RACE matters when it comes to wealth. Even after you control for income differences, whites have more wealth than black and Hispanic Americans.

The reasons for the gap remain unclear. Some suggest it's the terrible legacy of government policies in America that kept black Americans from owning property. This can have a persistent effect because it's harder to accumulate wealth when your parents can't help you pay for education or buy a home. There is probably something to that. But economists Joseph Altonji and Ulrich Doraszelski found that money from relatives could not explain a large part of the wealth gap. They suspect the wealth gap might be due to different saving behaviour or gaps in stock ownership—minorities often don't own stock, which typically (though not always) pays higher turns. They also found that a large part of the gap can be explained by differences in entrepreneurship; black Americans are less likely to own a business. That may be because they have less wealth to start a business to begin with or it could be a cultural legacy of the discriminatory government policies. You're more likely to start a business if your parents did too.

Even more worrying: my colleague points us to a new report from the Pew Research Centre which found that the wealth gap deepened following the financial crisis. The ratio of median white to black wealth is at its highest level in 24 years. That's because minorities were more affected by the housing bubble. Its inflation disproportionately boosted black minority wealth as minority homeownership rates rose. According to the Survey of Consumer Finances, between 2001 and 2007 the percent of non-whites and Hispanics who claimed their primary home as an asset increased from 47% to 52%. The figure among whites barely moved from 74% to 75.6%. Minorities also seemed more vulnerable to volatile housing prices. The average value of minority-owned primary homes increased 70% in this period, while it only increased 40% for whites. The Pew Centre points out that this may be because Hispanics are more heavily concentrated in California, Florida and Nevada—bubble hotspots. Minority wealth was especially sensitive to the housing bubble because housing is often the primary asset for non-white households.

Another thing that jumped out at me from the Survey of Consumer of Finances is the difference in education loans. From 1989 to 2007 the mean value of education debt for a minority household increased more than 200% while it only increased 130% for white households. Minority households also became more likely to have education debt. This is not surprising; minority households have less wealth to begin with so they need to take on more debt to finance their own or their children's education. Rising education debt could be viewed as a positive sign, to the extent that it implies an increase in educational attainment among minorities; education is our best hope, over the long run, to eliminate disparities in wealth and income. On the other hand, more debt needn't translate into greater attainment. I can't tell from the survey when education loans resulted in an actual degree and when the student dropped out before finishing and had nothing to show but more debt.

However you slice it, policy failures are chiefly to blame for the wealth gap. Some of it can be blamed on the legacy of policies which prevented black Americans from owning property. Some is associated with the policy shifts that facilitated the sub-prime crisis. Up until the crisis, increased rates of homeownership seemed like a triumph; now we know it made the problem worse. Hopefully we'll have more thoughtful education policy in the future to ensure the resources minorities are putting toward their education pays off.