The Black-white gap in wealth mobility in the US
After centuries of discrimination and economic exclusion, the US racial wealth gap remains stubbornly large. In Brookings’ latest paper studying Americans born in the 1940s through 1960s, they show that the median white American in their early thirties had $29,000 more wealth than the median Black American of the same age.
This racial wealth gap is even greater among older adults: the median white American in their late fifties had $251,000 more wealth than the median Black American. This is not just because initial wealth gaps compounded over time. As the study shows, even conditional on having the same wealth in their early thirties, white Americans reach a significantly higher wealth rank by their late fifties than Black Americans.
On top of having less wealth than white Americans to begin with, Black Americans are both less likely to move up the economic ladder and more likely to slide down it.
Black Americans who have high wealth are much more likely to lose ground than white Americans with the same wealth. For example, among those who start with wealth at the 90th percentile, Black Americans have much lower wealth in their late fifties (51st percentile) than white Americans (77th percentile).
We are far from closing the racial wealth gap. The paper shows how the patterns of wealth accumulation and wealth mobility during working life contribute to this inequality. The racial wealth gap reflects different wealth dynamics as well as different starting positions. A white person who has median wealth in their early thirties is in fact expected to have more wealth in their late fifties than a Black person who has 90th percentile wealth in their thirties.
Among the options for tackling the racial wealth gap are progressive taxation of wealth; bolstering the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC); reparations; targeted homeownership subsidies; and lowering the costs associated with higher education. Overall, the message of the paper is that policymakers need to pay attention to the processes driving different wealth trajectories by race, as well as the end results.
In many parts of the country, black and white Americans continue to live in very different worlds. This distinctive feature of American inequality is not an accidental development but rather a result of policy choices. The nation’s approach to urban policy has rarely attempted to invest the resources needed to overcome the effects of decades of racial discrimination in struggling neighborhoods. Instead, it has repeatedly made it easier for most white people to isolate themselves in communities that are largely physically separated from communities marked by joblessness, concentrated poverty, environmental hazards, disease and violence.