What drives the racial wealth gap?
Mainstream economic theory posits that differences are driven by human capital -- that greater human capital (i.e. education) leads to greater earnings, enabling greater savings and, in turn, higher accrual of wealth.
However, this framework ignores the reality of wealth: that it takes wealth to make wealth, and that one of the biggest drivers of the modern racial wealth gap is the historical racial wealth gap.
In this article -- co-authored by Fenaba R. Addo, a Cook Center Faculty Affiliate; William A. Darity Jr., the Cook Center Founding Director; and Samuel L. Myers, Jr., a Cook Center Distinguished Fellow -- the authors set the record straight, pushing back against false narratives of racial economic progress and showing how the racial wealth gap is in fact increasing.
Key Findings
- Between 2019 and 2022, the real disparity in the Black-White wealth gap grew by about 23 percent at the median and 16 percent at the mean.
- Inheritance statistics reflect the wealth gap: more White households expect (and receive) inheritances than do Black households. These transfers play an outsized role in the racial wealth gap.
- Federal tax policy has increasingly enabled the passing forward of wealth (to younger generations) at relatively low cost, a development that has disproportionately aided wealth White families.
