As we think about the 50th anniversary of the March on Washington, we’re reminded of something National Urban League Director Whitney Young said during that event in 1963: “The hour is late. The gap is widening.” Young was referring to the prosperity gap between blacks and whites. Fifty years later, that large gap remains.
On average, white families have six times the wealth of black and Hispanic families. So for every $6.00 a white family has in wealth, black and Hispanic families have only about $1.00 (e.g., $632,000 vs. $103,000). If we look at the typical, or median, family, the wealth values are lower (e.g., $123,800 vs. $15,700), but the ratio is larger: 8 to 1.
The income gap, by comparison, is much smaller, although still substantial. On average, white families have twice the annual income of black and Hispanic families. For every $2.00 of income white families earn, black and Hispanic families earn $1.00.
While these ratios have not changed much over time, the size of the gap has grown. The average wealth of white families was $230,000 higher than the average wealth of black and Hispanic families in 1983. This gap grew to over $500,000 by 2010.
There is another dimension to this disparity. The wealth gap between whites and people of color also grows sharply with age. Whites in their 30s and 40s have about 3.5 times more wealth than African Americans and Hispanics in the same age group. By the time they reach their early to mid-60s, whites have seven times the wealth of African Americans and Hispanics. In other words, the average wealth gap has grown over time, and it also grows over the course of people’s lives.
What does the wealth gap mean?
Although the United States is one of the wealthiest countries, this prosperity remains out of reach for many Americans. Blacks and Hispanics, who strive to make a better life for themselves and their families, are not on the same wealth-building paths as whites. They are less likely to own homes and retirement accounts, so they miss out on these traditionally powerful wealth-building tools. Families of color also lost a greater share of their wealth in the aftermath of the Great Recession.
Wealth is where the economic opportunity lies. A common misconception is that poor or even low-income families cannot save. Evidence from savings programs and research shows they can. But social safety net programs emphasize consumption, and many even discourage saving by making families ineligible if they have a few thousand dollars in savings.
Wealth-building policies, on the other hand, are delivered as tax subsidies for homeownership and retirement. Families of color are less likely to be able to use these tax subsidies, so they receive little to no benefit from them. Without fair policies, paths to building wealth can vanish. Reforming policies like the mortgage interest tax deduction so it benefits all families, and helping families enroll in automatic savings vehicles, will help improve wealth inequality and promote saving opportunities for all.