Today, let’s look at exactly what the Black / White wealth gap is and how is it measured?
The Black / White wealth gap comes from the Survey of Consumer Finances (SCF). The survey is conducted every three years, and is the most accurate look into family finance in the US. The results for the period 2019-2022 in October 2023.
In the survey, The Black / White wealth gap shrank by three percentage points. It was the biggest positive change in Black family wealth since 1998. The improvement was due to the increase in real estate values and business ownership. The current survey is a “snapshot” of the Black / White wealth gap and the number can move around. The Black / White wealth gap, or the ratio of Black wealth to White wealth, hit a high of 9% in 2013, after the housing crisis, and then decreased to the current low of 16% today.
According to the survey, in 2002, a typical Black family had about $16 dollars of wealth compared to White families which had $100 dollars in wealth. A White family had a median net worth of $284,310, while a Black family had a net worth of only $44,900. Whites are $239,410 dollars richer or about about six times wealthier.
There was good news. The Black / White wealth gap is closing. Black net worth (wealth) increased by a huge amount, 60% between 2019 and 2022. In 2022, the median Black household had a net worth of $44,900 dollars as compared to $28,000 in 2019. The gains were due to real estate ownership, business income and transfer payments during Covid-19. Most of the gains were by people in the lower half of the Black population. For comparison, Hispanics have a net worth equal to 21% of White net worth.
Sadly, Black incomes dropped by 1.5% during the survey period. Blacks continued to earn 57 cents for every White $1.00 dollar earned. There has been little change since 1989. The drop in Black income was part of a continued trend in society of highly educated, high income and wealthy people earning far more money than everyone else. Inequality increased.
Black Family financial stability improved thanks to government transfer payments, but Black family debt increased by 25% because of a jump in the use of home equity lines of credit. Being able to access home equity lines of credit may be a good sign.
Where did the gains in wealth come from?
The gains were due to the increased value of real estate owned by Black people. About 70% of the gain was due to real estate value appreciation. It pays to own a home. More interesting is the 20% of the increase in wealth due to the value of business ownership. Black people are starting businesses at record numbers. Wealth increases due to business ownership was highest among Blacks. A final factor was that non-retirement government transfer programs helped Black income during Covid-19. People were able to reduce debt during Covid-19.
There is some bad news. Median Black incomes were stagnant: They dropped 1.5% from $47,210 in 2019 to $46,479 in 2020. White income rose by 1% and Hispanic income dropped by 1.5%, also. Black income was 57% of Whites and has been consistent since the start of the survey in 1989. Income for less educated people has been flat since 1989.
Black average income rose from $69,090 in 2019 to $70,950, or 2.7% meaning that high-income or highly educated Blacks captured most of the wage gains. Wages contributed zero to income growth for the average Black person. Instead, most of the average income increase came from investments and business ownership.
What is the Black / White wealth gap and why does it matter?
Wealth (along with life expectancy) is probably the single best way to measure Black economic success. And it measures economic success over the long-term. Government policymakers, politicians, the media and the public closely watch the wealth gap. The Survey of Consumer Finances is the best tool we have to measure the Black / White wealth gap and the growth of income inequality. The results are revealing. Since the 1980s, income for the bottom 50% has stagnated. While incomes for the top 10% have jumped.
If the gains in Black wealth continue to improve at the current rate, the Black / White wealth gap would close in about 100 years. However, given cancelling of post Covid-19 transfer payments, we are more likely to see a return to the long-term average of 1% percent improvement every three years.
In the US, wealth, grants power, choices, and “freedom.” We have to make sure the “rich” don’t close off opportunities for the rest of us to enjoy the benefits of society.