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The income gap between blacks and whites is highest since 1989
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Even as Americans acknowledge gains in racial equality, new research shows that by at least one measure financial the U.S. still has a long way to go.

A recent Pew research study indicates that the financial gap between blacks and whites is the highest it's been since 1989.

In 2010, the median wealth of white households was eight times higher than blacks; now that figure has leapt to 17 times, the highest rate in two decades, according to Pew Research Center analysis of data from the Federal Reserves Survey of Consumer Finances.

Experts say that low and middle-class households have been the slowest to recover from the Great Recession, especially minority households. "We have seen a remarkable increase in the incomes of the top 1 percent of households over the past decade, with almost no gains in the incomes of the bottom 99 percent," said Mark Frank, professor of economics and international business, Sam Houston State University.

"Given that minority communities are already underrepresented within the top 1 percent of households, these forces that have increased overall income inequality in the Unites States have been particularly difficult on minorities."

Some states fare much better than others, however, according to data from personal finance site WalletHub, which analyzed states to see where the financial gap is the greatest.

Many states in the South had smaller wage gaps including West Virginia, Kentucky and Florida, which came in at number one with the lowest gap. Midwestern states showed larger wage gaps, with Wisconsin, Nebraska and Minnesota bottoming out the list.

Wages and wealth

Federal Reserve data show a striking divide in the economic recovery of white versus black households. From 2010 to 2013, white median wealth increased by 2.4 percent, according to the Pew study. Meanwhile, median wealth for black households dropped by 33.7 percent.

WalletHub analyzed 21 metrics, including gaps in median household income, unemployment rate, poverty rate, educational attainment and rates of uninsured.

One factor that stood out was home ownership, says Jill Gonzales, spokeswoman for WalletHub. "In the states at the bottom of the list, home ownership has not fared well for the minority community," says Gonzales, while states at the top of the list like Vermont and Alaska have policies to help get minorities into homes.

Foreclosures and loss of homes has also had a bigger impact than expected, she said. "A lot more things stem from home ownership, or lack thereof, than we give credit," she says.

"Losing a home has a snowball effect on families it leads to homelessness, moving to bad neighborhoods. Kids are less likely to graduate from high school, and the education attainment gap grows."

Financial assets, like stocks, have recovered quickly since the recession, and white households are much more likely to own stock accounts, according to the Pew report.

Since the recovery started, Americans across the board have lost assets, but the decrease is proportionally larger for minorities. The homeownership rate for non-Hispanic whites fell two percentage points from 75.3 percent to 73.9 in 2010, compared to a 6.5 percent drop among minorities, from 50.6 percent in 2010 to 47.4 percent in 2013.

Home ownership and stocks are indicators of a problem not just with income but with wealth, experts say. "The racial income gap has been pretty persistent over the past decades. The racial wealth gap, on the other hand, has been growing during and since the recession," says Tatjana Meschede, lecturer in social policy at Brandeis University.

"There are a number of reasons, including targeted sub-prime mortgage loans to communities of color, resulting in high rates of foreclosure and wealth loss."

Bridging the gap

What policies could help close the gap? Licensing and permits are one place to look, says Steven Horwitz, professor of economics at St. Lawrence University. Licensing regulations usually favor people already in service sectors and prevent new businesses from flourishing, he says.

"If you need to spend a couple thousand dollars on classes before you can get a cosmetology license or cut hair and you're poor, that's what we call a huge barrier to entry," says Horwitz, who believes that entrepreneurial opportunity is key.

The same applies to hair braiding places, he says, or laws that prevent people from making caskets without a license, or practicing as interior decorators.

The problem is not that minorities aren't business-minded, he says. "They are plenty entrepreneurial; regulations prevent them from exercising entrepreneurial ability in way that will be profitable and serve their neighborhoods." He points to high entrepreneurial spirit in low-income communities in activities that have a low cost to entry, like the drug trade.

Likewise, professor Omar Ali, who specializes in African studies at the University of North Carolina at Greensboro, says that African-Americans have faced setbacks in opportunity due to Jim Crow laws and institutional discrimination. Inability to get loans and protections like disability insurance (a congressional investigation found that blacks were much more likely to be turned down for disability insurance), contribute to financial setbacks.

He recommends educational improvements with an emphasis on "development" education for youths or the ability to recognize opportunities and take advantage of them.

"Development that is, our capacity to recognize opportunities and take advantage of them is something that middle-class and wealthier people in the nation tend to be able to exercise more frequently and better (like a muscle) more than poor people," he says.

He supports programs that give urban kids the same kind of exposure that middle-class kids get, like summer programs that allow students to go to museums, travel and stimulate curiosity and intellectual growth. The All Stars Project in Greensboro, for example, offers after-school programs that emphasize performance and play for urban students of color, and brings together business leaders to teach them to navigate the corporate world.

"Instead of trying to test students and assess work ad nauseam, let's create more opportunities to play and try out new things," he says.

"There's no denying that there is inequality out there," says Horwitz. "But it's more about unequal access to opportunity."