Wealth Gap Between Blacks and Whites Increases Fourfold in a Generation

May 17, 2010 | Last updated: July 31, 2020

The gap between the wealth possessed by white and black families grew more than four times larger between 1984 and 2007 — and federal policy is only exacerbating the trend, according to a study released today by researchers at Brandeis University’s Institute on Assets and Social Policy.

Not to be confused with income, wealth is a measure of what you possess minus the debts you owe. In the 23-year span under review, researchers found, the median value of assets among whites jumped from $22,000 to $100,000, while the median value of holdings among blacks rose from $2,000 to just $5,000. And the researchers say that’s no accident.

Instead, they argue, the quickly growing racial wealth gap “reflects public policies, such as tax cuts on investment income and inheritances which benefit the wealthiest, and redistribute wealth and opportunities.”

“Tax deductions for home mortgages, retirement accounts, and college savings all disproportionately benefit higher income families,” they write.

And income levels can be deceiving. Indeed, researchers discovered that middle-income white households are much wealthier than upper-income black families.

[B]y 2007, the average middle-income white household had accumulated $74,000 in wealth, an increase of $55,000 over the 23-year period, while the average high-income African-American family owned $18,000, a drop of $7,000 That resulted in a wealth gap of $56,000 for an African-American family that earned more than $50,000 in 1984 compared to a white family earning about $30,000 that same year.

The findings “make it clear that higher income alone will not lead to increased wealth.”

Consumers of color face a gauntlet of barriers — in credit, housing and taxes — that dramatically reduce the chances of economic mobility.

The findings, researchers warn, have real-world repercussions.

“Even when African Americans do everything right — get an education and work hard at well-paying jobs — they cannot achieve the wealth of their white peers in the workforce, and that translates into very different life chances,” IASP Director Thomas Shapiro, author of “The Hidden Costs of Being African American”* and the co-author of “Black Wealth/White Wealth,” *said in a statement announcing the study.

“A U-turn is needed,” he added. “Public policies have and continue to play a major role in creating and sustaining the racial wealth gap, and they must play a role in closing it.”

Food for thought as Congress considers how strong to make its Consumer Financial Protection Agency, and whether all the Bush tax cuts merit extension.