In addition to differences in income, there is a persistent wealth gap between black and white families in the U.S. The term “wealth” refers to all of your assets (the home you own, money in savings and investments, etc) minus your debt. According to a new research and policy brief by Thomas Shapiro, Tatjana Meschede, and Laura Sullivan, the wealth gap has increased from $20,000 in 1984 to $95,000 in 2007.

The authors explain the growth in the gap this way:

The [increase in the] racial wealth gap… reflects public policies, such as tax cuts on investment income and inheritances which benefit the wealthiest, and redistribute wealth and opportunities. Tax deductions for home mortgages, retirement accounts, and college savings all disproportionately benefit higher income families.

There are also much variety in how much wealth is held by people within any given race. The figure below, shows that the gap between high-income and middle-income whites has tripled since 1984. Both groups, however, have seen an increase in the amount of wealth they hold.

In contrast, the wealth of middle-income black families has stagnated and the wealth of high-income black families has recently dropped, flattening differences in wealth among middle- and high-income blacks, but dramatically increasing the wealth gap between blacks and whites.

So why don’t we see an increase in the wealth gap among blacks? The authors point to “…the powerful role of persistent discrimination in housing, credit, and labor markets.”

For example, African-Americans and Hispanics were at least twice as likely to receive high-cost home mortgages as whites with similar incomes. These reckless high-cost loans unnecessarily impeded wealth building in minority communities and triggered the foreclosure crisis that is wiping out the largest source of wealth for minorities.

The authors conclude:

Public policies have and continue to play a major role in creating and sustaining the racial wealth gap, and they must play a role in closing it.

Hat tip to Philip Cohen, Family Inequality.


Lisa Wade is a professor of sociology at Occidental College. You can follow her on Twitter and Facebook.