Wealth inequality in America is growing, according to data released by the Urban Institute, and it is being propelled by persisting racial disparities.
According to the data, the average white man earns $2.7 million over a lifetime, while the average black man makes $1.8 million and the average Hispanic man receives $2 million.
For women, the average income is even lower. White women average $1.5 million, black women average $1.3 million, and Hispanic women overage $1.1 million.
“These disparities partly reflect historical disadvantages that continue to affect later generations,” the report said.
Aside from historical disadvantages, another reason this could be occurring is that blacks and Hispanics are less likely to own homes, which causes them to miss out on building wealth.
In 1976, 68 percent of white families owned their home, compared with 44 percent of black families and 43 percent of Hispanic families. Though the gap narrowed slightly for Hispanic families by 2016, the gap widened for black families. Moreover, this is not due to just income inequality; black and Hispanic families were less likely to own homes than white families with similar incomes.
“Families of color will soon make up a majority of the population, but most continue to fall behind whites in building wealth,” the report said.
The gap is widening in this area, too. Compared to 1963 when the average wealth of white families was $121,000 higher than the average wealth of nonwhite families, in 2016, the average wealth of white families ($919,000) was over $700,000 higher than the average wealth of black families ($140,000) and Hispanic families ($192,000).
“Put another way, white family wealth was seven times greater than black family wealth and five times greater than Hispanic family wealth in 2016,” Urban Institute reported. “Despite some fluctuations over the past five decades, this disparity is as high or higher than was in 1963.”
Urban Institute recommends six ways to shrink the gap:
- Limit the mortgage interest tax deduction and use the revenues to provide a credit for first-time homebuyers.
- Establish automatic savings in retirement plans.
- Reduce reliance on student loans while supporting success in postsecondary education.
- Offer universal children's savings accounts.
- Reform safety net program asset tests, which can act as barriers to saving among low-income families.
- Provide subsidies to promote emergency savings, such as those linked to tax time.
“By more efficiently and equitably promoting saving and asset building, more people will have the tools to protect their families in tough times and invest in themselves and their children.”
To read the full report, click here.