The US has a huge racial wealth gap. Black families, on average, have less than one-third of the wealth of white households, but their incomes are higher. As a result, black families have less access to employment-linked benefits, such as unemployment insurance. These benefits can help black families protect themselves against poor health and build savings. Similarly, mortgage deductions are less accessible to black families due to racial disparities in homeownership.
While this racial wealth gap is wide and persistent, there are various explanations for this disparity. Higher education, better work, and more responsible financial decisions are not enough to close the gap. Black households with advanced degrees and high-paying jobs are less likely to own more wealth than their white peers. This wide wealth gap is not an individual-level issue. The country as a whole has trillions of dollars to gain from addressing the racial wealth gap.
In fact, the gap between the wealth of white and black families is at its highest level since 1989. In 2013, white families owned thirteen times more money than black families. Eight years earlier, the gap was only seven times smaller. NYU economist David Low has published a working paper that documents the racial wealth gap. His research shows that high-earning married black households have much less wealth than their white counterparts. But the racial wealth gap among blacks is still very large, despite recent progress.
While the racial wealth gap is widening, the underlying reasons for it remain the same. White people are disproportionately represented among the very wealthy, and they enjoy much more wealth than any other racial group. These differences translate into economic and political power differentials, resulting in a significant racial wealth gap. The current racial wealth gap has significant implications for both the US economy and the United States.
In addition to the wealth disparity, the racial wealth gap has been impacted by government policies, societal discrimination, and general trends in wealth accumulation. The current wealth gap is a result of historical patterns of wealth inequality. The federal housing program (FHA) encouraged White middle-class homeowners to buy homes, which is a key factor in the rising racial wealth gap. These policies led to restrictive covenants that made it difficult for minority families to obtain credit for home loans.
One way to reduce the racial wealth gap is to increase the level of progressive taxes. These taxes hit the wealthy on the high-income end of the economic spectrum. But this method isn’t effective unless the tax is sufficiently high – that is, the tax has to be imposed at levels that will discourage extreme wealth hoarding. This way, the racial wealth gap can be closed in the US.
Sadly, the racial wealth gap is an ongoing, systemic problem. It is not the fault of any individual, but rather of government policies. These policies systematically discriminate against African Americans, which is reflected in economic inequity. The disparity between black and white households is wider than the wealth gap in other countries. This disparity has significant economic and social implications, and can only be closed through progressive taxation.