Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020

Abstract

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. In this paper, we construct the first continuous series on white-to-Black per capita wealth ratios from 1860 to 2020, drawing on historical census data, early state tax records, and historical waves of the Survey of Consumer Finances, among other sources. Incorporating these data into a parsimonious model of wealth accumulation for each racial group, we document the role played by initial conditions, income growth, savings behavior, and capital returns in the evolution of the gap. Given vastly different starting conditions under slavery, racial wealth convergence would remain a distant scenario, even if wealth-accumulating conditions had been equal across the two groups since Emancipation. Relative to this equal-conditions benchmark, we find that observed convergence has followed an even slower path over the last 150 years, with convergence stalling after 1950. Since the 1980s, the wealth gap has widened again as capital gains have predominantly benefited white households, and income convergence has stopped.

The evolution of race and place in geographies of risk and resilience

“…Counties that received more federal aid saw even wider racial gaps in wealth accumulation. As disasters worsen in geographies that straddle racial lines, the trajectory of damage, loss, and impact on Black Americans will further widen the existing 6:1 White-to-Black per capita wealth ratio in the U.S. (Derenoncourt et al 2022). These trajectories map directly to patterns of oppression throughout American history, and mirror systemic trends worldwide.…”

On the undervaluing of diversity in the validity–diversity tradeoff consideration

“…Historically, the approach to such disparities as practiced in the United States and largely supported by our field adheres to the equity norms espoused by equal opportunity employment. Unfortunately, despite these ostensibly equitable practices, wealth gaps, such as those between Black and White Americans, continue to grow (Derenoncourt et al, 2022;Somaraju & Olenick, 2022). These gaps are likely to continue to grow in part due to organizational processes as long as the current structures remain, which tend to reproduce past inequities such as the implicit treatment of Whiteness as a positive credential (Ray, 2019).…”

Current challenges to social mobility and equality of opportunity

“…In the few countries where data allow reconstructing asset accumulation within couple-headed households, results point to a sizable gender wealth gap. For instance, men own 12% more wealth in France (Bonnet, Keogh and Rapoport, 2013 [91]) and 25% more in Italy (D'Alessio, 2018 [92]). Collecting evidence on the intra-household allocation of wealth is key to better understanding inequality of opportunity for two main reasons.…”