Posted on May 9, 2024

America’s Racial Wealth Gap Widens

Alex Hammer, Daily Mail, May 7, 2024

The wealth gap between white families and households of other races has widened by more than $1 million, startling new statistics show.

The data comes straight from the Federal Reserve, and its Survey of Consumer Finances.

The in-depth study is administered every three years, and tracks the difference in wealth held by white, Black, and Hispanic families.

The results released this week pertain to the period of time between 2019 and 2022, during which the average wealth of white families reached $1.4million. That was more than $1 million higher than the $211,596 average attributed to Black families, and the $227,544 attributed to Hispanics.

Put another way, white families had three times the average wealth of both their Black and Hispanic counterparts put together – a cause for concern as the racial wealth gap continues to widen.

‘Wealth translates into opportunity,’ said Signe-Mary McKernan, vice president for labor, human services and population at a think tank that analyzed the results, said.

‘It translates into mobility. [Wealth] enables people to reach their full potential,’ s

The inequities, she said, ‘lie in the policies’ – pointing to structural racism as a major player as a major contributor.

Singling out exclusionary homeownership policies such as redlining that have largely affected Blacks and Hispanics, she said these practices have ‘created pathways to building wealth for white families while creating barriers for other families of color,’

Redlining refers to the refusal of a loan or insurance to someone due to their living in an area deemed to be a poor financial risk, a practice that fuels financial disparities.

Education also plays a factor, McKernan said – bringing up how some equate it to a silver bullet that could stop inequality in its tracks.

However, the DC-based Urban Institute staffer said it not the solution everyone seeks, citing how Hispanics have had the fastest growth in advanced degrees of any ethnic group over the past 20 years, but are still well behind their white counterparts.

‘Education is seen as a silver bullet, and it will make a huge difference in your earnings, but what education doesn’t do is close the wealth gaps,’ she explained.

‘In a society that professes that those who work hard and play by the rules should be rewarded with social and economic upward mobility, this is a stark reminder that we still have work to do.’

And work to do she is right, with other numbers showing how pronounced the wealth gap is.

White families have a median wealth of $284,310, the fed found – a number more than four times that of Latinos, pegged at $62,120.

Moreover, the analysis found the wealth gap also widens as families age, with whites on average accumulating more wealth over their lives than Latino families in the same age bracket.

It also found that Black and Hispanic families have far less retirement and emergency savings than white families, as well as drastically lower rates of homeownership.

Things like inheritances were also markedly less common in Black and Hispanic families, the fed discerned – a reality that, like the other trends, has been present for decades.

McKernan’s think tank looked at the results through a lens rooted in economic and social policy research, and aired some possible solutions to address the ever-widening racial gap, like starting wealth-building accounts early on.

“Wealth is not just for the wealthy. Wealth is insurance against tough times. It’s tuition to get a better education and a better job,’ she said, citing initiatives like Oakland-Alameda County’s Brilliant Baby program, which sets up college savings accounts for during infancy.

‘It is the capital to build a small business. It’s savings to retire on, and it’s a springboard into the middle class,’ McKernan continued.

She also highlighted other programs available in California, like the Hope, Opportunity, Perseverance, and Empowerment for Children Trust Account Program that aims to close the racial wealth gap for children who have lost a parent to COVID-19, and the San Francisco Kindergarten to College program, the country’s first universal child savings account program.

Taking advantage of such programs is the best course of action for comparatively disenfranchised families to eventually build wealth, she said – but, of course, that takes time.

Embedding emergency savings accounts into retirement accounts could be another option, she said – allowing employees to navigate unexpected financial crises without compromising their retirement funds with emergency withdrawals.

In addition, automatic enrollment in emergency savings accounts nearly doubles the likelihood that people will save, she said.

Automatic stabilizers that would need to be offered by the government like expanded refundable tax credits and enhanced unemployment benefits would also help these families, the expert concluded.