9.5b The Racial Wealth Gap
The income gap between racial groups is shrinking but persistent (see Chapter 7). The wealth gap, however, remains a significant source of stratification (see Oliver & Shapiro, 1989; Sullivan et al., 2024; Chapter 7).
In 2019, the U.S. Federal Reserve found substantial differences in wealth for White, Black, and Hispanic families. The average White family has six times as much wealth of the average Black family and five times as much as that of Hispanic families (see Figure 9.9).
Figure 9.9
Median and Mean Amount of Wealth for White, Black, and Hispanic Families, 2023
Data based on Aladangady, A., Chang, A. C., & Krimmel, J. (2023, October 18). Greater wealth, greater uncertainty: Changes in racial inequality in the survey of consumer finances. Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/econres/notes/feds-notes/greater-wealth-greater-uncertainty-changes-in-racial-inequality-in-the-survey-of-consumer-finances-20231018.html
More than half (61.7%) of a typical household’s wealth comes from home equity (the value of one’s home exceeding what they paid for it) and retirement accounts (Hays & Sullivan, 2020). A household’s ability to accumulate these specific forms of wealth is due to many historic factors mentioned in this chapter that enabled some families, particularly White families, to buy homes and pass wealth from one generation to the next through inheritance (see Figure 9.10; Chapter 7).
Figure 9.10
Percentage of U.S. Adults Who Could Rely on Family or Friends for Inheritance or an Unexpected Expense, by Race
Data based on Bhutta, N., Chang, A. C., Dettling, L. J., & Hsu, J. W. (2020, September 28). Disparities in wealth by race and ethnicity in the 2019 survey of consumer finances. Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.htm
Economists analyzed historical data, including the U.S. Census and tax records and concluded that today’s racial wealth gap between Black and White U.S. adults traces back to their unequal starting points during U.S. slavery (Derenoncourt et al., 2022). These researchers argue that even if Black and White households save at the same rate and have the same profits on investments (capital gains), a wealth gap persists today because the wealth gap between Black and White households at the time of the Civil War was so massive.
The wealth gap has grown even wider since the 1980s, because White households hold more wealth in stocks. Black households have more of their wealth in housing and less in the stock market. Houses have increased in value by four times, but stocks have increased to five times their value (Derenoncourt et al., 2022; Hartmann, 2024). Therefore, White households have seen their wealth increase significantly. Black households have seen their wealth rise more slowly. Historic disadvantages thus continue to shape the racial wealth gap.
Photo 9.17
A White Family Moving Into Their New Home
