How Measurement of Inequalities in Wealth by Race/Ethnicity Impacts Narrative and Policy: Investigating the Full Distribution

This study uses data from a national survey to examine the wealth distribution of white, Black, and Latinx households in the United States. The authors identify wealth disparities between white and Black households and between white and Latinx households across the entire distribution.

Introduction

In addition to income, wealth—defined as “the total of all assets minus all debts”—is an important measure of a family’s economic security. As the authors explain, “wealth provides resources that translate into a more secure future. As income helps families to maintain their daily standard of living, wealth offers protection from economic shocks and facilitates upward mobility.” 

Previous research focused on the median wealth of households in the United States has consistently documented significant racial disparities between white and Black households and between white and Latinx households. However, the authors argue that if policymakers are to improve economic security for all Americans, then they must be informed by research that considers wealth and wealth inequality across the full wealth distribution. Accordingly, this study uses nationally representative survey data to examine wealth and racial wealth disparities for white, Black, and Latinx households across the full distribution. 

Laura Sullivan was a PhD candidate in Social Policy at the Heller School of Social Policy and Management at Brandeis University and is now an adjunct professional lecturer in the Department of Public Administration and Policy at American University. Tatjana Meschede is the associate director of the Heller School’s Institute for Economic and Racial Equity and holds a PhD in Public Policy from the University of Massachusetts, Boston. Both authors focus on wealth and income inequality in their research. 

Methods and Findings

The authors analyzed data from the Survey of Consumer Finances (SCF), a nationally representative survey conducted by NORC at the University of Chicago that includes information on household assets, liabilities, and financial behavior. Using data from 2001-2013, they examined household wealth at the 10^th  percentile, 25^th percentile, median,  75^th percentile, and 90^th percentile for white, Black, and Latinx households, with percentiles calculated separately for each racial group. The paper highlights several key findings: 

Trends over Time 

• Between 2001 and 2013, the median wealth of white households rose substantially from 2001-2007, fell due to the Great Recession, and partially recovered, resulting in an overall decline of 12%. In contrast, the median wealth of Black households consistently fell throughout this entire period, falling by 56% overall. The median wealth of Latinx households fluctuated over time but declined by 10% overall. 

The Effects of the Great Recession 

• Between 2007 and 2013, all racial groups suffered financial losses during the Great Recession. However, Black and Latinx households experienced greater percentage and absolute declines in wealth at the 75^th and 90^th percentiles than white households did. 

Disparities in 2013

• In 2013, at every percentile examined in this study, white households held substantially more wealth than Black and Latinx households did. 
• The disparities were so pronounced that the wealth of Black households and the wealth Latinx households at the 75^th percentile remained below the median wealth of white households. Likewise, the wealth of white households at the 25^th percentile exceeded the median wealth of both Black and Latinx households. The authors also found that racial wealth gaps widened at higher wealth percentiles, indicating that disparities among wealthier households were even greater than those observed at the median. 
• Additionally, one quarter of all Black households in the U.S. had zero or negative net worth in 2013, meaning they possessed no savings or held debts that surpassed their assets. 

Overall Takeaway 

• The authors conclude that focusing solely on median household wealth substantially understates the extent of racial wealth inequality in the U.S. Racial wealth disparities persist, and even widen, across the wealth distribution. 

Conclusions

The authors argue that discussions of racial wealth disparities in the U.S. should move beyond median household wealth to examine disparities across the entire wealth distribution. They also emphasize that racial wealth inequality has been created and sustained through public policy and therefore requires public policies explicitly designed to reduce it. They argue that policies “should be tailored to help households of color increase their assets and wealth across the wealth distribution,” noting that different policies will have greater relevance to households at different points along the spectrum. For example, policies that promote homeownership among Black and Latinx Americans and that ensure fair lending practices may be most relevant and beneficial to families with greater accumulated wealth. Meanwhile, policies that expand access to financial safety nets, help families reduce their debt, and protect against predatory lending are likely to have the greatest effects on households at the lower end of the distribution.