Wealth – the value of what you and your family own minus what you owe – matters. A lot. Wealth generates opportunity, fosters well-being, offers children the advantages of debt-free higher education and parent-provided home down-payments, provides capital for business formation and investment, and deflects the slings and arrows of economic misfortune. Wealth is, in short, the paramount indicator of future economic success.
For those not inheriting wealth, education and hard work, we all learn, are supposed to be the great equalizers. But the reality – especially for African Americans who have long faced discriminatory barriers to accumulating and bequeathing wealth – says otherwise. For people of color, all the right choices don’t equal all the right outcomes.
Based on our analysis of the U.S. Census’s most recent Survey of Income and Program Participation (SIPP), we found deep across-the-board wealth gulfs between black and white Americans – gulfs that educational attainment, employment, and income simply don’t explain. What does? The myriad benefits of intergenerational wealth transfers – and the fact that, by and large, black families have been denied opportunities to pass down comparable resources.
The bar charts below illustrate our findings. They lead to the inescapable conclusion that if we are going to fulfill the national promise of opportunity for all, we have to recognize that the most strenuous individual efforts are no match for the non-merit-based advantages of inherited wealth.
Before the Great Recession that began in 2008, the typical black family had a little less than a dime for every dollar in wealth held by the typical white family. To compound matters, the recession hit black families much harder. Most black families have no more than $25 in non-retirement liquid wealth and the figure rises to only $200 when retirement savings are included. In contrast, white families typically have over 100 times these amounts with $3,000 and $23,000, respectively, in liquid wealth without and with retirement savings included.
Typical white families with households headed by college degree holders have $180,500 in wealth, while typical similarly situated black households have only $23,400 in wealth. Black families whose heads earned a college degree have only two-thirds the wealth of white families headed by a high school dropout.
White families with a head that is unemployed have nearly twice the median wealth of black families with a head that is working full-time.
Black and white families with similar incomes have vastly different wealth. Even among those in the lowest 20 percent of the income distribution – those with incomes under $18,480 annually – the typical black family has virtually no wealth, while the equivalent white family holds nearly $15,000 in wealth.
Darrick Hamilton is associate professor of economics and urban policy at The New School’s Milano School of International Affairs, Management and Urban Policy and in the department of economics at The New School for Social Research. He is also director of the doctoral program in public/urban policy at The New School.