Authors: William Darity Jr., Darrick Hamilton, Mark Paul, Alan Aja, Anne Price, Antonio Moore, and Caterina Chiopris
Introduction: The racial wealth gap is large and shows no signs of closing. Recent data from the Survey of Income and Program Participation (2014) shows that black households hold less than seven cents on the dollar compared to white households.1 The white household living near the poverty line typically has about $18,000 in wealth, while black households in similar economic straits typically have a median wealth near zero. This means, in turn, that many black families have a negative net worth. (Hamilton et al. 2015). At the other end of America’s economic spectrum, black households constitute less than 2 percent of those in the top one percent of the nation’s wealth distribution; white households constitute more than 96 percent of the wealthiest Americans.
Our report indicates that closing the racial wealth gap requires an accurate assessment of the causes of the disparity and imaginative action to produce systemic reform and lasting change. Addressing racial wealth inequality will require a major redistributive effort or another major public policy intervention to build black American wealth. This could take the form of a direct race-specific initiative like a dramatic reparations program tied to compensation for the legacies of slavery and Jim Crow, and/or an initiative that addresses the perniciousness of wealth inequality for the entire American population, which could disproportionately benefit black Americans due to their exceptionally low levels of wealth. Indeed, the two strategies — reparations for America’s record of racial injustice or the provision of the equivalent of a substantial trust fund for every wealth poor American— need not be mutually exclusive. In what follows, we come to grips with the ten most important, widely held myths about closing the racial wealth gap.
Key Findings
- The median black household holds just ten percent of the wealth of median white household, and while blacks constitute thirteen percent of America’s population, they hold less than three percent of its wealth.
- None of the myths commonly offered to explain away the racial wealth gap-a need for greater educational attainment, homeownership, or entrepreneurship; a lack of proper savings behavior, financial literacy, or commitment to “buying and banking black”; or a renewed focus towards soft skills, personal responsibility, improved family structures, or emulating successful minorities-come close to accounting for the vastness of the gap.
- Often these myths aren’t just wrong, but the exact opposite is true. For example, on the topic of savings behavior: “A study conducted by the Institute on Assets and Social Policy using the 2013 Survey of Consumer Finances found that, at comparable levels of income, whites spend 1.3 times more than blacks.” Or, when it comes to prioritizing education, black families tend to be more supportive of children’s education (through direct financial support) than white families in similar households and socioeconomic positions.
