The wealth gap between white families and households of other races has widened by more than $1 million, according to startling new statistics.
The data comes directly from the Federal Reserve and its Survey of Consumer Finances.
The in-depth survey is conducted every three years and tracks the wealth gap among white, black and Hispanic families.
The results released this week cover the period between 2019 and 2022, when the average wealth of white families was $1.4 million. That was more than $1 million higher than the $211,596 average attributed to black families and the $227,544 attributed to Hispanics.
In other words, white families had three times the average wealth of both their black and Hispanic counterparts combined—a cause for concern as the racial wealth gap continues to widen.
The wealth gap between white families and households of other races has widened by more than $1 million, according to new statistics released this week by the federal government.
It found that white families, on average, have three times as much wealth as their black and Hispanic counterparts combined
“Wealth translates into opportunity,” says Signe-Mary McKernan, vice president for labor, human services and population at a think tank that analyzed the resultssaid.
‘It translates into mobility. [Wealth] enables people to reach their full potential’
The inequality, she said, “lies in policy,” pointing to structural racism as a major player and contributor.
She highlighted exclusionary homeownership policies such as redlining that have largely affected Blacks and Hispanics, saying these practices have “created pathways to wealth building for white families while simultaneously creating barriers for other families of color.”
Redlining refers to the denial of a loan or insurance to someone because he or she lives in an area considered low financial risk, a practice that fuels financial disparities.
Education also plays a role, McKernan said, highlighting how some equate it to a silver bullet that could end inequality.
However, the D.C.-based Urban Institute staffer said that’s not the solution everyone is looking for, citing the fact that Hispanics have had the fastest growth in advanced degrees of any ethnic group over the past two decades, but still lag far behind their white counterparts.
“Education is seen as a silver bullet, and it will make a huge difference in your income, but what education doesn’t do is close the wealth gap,” she explained.
The inequality, one expert said, ‘lies in policy’ – pointing to structural racism as a key player as a major contributor
The Fed also found that black and Hispanic families have far less retirement (right) and emergency savings (left) than white families
“In a society that claims 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 there is work to be done, she is right, because other figures show how big the wealth gap is.
White families have an average net worth of $284,310, the Fed found — a number more than four times that of Latinos, pegged at $62,120.
Additionally, the analysis found that the wealth gap also widens as families grow older, with whites accumulating more wealth on average over their lifetime than Latino families in the same age range.
It also found that black and Hispanic families have far less retirement and emergency savings than white families, and also that the homeownership rate is drastically lower.
Things like inheritance were also significantly less common in black and Hispanic families, the Fed found — 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 put forward some potential solutions to address the widening racial divide, such as starting wealth-building accounts early.
A think tank looked at the results through a lens rooted in economic and social policy research, and put forward some possible solutions to address the widening racial divide, such as starting wealth-building accounts early.
Things like inheritance were also significantly less common in black and Hispanic families, the Fed found — a reality that, like the other trends, has been present for decades.
“In a society that claims 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,” said a researcher who looked at the results this week.
“Wealth is not just for the rich. Wealth is an insurance policy against hard 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 early childhood savings accounts for students.
‘It’s the capital to build a small business. It’s savings for retirement, and it’s a springboard to the middle class,” McKernan continued.
She also highlighted other programs available in California, such as 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 om College program, the nation’s first universal child savings account program.
Taking advantage of such programs is the best course of action for relatively disenfranchised families to ultimately build wealth, she said — but that, of course, takes time.
Embedding emergency savings accounts into retirement accounts could be another option, she said, allowing workers to weather unexpected financial crises without jeopardizing their retirement funds through emergency withdrawals.
In addition, automatic enrollment in emergency savings accounts nearly doubles the likelihood that people will save, she said.
Automatic stabilizers that should be offered by the government, such as expanded refundable tax credits and enhanced unemployment benefits, would also help these families, the expert concluded.