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The Racial Wealth Gap

Since the founding of the United States of America, the mean and median wealth (net worth) of white families has been significantly greater than that of Black, native american, and hispanic families. This racial wealth gap continues to increase and there is a gross lack of financial inclusion for each of these groups at every level of the financial system. The racial wealth gap is a prominent racial equity issue as it leaves individuals and families of color, and specifically Black families, at a severe economic disadvantage that lingers and compounds over generations. 

While income is generally used to evaluate economic well-being and progress, wealth encompasses all resources related to asset accumulation, and thus sustainable economic advancement. 

Slavery, economic terrorism (Tulsa & “Black Wall Street”), and exclusionary events, policies, and practices are examples of the myriad of historical barriers that prevent black individuals and families from participating in structures that create generational wealth for their white counterparts. There are systemic obstacles to receiving higher education, buying homes or assets to pass to the next generation, and participating in financial markets to fuel dreams and investments for the future. As educational attainment, inheritance, and portfolio composition play key roles in asset accumulation and transmission of wealth from one generation to the next, a wide racial wealth gap remains. 

In fact, data from the 2019 Federal Reserve Board Survey of Consumer Finances (SCF) reveal that ownership participation and the median value of assets held by white families versus all other races amount to nearly double the participation in ownership of homes, businesses, stocks, bonds, mutual funds, and defined-contribution retirement accounts. Accordingly, the median net worth of a white family was $184,000 in comparison to $38,000 and $23,000 for hispanic and black families, respectively. This means that the median wealth gap between Black and white families is twelve cents per dollar of white wealth. When we unite these statistics, it is clear that white families are much better financially positioned for the present (current median net worth) and future (current ownership participation; as assets grow over time). 

Recap:

Mehrsa Baradaran stated it best in The Color of Money: “The [racial] wealth gap is where historic injustice breeds present suffering.” Because black people were assets (slaves) then financially suppressed after the aboliton of slavery, fierce effort must go into black asset accumulation and financial inclusion if this gap is ever to be closed. This must also be done for all racial groups that have been historically excluded from the financial system. Financial inclusion involves crystalizing access to useful and affordable financial products and services, including credit, savings, and insurance, in sustainable policy, law, and action. 

Citations:

https://www.federalreserve.gov/econres/scfindex.htm

https://www.stlouisfed.org/on-the-economy/2021/january/wealth-gaps-white-black-hispanic-families-201…

https://www.federalreserve.gov/econresdata/feds/2015/files/2015076pap.pdf

https://www.lareviewofbooks.org/article/banking-against-black-capitalism-on-the-color-of-money/

https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-case-for-accelerating-…

https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/

https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-…

https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-economic-impact-of-clo…

https://www.brookings.edu/research/closing-the-racial-wealth-gap-requires-heavy-progressive-taxation…

https://www.un.org/sustainabledevelopment/sustainable-development-goals/

https://www.worldbank.org/en/topic/financialinclusion/overview

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