What We Get Wrong About Closing the Racial Wealth Gap

Black woman holding two stacks of differing coins

The racial wealth gap in America is both striking and durable. It is neither inexplicable that the gap exists, given the history of the country, nor surprising that it persists, given the nature of wealth.

As the authors note in this report:

“[W]ealth begets more wealth. Higher levels of wealth enable greater access to more favorable terms for credit. Wealth provides individuals and families with financial agency and choice; it provides economic security to take risks and shields against the risk of economic loss. Basically, wealth is cumulative. It provides people with the necessary capital to secure finance and purchase an appreciating asset, which in turn, will generate more and more wealth (Hamilton, 2017). Literally, it takes wealth to make wealth, while blacks largely have been excluded from intergenerational access to capital and finance.”

It is perhaps because these inequities in wealth are so large that many feel compelled to try to explain why they exist. And so they offer myriad explanations for the wealth gap, each of which this report painstakingly debunks.

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.