Monday, August 22, 2016

The Growing Ethnic/Racial Wealth Gap

A study by Dedrick Asante-Muhammad, Chuck Collins, Joshn Hoxie and Emmanuel Nieves at the Institute for Policy Studies looks at the racial wealth divide in the United States and the futility of trying to get ahead when you're not a white American.  The study looks at the accumulation of wealth in the United States over the past three decades, a problem that has become particularly prominent since the Great Recession, and projects what it will look like over the next three decades.  This study is particularly pertinent given the obvious social disparity in the U.S. and the connection between civil unrest, poverty and race.  Let's look at some of the key observations that the authors of the study have made.

Let's start by looking at a table that shows how household wealth has changed for Black, Latino and White households over the period between 1983 and 2013:

As you can see, in 2013,  average White households were by far the wealthiest, having 7.7 times the household wealth of an average Black household and 6.7 times the household wealth of an average Hispanic household.  As well, over the three decade period prior to 2013, Black households saw their wealth rise by 26.9 percent compared to 69 percent for Hispanic households and 84.8 percent for White households.

Other key measures of prosperity also show Black and Hispanic households falling behind their White counterparts:

1.) Homeownership:  71 percent of White households own their homes compared to 41 percent of Black households and 45 percent of Hispanic households.

2.) Unemployment:  White workers have an unemployment rate of 4.4 percent compared to 8.6 percent for Blacks and 5.8 percent for Hispanics.

3.) Earned Income:  A median White household earns $50,400 compared to $30,400 for Black households and $37,400 for Hispanic households.

4.) Use of Alternative Financial Services including cheque cashers and non-bank entities:  18 percent of White households use these high fee service providers compared to 46 percent of Black households and 40 percent of Latino households.

5.) Retirement Savings:  White households have an average of $130,472 in retirement savings compared to $19,049 for Black households and $12,329 for Latino households.

With this data in mind, let's look at what the future holds for all three people groups.  Here is a graph showing what household wealth will look like for Black, Hispanic and White households over the next three decades (to 2043) if the trends are the same as they were from 1983 to 2013:

By 2043, the authors' projections show that White households would experience an average annual wealth increase of $18,368, bringing their total household wealth to $1.2 million.  Black households would see their annual average wealth increase by $765, bringing their total household wealth to $107,000.  Hispanic households would see their annual average wealth increase by $2,254, bringing their total household wealth to $165,000.  In 2043, average White household wealth will be 11.2 times the household wealth of an average Black household (up from 7.7 times between 1983 and 2013) and 7.3 times the household wealth of an average Hispanic household (up from 6.7 times between 1983 and 2013).

While this growing racial/ethnic wealth divide is interesting, what is even more interesting is, that by 2044, the U.S. Census Bureau projects that non-White households will account for less than half of all U.S. households in what they term as the "majority-minority" scenario.  By 2020, more that one-half of the nation's children will be part of a minority race or ethnic group.  This means that this very significant and racially-linked wealth disparity will impact more than half of American households.

The authors then projected how long it would take for Blacks and Hispanics to overcome this significant wealth disparity.  Assuming that White household wealth doesn't increase in the future (a highly unlikely scenario), it would take Latino households 84 years to accumulate the same wealth as White families have today (i.e. the year 2097).  In the case of Black families, the situation is even worse as shown on this graphic:

Let's close with one more interesting fact; the list of billionaires on the Forbes 400 list contains only two African-Americans and five Latinos.  These seven families own more wealth than the entire Black population and one-third of the Latino population in the United States combined.  Now that's inequality at its best/worst!

The massive and growing ethnic/racial wealth disparity in the United States is increasingly expressing itself as social and political unrest.  The sense of economic helplessness has grown, particularly since the Great Recession, and millions of non-Whites (and poorer Whites for that matter) are feeling as though they are being left further and further behind with no hope of providing for their futures or for the futures of their offspring.  The notable presence of public policies that exacerbate racial and economic inequality and the lack of will by Washington to change the system mean that the ethnic/racial wealth gap is becoming more firmly entrenched in society.  


  1. Replies
    1. The study did not include Asians, however, the authors noted that Asian households have seen their incomes rise steadily and have passed Whites in median income and will pass them soon in median wealth. The problem with the data is that Asians are grouped together as one racial category rather than by ethnicity (i.e. Chinese, Japanese etcetera) so the data is rather suspect.

      Thanks for your interest.

  2. This study is flawed because of Warren Buffet and Bill Gates. Use Median household income, not average or mean income. I know of very few white households that make over half a million in income. This is a crock.