The gap between the wealth of Black Americans and white Americans, one of the best examples of inequality in the US, is on track to grow wider after the 3-year pandemic, according to new data detailing over 100 years of racial wealth disparities in history.
In 2019, Black Americans had one-sixth the wealth of white Americans, according to analysis in a paper entitled “Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020” from economists Ellora Derenoncourt, Chi Hyun Kim, Moritz Kuhn and Moritz Schularick. Though that’s a drastic improvement from the 60-to-one ratio in 1860 on the eve of the Civil War, it’s still less than what they had in the 1980s.
“The racial wealth gap is the largest of the economic disparities between Black and white Americans, with a white-to-Black per capita wealth ratio of 6 to 1. It is also among the most persistent,” leads the introduction to the paper some of the most accurate information collected in history.
Our prior understanding of racial wealth differences has relied on limited snapshots, focused either on particular locations during a historical period or on recent decades when the gap has barely changed, says the authors in the paper, circulated by the National Bureau of Economic Research.
To address the lack of a comprehensive account of white-Black wealth inequality in the U.S., the authors assembled a new historical series of white-to-Black per capita wealth ratios from 1860 to 2020. The 2020 pandemic saw wealth concentration reach its highest level since World War II, Derenoncourt, from Princeton University; and Kim, Kuhn and Schularick, of the University of Bonn in Germany, said.
Given extremely low levels of Black wealth under slavery, even modest accumulation can imply a high growth rate for Black wealth that greatly exceeds that of white wealth, thus generating rapid convergence initially. However, as the racial wealth gap decreases, convergence slows and differences in returns on wealth and savings begin to matter more.
The failure of the Black and white wealth gap to narrow since the 1980s can in large part be attributed to the types of assets that make up each group’s holdings. Black households hold nearly two-thirds of their wealth in housing and very little of it in stocks, while white Americans own shares of publicly traded companies in much greater numbers. In the past 70 years, stocks have appreciated five times as much as housing prices.
But the vast gap between white and Black wealth following emancipation would ensure a wealth gap today even if Black Americans hadn’t been excluded from wealth-building opportunities in the past 160 years, the authors found.
Should current wealth-accumulating conditions continue for future generations, the paper estimates that the level of white-to-Black wealth could reach 8.4 by 2200 from around 5.6 in 2019 when Black wealth stood at $60,125.58 compared to $338,092.80 for white households.
The authors find that policies that marry and advocate for reparations and education specifically targeting portfolio composition could one day lead to a convergence in white and Black wealth, but that could take hundreds of years.
“Nevertheless, we argue these approaches are complementary, as policies that redistribute stocks of wealth without addressing racial gaps in savings and capital gains have but a transient effect on the wealth gap,” they wrote.
Read the entire paper here.