The Racial Wealth Divide is Accelerating. From [Prosperity Now PDF]In our 2016 report, The Ever-Growing Gap: Without Change, African American and Latino Families Won’t Match White Wealth for Centuries, we showed that it if current trends continue, it will take 228 years for the average Black family to reach the level of wealth White families own today. For the average Latino family, matching the wealth of White families will take 84 years.
In this report, we look at the racial wealth divide at the median over the next four and eight years, as well as to 2043, when the country’s population is predicted to become majority non-white. We also look to wealth rather than income to reconsider what it means to be middle class. In finding an ever-accelerating gap, we consider what it means for the American middle class and we explore what policy interventions could reverse the trends we see today. We find that without a serious change in course, the country is heading towards a racial and economic apartheid state.
ILLUSTRATING THE MAGNITUDE OF RACIAL WEALTH DISPARITY
• Earning a middle-class income does not guarantee middle-class economic security. White households in the middle-income quintile (those earning $37,201-$61,328 annually) own nearly eight times as much wealth ($86,100) as middle-income Black earners ($11,000) and ten times as much wealth as middle-income Latino earners ($8,600). This disconnect in income earned and wealth owned is visible across the entire income spectrum between these groups.
• If the middle class were to be defined by wealth rather than by income, Black and Latino families in the middle-income quintile would need to earn 2-3 times as much as White families in order to enter the middle class. If we were to define the middle class in terms of wealth, households would need to own between $68,000-$204,000 in wealth to qualify for the middle class. Under these terms, only Black and Latino households in the highest income-quintile (those earning more than $104,509) would qualify for middle-class status or higher, compared to White households in the top three income-quintiles who already own wealth in excess of this threshold. In fact, only Black and Latino households with an advanced degree have enough wealth to be considered middleclass, whereas all White households with a high school diploma or higher would be considered middle class.
• Defining class in terms of wealth instead of income, roughly 70% of Black and Latino households would fall below the $68,000 threshold needed for middle-class status, whereas only about 40% of White households would fall below the middle class. In contrast, roughly 13% of Black and Latino households could be considered to have “upper-wealth” (meaning they own at least $204,000 in wealth), compared to 40% of White households.
• The accelerating decline in wealth over the past 30 years has left many Black and Latino families unable to reach the middle class. Between 1983 and 2013, the wealth of median Black and Latino households decreased by 75% (from $6,800 to $1,700) and 50% (from $4,000 to $2,000), respectively, while median White household wealth rose by 14% (from $102,200 to $116,800). If current trends continue, by 2020 median Black and Latino households stand to lose nearly 18% and 12%, respectively, of the wealth they held in 2013. In that same timeframe, median White household wealth would see an increase of 3%. Put differently, in just under four years from now, median White households are projected to own 86 and 68 times more wealth than Black and Latino households, respectively.
• By 2024, median Black and Latino households are projected to own 60-80% less wealth than they did in 1983. By then, the continued rise in racial wealth inequality between median Black, Latino and White households is projected to lead White households to own 99 and 75 times more wealth than their Black and Latino counterparts, respectively.
• If the racial wealth divide is left unaddressed and is not exacerbated further over the next eight years, median Black household wealth is on a path to hit zero by 2053—about 10 years after it is projected that racial minorities will comprise the majority of the nation’s population. Median Latino household wealth is projected to hit zero twenty years later, or by 2073. In sharp contrast, median White household wealth would climb to $137,000 by 2053 and $147,000 by 2073.
Race, Wealth & The Middle Class
For several years, politicians, researchers, journalists and the public have focused their attention on growing economic inequality in the United States. Most often, this focus is on income (i.e., the wages earned from a job or from capital gains) rather than on wealth (i.e., the sum of one’s assets minus their debts). Income inequality, while stark, pales in comparison to the vast economic divide exposed by examining disparities in wealth. For example, a recent study by the Organisation for Economic Co-operation and Development (OECD) found that while the top 10% of income earners in United States receive almost 30% of the nation’s income, the wealthiest 10% own an astounding 76% of the country’s wealth. That means less than a quarter of the nation’s wealth is left for the bottom 90% of the American population.
As stark and as overlooked as these disparities are, they are particularly acute along racial lines as a disproportionate share of the nation’s wealth is held in White hands while households of color own a shrinking slice of the proverbial pie. Today, this translates into a racial wealth divide in which the median net worth of Black and Latino families stands at just $11,000 and $14,000, respectively—a fraction of the $134,000 owned by the median White family. Even more disturbing is that when consumer durable goods such as automobiles, electronics and furniture are subtracted, median wealth for Black and Latino families drops to $1,700 and $2,000, respectively, compared to $116,800 for White households (see Methodology for more details).
While some argue that this racial wealth divide stems from choices made by individuals and communities, the facts tell a different story. Recent research shows that the racial wealth divide persists across all levels of educational attainment and family structures, seriously diminishing the “personal choices” argument. Case in point? White high school dropouts own more wealth than Black and Latino college graduates. Furthermore, single-parent White households own more wealth than two-parent Black households.
Wealth is the buffer families need when faced with unexpected economic shocks like a lost job or a broken-down car. Wealth is also the capital available to families to take advantage of economic opportunities, like buying a home, saving for college or investing in the stock market. Ultimately, wealth can be the difference between a family maintaining and strengthening their economic status or flailing in economic insecurity. [MORE]