The Racial Wealth Gap
Why Policy Matters
by
Laura Sullivan, Tatjana Meschede,
Lars Dietrich, & Tomas Shapiro
institute for assets & social
policy, brandeis university
Amy Traub, Catherine Ruetschlin
& Tamara Draut
demos
About Demos
Demos is a public policy organization working for an
America where we all have an equal say in our democracy
and an equal chance in our economy.
Our name means “the people.” It is the root word of
democracy, and it reminds us that in America, the true
source of our greatness is the diversity of our people. Our
nation’s highest challenge is to create a democracy that
truly empowers people of all backgrounds, so that we all
have a say in setting the policies that shape opportuni-
ty and provide for our common future. To help America
meet that challenge, Demos is working to reduce both
political and economic inequality, deploying original
research, advocacy, litigation, and strategic communica-
tions to create the America the people deserve.
About IASP
Te Institute on Assets and Social Policy (IASP) is
dedicated to advancing economic opportunity, security
and equity for individuals and families, particularly
those lef out of the economic mainstream. Our work
is premised on the understanding that assets provide
the tangible resources that help individuals move out
of and stay out of poverty, as well as inspiring efective
individual, community, state and national actions
through the belief that security, stability, and upward
mobility are indeed possible.
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TABLE OF CONTENTS
Executive Summary 1
Introduction5
How Homeownership Contributes to the Racial Wealth Gap9
How Education Contributes to the Racial Wealth Gap 16
How Labor Markets Contribute to the Racial Wealth Gap 24
Conclusion32
Methodological Appendix33
1demos
EXECUTIVE SUMMARY
A
s the United States rapidly becomes both a more diverse
and unequal nation, policymakers face the urgent
challenge of confronting growing wealth gaps by race
and ethnicity. To create a more equitable and secure
future, we must shif away from public policies that fuel and exacer-
bate racial disparities in wealth. But which policies can truly begin to
reduce our country’s expanding racial divergences
Until now there has been no systematic analysis of the types of
public policies that ofer the most potential for reducing the racial
wealth gap. Tis paper pioneers a new tool, the Racial Wealth
AuditTM, and uses it to evaluate the impact of housing, education,
and labor markets on the wealth gap between white, Black, and
Latino households and assesses how far policies that equalize
outcomes in these areas could go toward reducing the gap. Drawing
on data from the nationally representative Survey of Income and
Program Participation (SIPP) collected in 2011, the analysis tests
how current racial disparities in wealth would be projected to
change if key contributing factors to the racial wealth gap were
equalized.
Main Findings:
public policy decisions. According to our analysis of the
SIPP data, in 2011 the median white household had
$111,146 in wealth holdings, compared to just $7,113
for the median Black household and $8,348 for the
median Latino household. From the continuing impact of
redlining on American homeownership to the retreat from
desegregation in public education, public policy has shaped
these disparities, leaving them impossible to overcome
without racially-aware policy change.
would substantially reduce the racial wealth gap. While
73 percent of white households owned their own homes
in 2011, only 47 percent of Latinos and 45 percent of
Blacks were homeowners. In addition, Black and Latino
20152
homeowners saw less return in wealth on their investment
in homeownership: for every $1 in wealth that accrues to
median Black households as a result of homeownership,
median white households accrue $1.34; meanwhile
for every $1 in wealth that accrues to median Latino
households as a result of homeownership, median white
households accrue $1.54.
disparities in homeownership rates, so that Blacks
and Latinos were as likely as white households to
own their homes, median Black wealth would grow
$32,113 and the wealth gap between Black and
white households would shrink 31 percent. Median
Latino wealth would grow $29,213 and the wealth
gap with white households would shrink 28 percent.
homeownership, so that Blacks and Latinos saw the
same fnancial gains as whites as a result of being
homeowners, median Black wealth would grow
$17,113 and the wealth gap between Black and
white households would shrink 16 percent. Median
Latino wealth would grow $41,652 and the wealth
gap with white households would shrink 41 percent.
on a college degree would have a modest direct impact on
the racial wealth gap. In 2011, 34 percent of whites had
completed four-year college degrees compared to just 20
percent of Blacks and 13 percent of Latinos. In addition,
Black and Latino college graduates saw a lower return on
their degrees than white graduates: for every $1 in wealth
that accrues to median Black households associated with
a college degree, median white households accrue $11.49.
Meanwhile for every $1 in wealth that accrues to median
Latino households associated with a college degree, median
white households accrue $13.33.
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