Racial/Ethnic Income Gaps vs. Wealth Gaps

December 13th, 2013 at 8:11 pm

Apropos of nothing other than my constant pursuit of social and economic justice bumping into my constant pursuit of interesting data, here’s a figure I made for a presentation the other day that warrants a broader look.  It compares the economic resources of non-whites—mostly blacks and Hispanics—to those of non-Hispanic whites, looking at both median income and net worth.  The latter concept is a family’s assets minus its liabilities, including housing wealth, which is the largest wealth component for most families in the middle of the income scale.

The income ratio is about two-thirds; the wealth ratio about 15%.  Just a pretty potent reminder that when you’re talking about racial disparities, the largest differences—the ones that really take account of the legacy of discrimination—are the ones that compare wealth, not income.

But is this just a 2010 story, given the loss of housing wealth when the bubble burst?  Nope.  By these data, that implosion was not particularly racist: the net worth of both whites and non-whites and non-whites fell by about 30% in real terms, 2007-10, so the net worth ratio didn’t change much.



Source: Survey of Consumer Finances

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6 comments in reply to "Racial/Ethnic Income Gaps vs. Wealth Gaps"

  1. purple says:

    Why are ‘Asians’ buried amongst other minority groups ? They are no longer a statistically insignificant minority group (especially in California), and they make more money than “whites”. They may have less net wealth at the moment but that’s going to change in a generation.

    For that matter, there are huge differences in income by religion (even factoring out for ethnicity), but for some reason we won’t go there. Are these differences in income due to a legacy of discrimination against different religious groups ?

    Are these types of discussions supposed to draw our attention to culture, history, racism or genetics ? I just wonder what the specific argument is.

    A lot of cultural blindspots out there.

    • Jared Bernstein says:

      Meant to mention that in the post. The problem is that the underlying survey here–the Survey of Consumer Finances–has too small a sample to break out the separate racial and ethnic groups.

  2. Michael says:

    It will be interesting to see how the wealth gap plays out over the next few years as the recovery lurches forward. Blacks and Hispanics lost a great deal of wealth in retirement and housing and with levels of unemployment significantly higher than our white non-Hispanic peers I worry that this gap will widen. Throw in on top that young adults — the most racially diverse cohort of US adults — are having more trouble than ever financing their educations, finding work and saving for anything, having access to the previous generations wealth will come into play even more.

  3. Steve Roth says:

    I think it’s also important to consider legacy/inheritance effects here. We’ve seen in many studies how power and privilege seem to self-propagate over generations, even over centuries.

    Also wondering how SCF handles cap gains vis-a-vis income.

  4. Steve Roth says:

    A quick look suggests that SCF does include realized cap gains in income, but not unrealized cap gains.

    Since cap gains on long-held assets (equities, real estate, privately held businesses) may not ever be “realized” during a rich person’s lifetime, do those cap gains *ever* get counted as income?

  5. Michael Holzman says:

    There was a good Pew Foundation study on this a year or two ago.

    It is best to disaggregate Black from Hispanic data. The latter is a highly heterogeneous category affected by national origin, English language usage, etc. This is also the case for Asian-American data, which is not a coherent demographic category–there are enormous cultural, educational and economic differences between, say, Chinese-Americans and Hmung-Americans, or Asian Indians and Japanese-Americans.