Study Finds Major Rise in Wealth Disparity between African Americans and Whites

The value of assets held by White families has risen sharply compared to African-American families, leading to what researchers at Brandeis University’s Institute on Assets and Social Policy (IASP) describe in a new report as a dramatic wealth gap.

Between 1984 and 2007, the African-American and White median wealth gap more than quadrupled, going from $20,000 to $95,000, excluding home equity, according to the IASP report. That gap in wealth, as the authors note, is enough to pay the full tuition at a four-year public university for two children, plus tuition at a public medical school. 

In explaining the acceleration of the racial wealth gap, the authors cite persistent discrimination in consumer credit markets, including high-cost and predatory home loans and payday lending schemes which contribute to saddling African Americans with ever growing debt. For example, research has shown that African Americans and Latinos are twice as likely to receive a higher cost loan as Whites. 

Unequal access to credit in one area could exacerbate other existing forms of inequality, even for upwardly mobile African Americans. A separate study from College Board Advocacy & Policy Center, for instance, found that 36 percent of Whites graduated with no college debt compared to only 19 percent of African Americans. With more income tied up in debt, families of color have less of an opportunity to build wealth.

By contrast, middle- and high-income Whites have been able to take advantage of tax cuts and deductions on inheritances, retirement accounts, and home mortgages. As a result, high-income Whites saw a more than fourfold increase in median wealth between 1984 and 2007 (see figure 2 below), far exceeding gains by high-income African Americans, according to IASP.  In fact, high- and middle-income Whites held over $200,000 and nearly $75,000 in assets respectively in 2007, compared with only $18,000 for high-income African Americans.

To help close the wealth gap, the IASP report calls for a Consumer Financial Protection Agency that would ensure fairness in the marketplace and expand opportunities for families of color to build wealth.