What Is the Racial Wealth Gap? Definition, Statistics, and Impact

The term "racial wealth gap" technically refers to the difference in assets owned by various racial or ethnic groups but this gap results from a range of factors that affect their overall economic well-being. The term reflects disparities in access to opportunities, means of support, resources, and the transfer of intergenerational wealth.

What Is the Racial Wealth Gap?

Federal surveys reveal a large disparity among racial and ethnic groups in the U.S. The 2022 Survey of Consumer Finances provides the most recent data available. It examined assets such as savings, investments, retirement, pensions, and especially homeownership and found that White families had more than six times the wealth of Black families and five times the wealth of Hispanic families.

"Other families" form a diverse category that includes people who identify as Native American, Alaska Native, Pacific Islander, and those who report more than one racial identification. Data showed that they had less wealth than White families but more than Hispanic and Black families. Asian Americans were newly distinguished from "other" and had more wealth than White families.

Black, Latino/Latina, Native American, and Asian American people have experienced both formal legal discrimination under U.S. law and discrimination as a result of U.S. societal attitudes and practices. The somewhat greater emphasis on the status of Black Americans corresponds to the larger number of studies and more detailed information analyzed and made available.

Understanding the Racial Wealth Gap

Racial wealth gaps exist in the U.S. between the minority and majority populations as well as within ethnic and racial groups.

• Data from the Federal Reserve Board's 2022 Survey of Consumer Finances shows that White families have greater wealth than other racial groups with Black families and Latino/Latina families having the least.
  
• The racial wealth gap among White, Black, and Latino/Latina families has grown larger. In 1983, the average wealth of White families was about $320,000 higher than that of Black and Latino/Latina families in 1983. White families' wealth was about $1 million higher by 2022.
• White families were almost four times as likely to receive an inheritance as Black families in 2022 and roughly five times as likely to do so as Latino/Latina families. Intergenerational wealth transfers explain 12% to 16% of the racial wealth gap, according to research estimates.
• Asian Americans represent the highest-earning racial and ethnic group in the U.S. but not all share equally in wealth. The disparity between high- and low-income Asian American households is higher than it is between high- and low-income Black, Latino/Latina, and White households. Chinese Americans with the highest incomes earned 19 times as much as those with the lowest in 2022. Sri Lankan, Korean, and Pakistani American households also had high levels of income inequality.

Studies of the racial wealth gap vary somewhat in their relative measures of the different groups’ wealth but all confirm a gap of many multiples between the wealth of White families and people of color. Observers have described the situation as being "as bad or worse than it was before Civil Rights [1968]."

The absolute dollar value of the wealth gap between White and non-White families grew between 2019 and 2022 despite quicker growth in median wealth for Black and Hispanic families, according to the Federal Reserve.

Asian families began to be considered separated within the "other" category of 2022 data for the first time and they showed even greater wealth than White families. Asian Americans represent a large and financially diverse group that hasn't yet been studied extensively, however.

Research by the Pew Research Center shows that it's the most economically divided racial or ethnic group in America with differences reflected among specific Asian-origin groups. Income distribution among Asian Americans has gone from one of the most equal to the most unequal among the major racial groups in the U.S. in three and a half decades.

Racial Wealth Gap vs. Racial Wage Gap

The racial wealth gap is greater than the racial wage gap alone although they're related. The wage gap is the difference in earnings from labor among different races and ethnicities. The wealth gap describes the disparity of cumulative assets across races and ethnicities.

This disparity results from differences in income and the historical accumulation of assets across generations. The broader concept of wealth stands as an important measure of economic health in this context. It predicts the ability to survive periods of financial instability, unemployment, or low income, to save for education, and to provide for retirement and an inheritance for children.

What Causes the Racial Wealth Gap?

Specific government policies and societal discrimination have fed into the creation of a gap but it's also important to consider general trends of wealth accumulation over time. The gap is generally viewed as the result of historical and continuing patterns of wealth inequality in this sense.

Income Inequality

Income inequality can cause a disparity in wealth over time. Having stable, high wages provides the opportunity to put money away while maintaining a decent standard of living and this is important in creating wealth.

Members of racial and ethnic minority groups also have significantly less access to housing wealth and government policies have kept them from accessing it. Wealth estimates suggest that as much as two-thirds of a typical American household's wealth comes from homeownership.

Housing Policies

The continual displacement of racial and ethnic minorities has contributed to diminished wealth. The mismanagement by Congress of the Freedman's Savings Bank, founded in 1865 and closed in 1874, fueled inequality. Government policies enacted after Reconstruction kept Black individuals and families from tapping into land equity.

The Federal Housing Administration (FHA) encouraged White middle-class homeownership in the 20th century using techniques such as redlining and restrictive covenants. This prevented racial and ethnic minorities from accessing credit or buying homes outside of redlined communities.

Some Black residents were forced to resort to exploitatively-priced housing contracts because they were unable to get regular mortgages. This massively increased the cost of housing and gave them no equity until their last payment was delivered. These policies pushed Black individuals and families into urban housing projects and kept them out of suburban communities where housing appreciated and increased White wealth.

Chicago's Contract Buyers League was formed in the 1960s by a group of inner-city residents to fight these practices.

The Great Recession caused high rates of unemployment and saw predatory, high-interest housing loans that targeted the Black community and other racial and ethnic minority groups. This resulted in high rates of foreclosure in these communities.

Political Representation

Representation and political enfranchisement also play a part. The post-Reconstruction era reversed political gains made by formerly enslaved African Americans. Racist laws and explicit violence leveled historical attempts to grow wealth, including the massacre of "Black Wall Street" in the Greenwood District of Tulsa, Oklahoma.

A poll tax had to be paid to vote and was levied to suppress racial and ethnic minority votes. This wasn't outlawed until 1964 with the passing of the 24th Amendment.

The impact of the 24th Amendment and civil-rights-era legislation depended and continues to depend on enforcement that has been inconsistent over the past half-century. Even with strong laws, societal and cultural attitudes and practices have played a strong role in the persistence of inequality even with strong laws.

Other Factors

Education has historically influenced the creation of a wealth gap. University education is a known path to higher wages with men aged 25 to 34 who have a college degree earning $77,000 versus $45,000 for those with a high school diploma as of 2023. The disparity in earnings is $65,000 versus $36,000 among women of the same age, according to the Pew Research Center.

Data from the National Student Clearinghouse Research Center shows that the six-year graduation rate for first-time, full-time undergraduates in 2023 was 74.8% for Asian American students, 68.5% for White students, 50.1% for Latino/Latina students, 47.5% for Native American and Alaska Native students, and 43.4% for Black students.

Educational inequalities usually begin early in life. The odds of attending a high-poverty or high-minority school in the U.S. depend largely upon a child's racial/ethnic background and social class. Black and Latino/Latina students are much more likely to attend high-poverty schools than White or Asian American students. Attending a high-poverty school lowers math and reading achievement for students in all racial/ethnic groups, an effect that hasn't diminished over time.

Studies have also concluded that economic mobility is segregated in the U.S. along racial lines partly due to access to social networks, a category that includes access to housing, support structures, and referrals for employment. This can tilt the playing field for those seeking employment or recovering from economic loss.

White Families Have More Wealth Than People of Color

Source: Federal Reserve Board, 2022 Survey of Consumer Finances. Figures display the median and mean wealth by race and ethnicity, expressed in thousands of 2022 dollars.

Asian Americans: The Largest Internal Wealth Gap

Asian households in the U.S. appear to have fared well. The typical Asian household has a higher median income than that of any other racial or ethnic group. The real annual median household income of Asian households was $112,800 in 2023, compared to $89,050 for non-Hispanic White households, $65,400 for Latino/Latina households, and $56,490 for Black households, according to U.S. Census data.

Asian Americans also have the lowest unemployment rate of any community of color although wealth accumulation in lower-income brackets has fallen off. Asian Americans represent a large and financially diverse category, however. They're the most economically divided racial or ethnic group in the U.S., according to the Pew Research Center.

Asian Americans represent a split category that can be misleading when assessing the racial wealth gap. The picture looks different from the viewpoint of different subgroups as well as across different levels of income for this demographic. The racial wealth gap within the Asian American group is high.

The gap in living standards for Asian Americans near the top and those near the bottom of the economic ladder doubled between 1970 and 2016, transforming one of the most equitable income distributions into the least equitable.

The Pew Research Center examined the wealth gap in Asian American households of different origins in 2022 and found that Chinese Americans with the highest incomes earned 19 times as much as those with the lowest. Sri Lankan, Korean, and Pakistani American households also had high levels of income inequality.

One reason for the disparity is that income growth has become weighted toward the top. Incomes for Asian Americans in the lowest-earning category had the least growth of any racial group between 1970 and 2016 while incomes for Asian Americans in the top-earning categories had the most. The disparity between high- and low-income Asian households is consequently greater than it is for Black, Latino/Latina, or White households.

Researchers also attribute the growing gap to changes in immigration. A large proportion of immigrants took low-skilled employment following the Vietnam War but Asian immigrants including Asian Indian immigrants have benefited from the U.S. H-1B visa program since the 990s. The program made highly skilled employment available.

Asian Americans have other impediments to asset accumulation, however, and this can differ across subgroups. Asian Americans tend to live disproportionately in high-cost urban areas, especially in large cities in California and New York. They also tend to have larger households.

Different sociopolitical factors have historically had an effect as well. Settler colonialism such as the annexation of Hawaii by the U.S. in the late 19th century and subsequent changes in land ownership has been suggested as a reason why some groups in the larger Asian American-Pacific Islander category have amassed less wealth.

The History of the Racial Wealth Gap

American wealth inequality is older than the U.S. itself. The enslavement of Africans and Indigenous people provided a cheap source of labor and enhanced the profits of early American colonists.

European immigrants to the U.S. used chattel slavery to spur development and grow wealth along with their access to political and economic structures denied to underrepresented groups. This system persisted into the 1860s in large parts of the country. It evolved into exploitative tenant farming in many areas. Black people and members of other racial and ethnic minority groups were often denied basic property and contract rights.

This period also coincided with the continued conquest of Indigenous people. It was a time of their resistance to colonial projects including wars and shifting alliances such as Pontiac's Rebellion and the Iroquois Confederacy.

The initial source of violent disenfranchisement was overseas imperialism in the 19th century but it shifted to expansionism within the borders of the U.S. bolstered by concepts such as Manifest Destiny and political disenfranchisement. Court rulings such as Johnson v. M’Intosh (1823) and Cherokee Nation v. Georgia (1831) stripped Indigenous people of their right to sell land and undermined their political autonomy.

Post-Civil War

The country entered the Reconstruction period from 1865 to 1877 after the 13th Amendment ended slavery in 1864 and the 14th Amendment granted full citizenship to formerly enslaved persons born or naturalized in the United States in the mid-1860s. There were promises to encourage wealth creation among newly enfranchised Black Americans including efforts at increasing education.

That period ended with compromises with White Southerners, however, ceding power in the South back to the former enslavers. George White was the last Black congressman from a Southern state for many years when he left in 1901. He commented on the Reconstruction-era improvement in the economic status of the Black population in the U.S. when he decided that running for re-election to Congress in North Carolina would be futile due to the predominance of White supremacy.

The illiteracy rate among Black Americans dropped by 45%, the aggregate of Black-owned property rose in value to about $920 million, and the property per capita for Black Americans was about $75 between 1868 and 1900 according to Congressman White. He then noted, "All this we have done under the most adverse circumstances," citing lynchings, disfranchisement, and factory and labor union exclusion of Black workers among other obstacles.

Post-Reconstruction, the reversal of Black progress, and the dominance of White supremacy ultimately resulted in the political and economic disenfranchisement of Black Americans, stunting the accumulation of wealth among racial and ethnic minority populations and leading to the introduction of the infamous "Black codes" of the Jim Crow era.

Jim Crow laws and practices entrenched racial segregation across large parts of the country, limiting racial and ethnic minorities' access to land and other economic and cultural structures.

Other underrepresented groups were also denied access to economic structures. Indigenous people were subjected to a brutal period of dispossession in the 19th century, including being "civilized" through the "Indian schools" forced upon them and being either assimilated or put into the reservation system, a system that's marked by poverty to this day.

Asian immigrants in the U.S. were also dispossessed during this period. Chinese immigrants came to the U.S. during the California Gold Rush, often performing intensive labor on the railroads. The economic downturn led to competition for jobs and this caused a backlash of anti-immigrant sentiment.

Congress passed the Chinese Exclusion Act under the Chester A. Arthur administration in 1882. This act was the first serious restriction of free immigration in U.S. history and prohibited Chinese immigration to the U.S. It wouldn't be repealed until the middle of the 20th century.

The late 19th and early 20th centuries also witnessed the imperial acquisition of territories in the Pacific Islands including Hawaii, Guam, American Samoa, and the Virgin Islands as well as the acquisition of Puerto Rico from Spain in 1898.

The 20th Century

The 20th century would see flourishing civil rights movements but it would also see the continuation of federal policies and societal practices that block members of racial and ethnic minority groups from acquiring wealth.

The interwar period saw an increase in racial inequality in education, housing, jobs, and wage rates that contributed to wealth disparities. This has been linked to Black Americans and members of other underrepresented groups receiving less support than White Americans from federal programs such as Franklin Delano Roosevelt's New Deal, Harry Truman's Fair Deal, and the implementation of the GI Bill.

Richard Rothstein's 2017 book, "The Color of Law", describes the New Deal-era role the FHA played in keeping Black Americans from accessing wealth through housing ownership. The FHA was founded in 1934 during the Roosevelt administration and engaged in redlining by withholding insurance for mortgages from Black communities while also giving subsidies to builders to mass-produce housing that was open to White residents but unavailable to Black residents. Rothstein labeled this a "state-sponsored system of segregation."

Racism was officially sanctioned by immigration law and it also kept Asian people from immigrating to the U.S. in significant numbers until late in the 20th century. Earlier proscriptions of Asian immigration were expanded to include additional Asian groups in early-20th-century legislation such as the Immigration Act of 1917 and the Immigration Act of 1924 (the Johnson-Reed Act).

Asian Americans made up less than 1% of the total U.S. population by 1965 as a consequence according to assessments of Census data, much less than other racial groups. Legislation that year reopened the doors and Asian people accounted for the largest proportion of immigrants to the U.S. of any racial or ethnic group by the mid-2010s.

One of the grimmer episodes in American history unfolded during World War II in the aftermath of the 1941 Japanese attack on Pearl Harbor, the American base in Hawaii. American-born and foreign-born Japanese Americans formed a big part of the West Coast Asian community and they were forced into mass internment camps under the Roosevelt administration's 1942 Executive Order 9066 despite constitutional objections.

Congress passed an official apology in 1988, paying out $20,000 in reparations to each person who had been forcibly evacuated and interned.

The Civil Rights Era

The civil rights era of 1954 to 1968 saw the passage of several important pieces of legislation to combat racial inequality including the Civil Rights Act of 1964, one of the most comprehensive pieces of civil rights legislation since the Reconstruction era. The 1964 law sought to curb discrimination based on "race, color, religion, sex, and national origin."

One section of that act, Title VII, prohibited racial wage discrimination. The Lyndon B. Johnson administration also launched affirmative action programs to undo some of the racial inequality in the country.

The racial wealth gap in the U.S. has grown significantly since the civil rights era, however. Attempts to explain why often rely on structural arguments. Historians argue that Black Americans were vulnerable to large political and economic trends in the post-civil-rights period that include:

• The deindustrialization and the decline of unions in the 1970s that caused well-paid union jobs to vanish
• The expansion of private prisons
• The war on drugs which led to higher rates of incarceration that negatively impacted familial wealth, particularly among racial and ethnic minorities
• Continued discrimination in housing which kept many Black Americans from benefiting from the rise of housing wealth during that period

Economic studies point to disparate levels of family support, inheritance, retirement planning, and emergency savings as well as average family income, unemployment, and the volatility of the labor market. They all had a greater impact on Black populations than on White populations.

The returns on capital have also grown at a faster rate than wages and salaries have with technology and globalization's increasing impact on the U.S. economy. All these factors have contributed to the racial wealth gap.

The late 20th century saw some legislation that increased federal recognition of Indigenous peoples with laws such as the Indian Self-Determination and Education Assistance Act of 1975 and the Tribal Self-Governance Act of 1994. These came about as a result of consistent activism.

The 21st Century

The Great Recession hit racial and ethnic minority populations hard from 2007 to 2009. Slow and staggered recoveries tilted wealth farther away from them.

Indigenous peoples have endured some of the most violent and repressive dispossessions in American history and racial wealth gaps for this group linger. They've seen increases in educational attainment and income as well as decreases in poverty and unemployment in the past quarter-century but Indigenous peoples still have the highest levels of poverty and unemployment and the lowest incomes and rates of educational achievement of all U.S. racial and ethnic minority groups.

Attempts to combat the racial economic gap have continued. The 2009 Lilly Ledbetter Fair Pay Act was passed during the Obama administration and mandates that employers take steps to ensure that they don't discriminate concerning wages and salaries.

Wealth gaps nonetheless persist. COVID-19 impacted underrepresented populations the most, exacerbating the racial wealth gap. Racial and ethnic minority groups faced higher risk from the coronavirus, resulting in high rates of hospitalization and death. They've also faced discrimination and poorer housing conditions and they've held a higher proportion of essential jobs which put them at a higher risk of exposure.

The Bottom Line

This overview of the economic status of Black, Latino/Latina, Native American, and Asian American people relative to that of White people in the United States has detailed the experiences of these groups with formal legal discrimination under U.S. law as well as discrimination as a result of U.S. societal attitudes and practices. There's been progress but the racial wealth gap persists.