The American Racial Wealth Gap - Part 1
Updated: Nov 6, 2019
“I’ve heard of it…” “It’s not that bad…” “Yeah, but look at Oprah!” are some responses one may hear when trying to discuss the U.S. racial wealth gap with someone who is white. A 2018 survey found that whites severely underestimate the size of the racial wealth gap. They think that black wealth is about 80% that of whites (which is closer to the income gap). Data from the U.S. Census Bureau reveals that black wealth is about 7% that of whites. In 2014, the median net worth of non-Latinx white households was $130,800. The median net worth of black households was $9,590. It was $17,530 for Latinx households. Native American wealth has not even been measured since 2000 but at that time, their median household net worth was just $5,700.
The wealth gap refers to the difference between the median wealth of people of color versus the median wealth of whites. Almost all studies calculate wealth by adding up total assets (such as cash, retirement accounts, home, etc.) then subtracting liabilities (such as credit card debt, student loans, mortgage, etc.) The resulting figure is the net worth.
That gap is worsening, growing wider with each passing year. Between the years 1983 and 2013, white households saw their wealth increased by 14%. But during the same period, black household wealth declined 75%. Median Latinx household wealth declined by 50%. It is projected that with no change in policy, by 2053 (about ten years after it is projected that racial minorities will comprise the majority of the nation’s population) median black household wealth will reach zero. Twenty years later, the median Latinx household wealth is also projected to reach zero. But this is only if the wealth gap is left unaddressed and not made worse. With current trends in administrative practices, policies that widen the racial wealth gap are likely to develop.
This racial wealth gap exists even among blacks who are highly educated and come from two-parent homes. Black families with graduate or professional level degrees have approximately $200,000 less in wealth than similarly-educated whites. Black or Latinx college graduates don't even have as much wealth as white high school dropouts. Two-parent black households have less wealth than single-parent white households.
The causes of the racial wealth gap are numerous and wide but all stem back to slavery. Until 1863, slavery prevented blacks from building any type of wealth. From 1863 to the Civil Rights Act of 1964, Jim Crow laws prevented black people from being able to gain substantial wealth. Those that did rise above segregation and economic oppression were beaten, bombed, and killed.
As part of The New Deal, the Federal Housing Administration (FHA) created loan programs to help make home ownership accessible to more Americans. The government created color-coded maps, with green for good area and red for bad areas, to decide who would get these loans. Many of the neighborhoods that were designated as red were ones with people of color. This practice, known as redlining, not only made it harder for those who were not white to access loans to buy homes it encouraged developers to actively discriminate against people of color. The white neighborhoods were growth building machines, with new businesses moving to these areas which increased property values and lead to increased job opportunities. This increased and compounded wealth building for whites to be passed on through generations. Meanwhile, people of color were continually segregated from these high growth areas, resulting in wealth disparity from which the United States has never recovered.
Written by Caroline Cooper