Introduction

Issues of racial inequity are increasingly at the forefront of America’s public debate. In addition to urgent concerns about racial bias in law enforcement and the criminal justice system, activists highlight deeply connected issues of economic exclusion and inequality. No metric more powerfully captures the persistence and growth of economic inequality along racial and ethnic lines than the racial wealth gap. According to data from the Survey of Consumer Finances, the median white household possessed $13 in net wealth for every dollar held by the median black household in 2013. That same year, median white households possessed $10 for each dollar held by the median Latino/a household.

Research probing the causes of the racial wealth gap has traced its origins to historic injustices, from slavery to segregation to redlining. The great expansion of wealth in the years after World War II was fueled by public policies such as the GI Bill, which mostly helped white veterans attend college and purchase homes with guaranteed mortgages, building the foundations of an American middle class that largely excluded people of color. The outcomes of past injustice are carried forward as wealth is handed down across generations and are reinforced by ostensibly “color-blind” practices and policies in effect today. Yet many popular explanations for racial economic inequality overlook these deep roots, asserting that wealth disparities must be solely the result of individual life choices and personal achievements. The misconception that personal responsibility accounts for the racial wealth gap is an obstacle to the policies that could effectively address racial disparities.

This paper explores a number of these popular explanations for the racial wealth gap, looking at individual differences in education, family structure, full- or part-time employment, and consumption habits. In each case, we find that individual choices are not sufficient to erase a century of accumulated wealth: structural racism trumps personal responsibility. Drawing on data from the 2013 Survey of Consumer Finances, we find that white adults who don’t graduate high school, don’t get married before having children, and don’t work full time still have much greater wealth at the median than comparable black and Latino adults—and often have more wealth than black and Latino households that have married, completed more education, or work longer hours. Differences in consumption habits also cannot explain the wealth gap; we look at academic research finding that white households spend more than black households of comparable incomes, yet still have more wealth.

The racial wealth gap matters because of the central role wealth plays in enabling families to both handle current financial challenges and make investments in their future. Families that have accumulated some wealth are better equipped to manage unanticipated expenses like an emergency medical bill, or disruptions in household income such as a layoff, without falling into debt or poverty. Over the longer term, wealth can expand the prospects of the next generation, helping to pay for college, provide a down payment for a first home, or capitalize a new business. As long as a substantial racial wealth gap persists, white households will continue to enjoy greater advantages than their black and Latino neighbors in meeting the financial challenges of everyday life and will be able to make greater investments in their children, passing economic advantages on. We can only create a more equitable future by confronting the racial wealth gap and the public policies that continue to fuel and exacerbate it.

Terminology