The Widening Racial Wealth Gap in the United States after the Great Recession

Abstract

African-Americans consistently have a lot less wealth than whites. This impedes their economic mobility as they have fewer resources to start a business, pay for their children’s education and move to a new neighborhood for a new job or better education. The concurrent labor market and housing market decline during and after the Great Recession of 2007–2009 measurably widened this racial wealth gap. In the years after the Great Recession, African-Americans had about one-tenth the wealth of whites. Significant wealth gaps exist by age, education, marital status, and income. The implication is that African-Americans continue to face substantial obstacles in the labor, housing and credit markets to rebuilding their wealth and significantly close the wealth gap. The racial wealth gap in 2016 consequently was still much wider than before the Great Recession.

Key words:

• household wealth
• inequality
• race
• discrimination
• segregation

Notes

¹ Unless otherwise indicated, all authors’ calculations are based on Board of Governors. Federal Reserve System. Various Years. Survey of Consumer Finances. Washington, DC: Fed. See the Appendix 2 for a discussion of the data.

² Almost two-thirds of whites and less than one-fifth of African-Americans indicated saving for retirement as their most important reason for saving. Authors’ calculations. Details available upon request.

³ These data are for households 25 years old and older who are not retired. Table A1 in the Appendix 1 shows the same variables for all households. The basic conclusions are not influenced by the choice of the relevant samples.

⁴ Authors’ calculations. Details available upon request.

⁵ For a discussion of possible policy approaches see Hanks, Solomon, and Weller (2018).