across the affected population. This can involve a number of assumptions, but we utilize the most conservative assumptions possible.  Focusing on a single point in time for the expected changes, such as immediately, 1 year ahead, or 5 years ahead, the Racial Wealth Audit™ then examines impacts on the racial wealth gap.

Once predicted changes in wealth are established, the Racial Wealth Audit™ looks at the differences in the racial wealth gap at the 50th percentile between whites and households of color, focusing on African-Americans and Latinos. The Racial Wealth Audit™ determines the change in the racial wealth gap before and after the policy. This allows us to specifically and concretely compare policy options with each other as different iterations of a proposed policy may produce differing impacts on the racial wealth gap. By including impacts on the racial wealth gap as part of the decision-making process, the Racial Wealth Audit™ adds important information to policymakers’ decision-making resources, highlighting the impacts on the racial wealth gap as a key outcome that may be affected by the adoption of a new policy.

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