The wealth gaps between black and white families with children, and between Hispanic and black families, have widened since the Great Recession in 2007-09, even though the long-time gap between black and white families’ earnings and wages, or income, has stayed the same.
By 2016, black families had just one cent, and Hispanic families had eight cents, for every dollar of wealth held by white families, according to a new study by Northwestern University sociologist and Institute for Policy Research faculty fellow Christine Percheski and Christina Gibson-Davis of Duke University.
Using data from the Federal Reserve’s Survey of Consumer Finances (2004-16), Percheski and Gibson-Davis compared the wealth – meaning assets minus debts – of households with children for black, white and Hispanic families from 2004 to 2016. A family’s wealth is key to children’s future success in education, jobs and opportunities.
“Racial inequality in income for families with children has not grown recently, but racial wealth inequality has grown tremendously,” Percheski said. “The level of racial economic inequality in the U.S. is staggeringly high, and that is an important part of the story of racial violence and racial injustice and health disparities of the COVID-19 pandemic.”
During this time of massive protest against racial injustice, Percheski and Gibson-Davis point to the necessity of profound policy changes to address racial inequality, such as reducing discrimination in housing and mortgage lending, compensating communities targeted by predatory lenders and overhauling how the U.S. finances higher education.
“Racial economic inequality is an important part of the story of racial violence and racial injustice,” Percheski said. “We absolutely need to think about how we can start to reduce wealth inequality, and it’s not going to be quick or easy, and it will require radical action.”
Key findings of the study include:
- Wealth gaps between black and white families with children are larger and have grown faster than those in the general population of all U.S. households. For families with children, gaps between black and white families at the top, bottom and middle of the wealth scale are widening.
- The Great Recession caused wealth losses for most families in all racial and ethnic groups, but fewer black families with children regained their lost wealth. Between 2013 and 2016, white families increased their wealth, but black families’ wealth continued to decrease, leading to larger racial gaps in 2016 than in 2004.
- Hispanic families with children in 2016 (the latest data available) had more net worth than black families with children but still far less than white families. While black families had one cent for every dollar of wealth of their white counterparts, Hispanic families had eight cents.
- Home ownership rates among black families with children dropped by nearly 20% in the aftermath of the Great Recession, but neither lower rates of home ownership nor higher levels of education debt fully account for the decline in their wealth.
The study, “A Penny on the Dollar: Racial Inequalities in Wealth among Households with Children,” was published recently in Socius: Sociological Research for a Dynamic World.