Income inequality in the U.S. is sky-high, with the top 5% of earners seeing their incomes increase more quickly than lower earners, and with a huge gulf between incomes for top CEOs and average workers. But we also need to talk about wealth inequality, which shapes so much of people’s lives in regular times and, in the COVID-19 economy, defines who has resources to fall back on and who doesn’t.
New Census Bureau data from 2017 on wealth—the assets people have minus the debts they owe—shows how this inequality shapes up. Relevant for the specific economic crisis of the coronavirus pandemic, renters had median wealth of just $3,036, compared with $269,100 for homeowners including their home equity. This shows the seriousness of the eviction crisis the U.S. faces. But renting vs. ownership is a distinction that is at base about wealth, since owning a home requires some wealth and since home equity combines with retirement accounts—the other main type of wealth U.S. households have—to form 61.7% of households’ wealth. Other inequalities are striking for other reasons, and racial inequality is firmly at the top of that list.
Racial disparities in wealth are huge, in a “if you don’t believe in systemic racism check out this number and if you still don’t believe in systemic racism, go sit in the corner and think about it” kind of way. White, non-Hispanic households have a median $171,700 in wealth. Asian-American households have a median of $157,400. For Hispanic origin households, it’s just $25,000. And for Black households, it’s $9,567. That right there is inequality that is baked into our society, affecting opportunities across generations.
“White families receive much larger inheritances on average than Black families,” a Brookings Institution report explained, using earlier data. “Economists Darrick Hamilton and Sandy Darity conclude that inheritances and other intergenerational transfers ‘account for more of the racial wealth gap than any other demographic and socioeconomic indicators.’”
Additionally, “Black families who make it to the top of the income distribution in a particular year are more likely than white families to drop out of the top in subsequent years, and their respective wealth levels reflect this difference. Likely less important, but still notable, high- and middle-income Black families are more likely than their white counterparts to be called upon to assist family members and neighbors.”
And of course, inheritances go largely untaxed, with only the very largest estates falling under the federal estate tax, so white people get to hand down wealth, and the advantages it confers, from generation to generation, preserving this form of inequality uninterrupted. Again, in the coronavirus pandemic that has hit Black and Latino communities so hard on a health level, the lower levels of wealth help force people to stay at jobs that are unsafe and causes increased suffering.
This is the kind of inequality that Republicans go to the mat time and time again to preserve, and Democrats need to be more willing to really try to erase, through tax policy as well as proposals like consumer protection, debt-free college, fair housing, retirement savings, and baby bonds—but in the end, the racial wealth gap also shows why the time for reparations has not passed.