Washington, D.C. — The wealth gap between black and whites families in America is inextricably linked to America’s history of structural racism. A new report out today concludes that this gap is deepening. The report recommends targeted policies that are necessary to ensure African American families can build wealth similarly to white families in America.
The Center for American Progress found that even when African Americans pursue higher education, purchase a home, or get a good job, they still lag behind their white counterparts. The report, “Systematic Inequality: How America’s Structural Racism Helped Create the Black-White Wealth Gap,” details the key factors that contribute to the vicious cycle of persistent wealth inequality, including structural obstacles such as employment discrimination; housing discrimination and segregation; less access to critical savings vehicles; and costlier debt. These factors result in African Americans having fewer opportunities to obtain and build wealth over time. The figures compiled by CAP are disturbing.
African Americans have about a tenth of the wealth of white Americans. In 2016, the median wealth for nonretired black households 25 years old and older was less than one-tenth that of similarly situated white households—or $13,460 compared with $142,180.
The black-white wealth gap has not recovered from the Great Recession. In 2007, immediately before the Great Recession, African Americans’ median wealth was almost 14 percent that of whites. Although African American wealth grew at a faster rate than white wealth in 2016, African Americans still owned less than 10 percent of whites’ wealth at the median.
College educated African Americans have less wealth than non-college educated white Americans. For instance, the median wealth for African American households with a college degree equaled about 70 percent of the median wealth of white households without a college degree.
As households grow older, whites pull farther away from their African American counterparts. In 2016, African Americans near retirement—between the ages of 50 and 65 years—had only about 10 percent of the wealth of whites in the same age group. This is down from about 24 percent when the same groups of people were between the ages of 32 and 47 years in 1998.
African Americans are less likely to be homeowners, to own their own business, and to have a retirement account than whites. And in 2016, the most recent data available, when African Americans owned such assets, they were worth significantly less than assets owned by whites. For example, 41 percent of African Americans were homeowners in 2016, compared with nearly 72 percent of whites, and African Americans who did own homes had half as much home equity as whites.
African Americans have less but more costly debt. In 2016, African Americans with debt typically owed $35,560—less than 40 percent of the $93,000 in debt owed by whites. However, because African Americans typically owed larger amounts of high-interest debt—such as installment credit and student and car loans—the debt they typically owed was more expensive.
“The measure of a family’s financial net worth, their wealth, provides all sorts of opportunities and security for families in America, whether it’s changing jobs, moving to a new school or neighborhood, or enjoying retirement after a lifetime of work,” said Danyelle Solomon, senior director of Progress 2050 at CAP and co-author of the report. “Unfortunately, we see wealth in this country is unequally distributed, especially by race and particularly between white and black households. In concrete numbers, we find African Americans have been consistently denied opportunities to realize the American dream.”
According to the report, these disparities that exist today can be traced back to public policies, both implicit and explicit: from slavery to Jim Crow, from redlining to school segregation, and from mass incarceration to environmental racism.
The report challenges policymakers to take bigger and bolder steps to ensure greater racial equity. This includes a specific list of policy recommendations to comprehensively address the racial wealth gap in a meaningful and systematic way, including policies that help families build savings, reduce debt, and ensure more equitable access to education and employment, and other targeted prescriptions outlined in the report.
The authors conclude that only broad and persistent policies that adopt a targeted universalism framework aimed at equitable wealth creation will address the alarming disparities between black and white wealth.
Read the report: “Systematic Inequality: How America’s Structural Racism Helped Create the Black-White Wealth Gap” by Angela Hanks, Danyelle Solomon, and Christian E. Weller.