Income inequality is an important issue in the United States, and a lot of people, including President Obama, are trying to figure out solutions. But, income inequality isn't the only economic challenge rankling America. Wealth inequality is also a big issue slowing down our economy, and it isn't necessarily going to be solved by the same policies that address income inequality.

Wealth inequality versus income inequality.

Wealth inequality is a productive lens through which to evaluate policies and programs that attempt to address inequality more generally. If we assume that the world is fair, we tend to perceive that anyone who has difficulty succeeding has individual failings. The structure of our society makes upward social mobility nearly impossible. However, there are policies, both historical and contemporary, that affect groups' abilities to obtain and maintain wealth. Research has shown that systematic discrimination and discriminatory policy drive wealth inequality more than individual actions do.

Due to laws and unofficial policies in the U.S., the ability to accrue wealth has historically been split along racial lines. Racial wealth inequality has persisted to this day so that even people of color with high incomes have more difficulty building wealth than whites. Like income inequality, wealth inequality disproportionately impacts people of color and is directly affected by government policies. So much so that it persists in spite of the individual achievements of people of color and gains in overall racial equality.

The cycle of wealth inequality.

Historically, government policies (such as slavery, Jim Crow laws, and redlining) have made it difficult for minorities (particularly Blacks) to build intergenerational wealth. If your great-grandparents were slaves and your grandparents dealt with Jim Crow laws and redlining and your parents dealt with the predatory lending practices (that disproportionately financially affected people of color in the last recession), there is an increased chance that each generation had a difficult time making, saving, and leaving money to be passed down to their descendants.

Black and Latino families are less likely that whites to receive inheritances or family gifts that they can use to pay for college, start a business, or buy a home. Home ownership is the number one way that Americans build wealth. Difficulty building intergenerational wealth means that it is more likely that minority families will delay, or forgo, buying homes. This means that when their children are ready to start college, they are likely to have been unable to build the wealth needed to send them to college without the use of loans. As the price of college skyrockets for everyone, more people are relying on student loans, regardless of race, but students of color are disproportionately affected

"Today’s average college graduate holds $26,600 in debt when he or she graduates, and the numbers for borrowers of color are more severe. A 2010 study by the College Board Advocacy & Policy Center found that 27 percent of black bachelor’s degree recipients had student-loan debt of $30,500 or more, compared to just 16 percent of their white counterparts. Additionally, 69 percent of black students who did not finish their college degree cite the high cost of tuition, compared to 43 percent of their white peers." - Americanprogress.org

Whether or not they graduate, people of color face discrimination in the labor market that leads to their having lower incomes than their counterparts. They are also burdened with higher student loan payments, which make it more difficult to save. Lacking savings makes it more difficult to pass on intergenerational wealth, and the wealth inequality cycle continues.

The startling numbers.

Demos and the Institute on Assets and Social Policy at Brandeis University worked together to create a tool to assess how a current or proposed policy will affect wealth inequality along racial lines. It's called the Racial Wealth Audit tool.

The Racial Wealth Audit tool is used to evaluate policies in three areas: home ownership (and returns on home investment), income inequality (and returns on income), and college graduation rates (and return on degrees). You can read the whole report here. The specific findings vary for each area, but, in each area, individual achievement produced unequal results based on race.

For instance, even though a college education is often discussed as a cure-all solution, the tool finds that the effect of obtaining college degrees only modestly affects wealth inequality because Blacks and Latinos get a lower return on their degrees. In 2011, 34 percent of whites, 20 percent of Blacks, and 13 percent of Latinos had obtained four-year college degrees. For every dollar Black households accrue as a result of having a degree, white household accrue $11.49. For every dollar accrued by Latino families as a result of a degree, white households accrue $13.33. In other words, for groups that have been historically discriminated against, degrees make less of a positive impact. Equal accomplishment does not result in equal gains.

Here's what the tool said would happen to the wealth gap if college graduation rates were equal.

"If public policy successfully eliminated racial disparities in college graduation rates, median Black wealth would grow $1,313 and the wealth gap between Black and white households would shrink 1 percent. Median Latino wealth would grow $3,528 and the wealth gap with white households would shrink 3 percent.

"If public policy successfully equalized the return to college graduation, median Black wealth would grow $10,786 and the wealth gap between Black and white households would shrink 10 percent. Median Latino wealth would grow $5,878 and the wealth gap with white households would shrink 6 percent."

One of the major reasons is the high cost of college. Due to wealth inequality, Black and Latino families are more likely to take on student loan debt to cover rising college costs and take on more debt than their white counterparts. This makes them more likely to not attend college or to drop out before completion.

Here's what the research says about the wealth disparity in homeownership:

"[I]n 2011 the median white household had $111,146 in wealth holdings, compared to just $7,113 for the median Black household and $8,348 for the median Latino household. From the continuing impact of redlining on American homeownership to the retreat from desegregation in public education, public policy has shaped these disparities, leaving them impossible to overcome without racially-aware policy change."

If homeownership were equal, the wealth gap between Black and white households would shrink by 31 percent and between Latino and white families by 28 percent.

Suggestions for reducing educational inequality:

Demos made several suggestions for policies that could reduce the racial wealth gap in all three areas (home ownership, college graduation, and income inequality), and more importantly on how to increase the returns for each. The educational suggestions are policies that would be good for everyone -- not only because better education would be better for everyone, but also because wealth inequality slows overall economic growth. For educational reform, they suggest public investment in pre-school in poor communities, equitable K-12 funding, school integration (students of color are more likely go to segregated, poorly funded, public grade schools that do not prepare them for college), and making college more affordable.

Unless the effects of historical and contemporary discriminatory policies are mitigated, individual accomplishment won't be enough to reduce the racial wealth gap.