In the United States, there is a significant gap in wealth between white households and households of color. In 2019, a typical white household held eight times the wealth of a Black household and five times that of a Hispanic household. This gap has existed for the entirety of American history, and has continued to increase over the last 30 years. In addition, the gap persists regardless of a household’s education level. White households with a bachelor’s or postgraduate degree are three times wealthier than Black households with the same education. This disparity only increases as education decreases.
Wealth is understood as the difference between a household’s assets and its debts. Assets include income, investments, homeownership, and other monetary resources. The ability to accumulate wealth is the basis for financial security, which significantly impacts one’s opportunities and quality of life in terms of access to education, employment, healthcare, and more. Addressing the racial wealth gap has become a divisive issue and a political priority for activists, politicians, and citizens alike.
The Black/white wealth gap has its roots in slavery, as enslaved African Americans were unable to own property, receive income, or accumulate wealth. There are several reasons why the gap has persisted since the abolition of slavery and continues to grow today. In the immediate aftermath of the Civil War, attempts to build wealth for the Black community stalled. Federal efforts to assist newly freed Black Americans in finding work and financial success suffered from mismanagement and lack of political willpower.
Throughout the 20th century, Black Americans were repeatedly and deliberately prevented from accumulating wealth by both private and government entities. Jim Crow laws significantly limited opportunities for Black people by restricting their movement and mandating racial segregation in schools, workplaces, and public facilities. These laws remained in place until school segregation was deemed unconstitutional in 1954. Most other discriminatory laws were outlawed by the Civil Rights Act of 1964 and Voting Rights Act of 1965. The practice of redlining systematically prevented minority families from receiving government-insured loans to purchase homes and devalued property in Black neighborhoods. Redlining was supported by the Federal Housing Administration (FHA) and the Home Owners’ Loan Corporation (HOLC)—both federal agencies.
Wealth accumulation is intergenerational in nature. The wealth of previous generations provides access to the financial resources necessary for an individual or household to accumulate more wealth. People of color who have historically been prevented from accumulating wealth through traditional methods such as earning degrees and buying homes have fewer resources with which to access wealth in the present day. Essentially, they start out several steps behind in the process of growing wealth. A lack of generational wealth, along with the aforementioned obstacles, is part of why the racial gap remains in such force today.
In recent years, many laws and programs have been proposed to help close the racial wealth gap. On June 1st, 2021, the Biden-Harris Administration announced a set of initiatives to help close the gap, mostly by supporting homeownership and entrepreneurship. Their proposals include:
- Ensuring equity in home appraisals
- Increasing government assistance to small, disadvantaged businesses
- Expanding housing options for lower-income buyers and ending exclusionary zoning
Other actions to address the gap may take the form of congressional legislation or similar initiatives at the state and local levels. For example, the proposed Green New Deal contains provisions to address the racial wealth gap. The Green New Deal is a comprehensive framework for combating climate change and economic inequality through overhauls of the economy and infrastructure. It targets the racial wealth divide with investments in job creation for vulnerable communities, as well as by ensuring healthcare and housing for all in order to lessen the impacts of wealth inequality.
Addressing the gap, along with racial inequality generally, is a major priority for the Democratic Party. Their members are the main proponents of political action on the issue. The Republican Party generally opposes such action because racial inequality is not a priority for most of their voters and they believe in limited government intervention. Regardless of party, the racial wealth gap is an important piece of recent national conversations surrounding racial inequality.
