Racial Wealth Gaps Research and Data
RACIAL WEALTH GAPS ARE PROFOUND
In 2019, the typical Black household had 13 cents of wealth for every dollar of wealth owned by white American households.[1]
As of 2000, the typical Native American household had 8 cents of wealth for every dollar owned by the average white American household.[2] (Note: Native American wealth data is not available from the U.S. government, so Native Americans are excluded from most research on racial wealth gaps.)
WEALTH GAPS REFLECT PAST INJUSTICE
Wealth is generational. A family’s wealth today is linked to the wealth of preceding generations. That is why past discrimination and injustice still has so much impact today. Advantages and disadvantages can build across generations, making it hard for communities that have been harmed by past discrimination and injustice to catch up.
Black Americans and Native Americans have been disproportionately harmed by race-based policies, beginning with policies that supported slavery and taking land.
- Broken treaties and other government actions that forced Native Americans off their tribal land were devastating for Native culture and wealth. This includes policies like the General Allotment Act of 1887, which set in motion a 65% decrease in land held by tribes over the next 50 years. The impact of that one policy represents 90 million acres of lost community wealth.[3]
- Centuries of slavery violated the most basic freedoms and human rights of Black Americans, including legalized bondage, torture and death. Slavery had a profound impact on the ability of Black Americans to build family and community wealth, including the effects of separating families, preventing education and denying wages for labor. The losses from unpaid wages and lost inheritances to Black descendants is estimated at around $20 trillion today.[4]
Throughout U.S. history, policies that were very successful at building wealth for white Americans did not benefit Black and Native Americans in the same way. For example:
- The 1862 Homestead Act granted more than 270 million acres of land to private citizens and displaced Native Americans on the land.[5] While the program was open to people of all races, it overwhelmingly benefitted white Americans.[6]Today, the wealth of more than 46 million adults in the U.S. can be traced back to this policy.[7]
- The 1935 Social Security Act established new retirement and unemployment supports for workers. Because it excluded agricultural and domestic workers, 65% of the Black American workforce did not benefit. If all Black workers had received Social Security benefits when the act was passed, they would have accrued $143 billion more in household wealth.[8]
This disparate impact is true across all the programs most widely credited with building wealth and opportunity in the U.S. The National Housing Act and Federal Housing Authority helped many Americans buy homes and build wealth — but redlining and discrimination disqualified many non-white Americans from loans.[9] The GI Bill of 1944 helped create the modern American middle class by giving returning WWII veterans low-cost mortgages, low-interest business loans and tuition assistance — but most non-white veterans could not access these benefits.[10]
WEALTH GAPS PREDICT FUTURE OUTCOMES
Access to wealth helps people take advantage of opportunities — like going to college, buying a house and starting a business. Wealth also makes a big difference in managing through financial difficulties and other hardships. For these reasons, wealth is one of the most critical determinants in life opportunities and outcomes in the U.S. For example:
- Wealth predicts educational achievement. People from high-wealth families are more than one and a half times as likely to complete college by age 25 as those in low wealth families. Education, in turn, is a key predictor of future income and economic security.[11]
- Wealth predicts health. Wealthier people are healthier. They have lower rates of chronic disease and decreased risk of conditions like obesity and hypertension. People with wealth even live longer.[12]
Wealth also predicts wealth, creating cycles of prosperity and wellbeing. A child born to a wealthy family is more likely to be wealthy as an adult.[13] This is true because wealth is passed down through inheritance (and white families have more and bigger inheritances than non-white families).[14] It is also true in all the ways wealthy families can more easily provide support and stability for their children. Closing wealth gaps can make a difference in addressing virtually all other social and economic disparities.
At the Bush Foundation, this research motivates and guides our efforts to close racial wealth gaps. This includes our $100 million commitment to seed community trust funds that will directly support wealth-building activities for Black and Native people in our region.
Research shows that activities like going to college, buying a home and starting a business make a difference in building wealth. The community trust funds will help more people have these opportunities. Research also shows that these wealth-building strategies do not always pay off for Black and Native Americans to the same extent they do for white Americans. For example, Black households headed by someone with an advanced degree still have less wealth than white households without even a high school diploma.[15] And Native Americans who own their homes have home values that are 40% lower than white households.[16] While we believe these trust funds can make a real difference, eliminating race-based wealth gaps ultimately requires eliminating racism in people and institutions. We are committed to working toward this systems change, too.
We believe that working to close racial wealth gaps is one of the most important and highest impact things we can do. Closing wealth gaps will create new cycles of prosperity and wellbeing to make our region better for everyone.
citations
[1] Neil Bhutta, Andrew C. Chang, Lisa J. Dettling, and Joanne W. Hsu, Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances, (Federal Reserve Board, September 28, 2020)
[2] Mariko Chang Pyle, Lifting as We Climb: Women of Color, Wealth, and America’s Future, (Insight Center for Community Economic Development, Spring 2010), 14
[3] Indian Land Tenure Foundation, Land Tenure History, accessed 3/11/2021
[4] Thomas Craemer, There Was a Time Reparations Were Actually Paid Out – Just Not to Formerly Enslaved People, (UConn Today, March 5, 2021)
[5] Megan Gambino , T.A. Frail, Document Deep Dive: How the Homestead Act Transformed America, (Smithsonian Magazine, May 2012
[6] Trina R. Williams, Asset-Building Policy as a Response to Wealth Inequality: Drawing Implications from the Homestead Act (St. Louis, MO: Center for Social Development, Washington University in St. Louis, 2003), 4
[7] Thomas M. Shapiro, The Hidden Cost of Being African American: How Wealth Perpetuates Inequality, (Oxford University Press, 2004), 190
[8] David Stoesz, The Excluded: An Estimate of the Consequences of Denying Social Security to Agricultural and Domestic Workers, (Center for Social Development, George Warren Brown School of Social Work, 2016), 9
[9] Dedrick Asante-Muhammad, Chuck Collins, Josh Hoxie, and Emanuel Nieves, The Road to Zero Wealth: How the Racial Wealth Divide is Hollowing Out America’s Middle Class, (The Institute for Policy Studies and Prosperity Now, September 2017)
[10] Claire Suddath, A Brief History of the Middle Class, (Time, Feb. 27, 2009)
[11] Breno Braga, Signe-Mary McKernan, Caroline Ratcliffe, and Sandy Baum, Wealth Inequality Is a Barrier to Education and Social Mobility, (Urban Institute, April 2017), 1
[12] Braveman P, Acker J, Arkin E, Proctor D, Gillman A, McGeary KA, and Mallya G, Wealth Matters for Health Equity, (Robert Wood Johnson Foundation, September 1, 2018)
[13] Susan K. Urahn, Erin Currier, Diana Elliott, Lauren Wechsler, Denise Wilson, and Daniel Colbert, Pursuing the American Dream: Economic Mobility Across Generations, (The Pew Charitable Trusts, July 2012), 2
[14] Bhutta, Chang, Dettling, Hsu, Disparities in Wealth by Race and Ethnicity (n 1)
[15] William Darity Jr., Darrick Hamilton, Mark Paul, Alan Aja, Anne Price, Antonio Moore, and Caterina Chiopris, What We Get Wrong About Closing the Racial Wealth Gap (Samuel DuBois Cook Center on Social Equity Insight Center for Community Economic Development, April 2018), 6
[16] Danyelle Solomon, Connor Maxwell, and Abril Castro, Systemic Inequality: Displacement, Exclusion, and Segregation, How America's Housing System Undermines Wealth Building in Communities of Color, (Center for American Progress, August 7, 2019)