Historic racial wealth disparities in the United States have been exacerbated by policies that concentrate wealth among the richest households, a report from the Institute for Policy Studies argues.
Based on data from the Federal Reserve Board's most recent triannual Survey of Consumer Finances, the report, Dreams Deferred: How Enriching the 1 Percent Widens the Racial Wealth Divide (23 pages, PDF), found that between 1983 and 2016 the median wealth of African-American families fell more than 50 percent (after adjusting for inflation), while that of white families rose 33 percent. The analysis also found that the median household wealth of white Americans ($147,000) today is forty-one times that of African Americans ($3,600) and twenty-two times that of Latinos ($6,600). If the trends of the past three decades persist, the median wealth of white households will reach $174,000 by 2050, while that of Latino households will be $8,600 and that of African-American households will drop to $600 — on track to reach zero by 2082.
According to the report, the proportion of all U.S. households with zero or "negative" wealth has grown from one in six in 1983 to one in five in 2016 — and include 37 percent of African-American families and 33 percent of Latino families (down from 40 percent in 1983), compared with 15.5 percent of white families. While white households are equally likely to have zero or negative wealth as they are to have more than $1 million in wealth, black and Latino households are twenty and fourteen times as likely to have zero or negative wealth as they are to have at least $1 million in assets.
The widening of the racial wealth divide has coincided with an extreme concentration of wealth, with the number of households with $10 million or more in assets soaring some 856 percent between 1983 and 2016 and the richest 0.1 percent seeing their wealth jump 133 percent, even as overall median household wealth fell 3 percent, from $84,110 to $81,704. During the same period, median household wealth rose by about $1,000 a year for white families and $66 for Latino families, and fell $83 a year for black families, while it jumped by $500,000 annually for the top 1 percent.
According to the report, both the racial wealth gap and broader wealth inequality have been created and perpetuated by public policies that favor white Americans and the very wealthy. To create a more equitable economic system and a more just society overall, the report recommends a variety of policies, including a baby bond program to help low-wealth households build wealth; a tax on the wealthiest 0.1 percent aimed at reducing distortions caused by concentrated wealth and generating revenue that can be used to expand opportunity for low-wealth households; an audit of federal government policies to evaluate their impact on the racial wealth divide; and targeted reparations to address the legacy of racism.
"Just as racial economic inequality is the foundation of racial inequality, similarly the racial wealth divide is a key indicator of racial economic inequality," said Dedrick Asante-Muhammad, an associate fellow at IPS and co-author of the report. "Wealth is concentrating at an incredibly rapid rate in the United States in our increasingly top-heavy economy. Looking at the racial wealth divide in the context of this concentration of wealth is illuminating."
"This extraordinary concentration of wealth ripples through all aspects of our society, disrupting our democracy, economic stability, and social cohesion," said Chuck Collins, director of the institute's Program on Inequality, co-editor of Inequality.org, and a co-author of the report. "Like two strands of the same thread of DNA, the historic racial wealth divide and this recent 'top-heavy' history of wealth concentrating in fewer hands are two trends that interact and influence one another."