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Wealth—the measure of an individual’s or family’s financial net worth—provides all sorts of opportunities for American families. Wealth makes it easier for people to seamlessly transition between jobs, move to new neighborhoods, and respond in emergency situations. It allows parents to pay for or help pay for their children’s education and enables workers to build economic sustainability in retirement. Importantly, it is the most complete measure of a family’s future economic well-being. After all, families rely on their wealth to pay their bills if their regular income disappears during an unemployment spell or after retiring, for instance.

Unfortunately, wealth in this country is unequally distributed by race—and particularly between white and black¹ households.² African American families have a fraction of the wealth of white families, leaving them more economically insecure and with far fewer opportunities for economic mobility. As this report documents, even after considering positive factors such as increased education levels, African Americans have less wealth than whites. Less wealth translates into fewer opportunities for upward mobility and is compounded by lower income levels and fewer chances to build wealth or pass accumulated wealth down to future generations.

Several key factors exacerbate this vicious cycle of wealth inequality. Black households, for example, have far less access to tax-advantaged forms of savings, due in part to a long history of employment discrimination and other discriminatory practices. A well-documented history of mortgage market discrimination means that blacks are significantly less likely to be homeowners than whites,³ which means they have less access to the savings and tax benefits that come with owning a home. Persistent labor market discrimination and segregation also force blacks into fewer and less advantageous employment opportunities than their white counterparts.⁴ Thus, African Americans have less access to stable jobs, good wages, and retirement benefits at work⁵— all key drivers by which American families gain access to savings. Moreover, under the current tax code, families with higher incomes receive increased tax incentives associated with both housing and retirement savings.⁶ Because African Americans tend to have lower incomes, they inevitably receive fewer tax benefits—even if they are homeowners or have retirement savings accounts. The bottom line is that persistent housing and labor market discrimination and segregation worsen the damaging cycle of wealth inequality.

While this report focuses on wealth disparities between black and white households, it is important to note that Latino and certain Asian American and Pacific Islander (AAPI) household wealth falls far below their white counterparts’ as well. Indeed, Hispanic families have only slightly more wealth than black families. In 2016, the median wealth for black and Hispanic families was $17,600 and $20,700, respectively, compared with⁷ white families’ median wealth of $171,000. The disparity between white and AAPI wealth is often overlooked because, collectively, their average and median wealth is comparable to whites. There is, however, significant wealth inequality among AAPI households.⁸ This report offers solutions to address the distinct issues that exacerbate the black-white wealth gap.

Exactly how bad is the wealth gap between blacks and whites? According to 2016 Federal Reserve data highlighted throughout this report, there are several key drivers perpetuating the considerable wealth gap between white and black Americans:

• African Americans own approximately one-tenth of the wealth of white Americans. In 2016, the median wealth for nonretired black households 25 years old and older was less than one-tenth that of similarly situated white households.⁹
• The black-white wealth gap has not recovered from the Great Recession. In 2007, immediately before the Great Recession, the median wealth of blacks was nearly 14 percent that of whites. Although black wealth increased at a faster rate than white wealth in 2016, blacks still owned less than 10 percent of whites’ wealth at the median.¹⁰
• Black households have fewer and are in greater need of personal savings than their white counterparts. For a variety of reasons, blacks are more likely to experience negative income shocks but are less likely to have access to emergency savings. As a consequence, blacks are more likely to fall behind on their bills and go into debt during times of emergency.
• African Americans face systematic challenges in narrowing the wealth gap with whites. The wealth gap persists regardless of households’ education, marital status, age, or income. For instance, the median wealth for black households with a college degree equaled about 70 percent of the median wealth for white households without a college degree. The gap worsens as households grow older. In 2016, blacks between 50 and 65 years old and near retirement had only about 10 percent of the wealth of whites in the same age group. This is down from the approximately 24-percent gap in 1998, when the same groups of people were between 32 and 47 years old.
• African Americans have fewer assets than whites and are less likely to be homeowners, to own their own business, and to have a retirement account. The most recent data available, from 2016, show that when blacks owned such assets, they were worth significantly less than assets owned by whites.
• Black households have more costly debt. In 2016, blacks with debt typically owed $35,560—less than 40 percent of the $93,000 in debt owed by whites. However, because blacks owed larger amounts of high-interest debt—such as installment credit and student and car loans—the debt they typically owed was more expensive. For example, blacks carry larger credit card balances than whites.

The persistent racial wealth gap leaves African Americans in an economically precarious situation and creates a vicious cycle of economic struggle. The lack of sufficient wealth means blacks are less economically mobile and therefore unable to grow their wealth over time. Policy levers such as improved access to higher education alone, while important, will not be enough to create equal opportunity in terms of wealth-building for all. Only broad and persistent policy attention to wealth creation can address this glaring inequity.

Wealth—an individual’s or family’s financial net worth—can function as a generational stepping stone that older generations pass on and future generations benefit from and build over time. Throughout most of American history, however, this essential stepping stone was not, for all intents and purposes, available to African Americans. For blacks, the American experience began with slavery, which allowed whites to profit off of the bodies and blood of enslaved people, who by rule of law were unable to live freely, let alone build wealth to pass along to future generations. More than one and a half centuries since slavery’s abolition, America has yet to fully reckon with how to atone for this original sin. The disparities that exist between blacks and whites today can be traced back to public policies both implicit and explicit: From slavery to Jim Crow, from redlining to school segregation, and from mass incarceration to environmental racism, policies have consistently impeded or inhibited African Americans from having access to opportunities to realize the American dream. Direct action must be taken to change an American system built on suppression, oppression, and the concentration of power and wealth.

Decade after decade, black Americans have struggled to keep pace with their white counterparts and—despite momentous effort—continuously find themselves several steps behind. The data are clear: Even when African Americans pursue higher education, purchase a home, or secure a good job, they still lag behind their white counterparts in terms of wealth. Moreover, the disparities between white and black Americans can nearly always be traced back to policies that either implicitly or explicitly discriminate against black Americans. According to the Centers for Disease Control and Prevention, for example, black mothers and children die at disproportionately higher rates than their white counterparts, regardless of their income levels.¹¹ Researchers have suggested that racism—which has produced segregated neighborhoods with fewer hospitals, higher rates of chronic illnesses, and unequal access to health care—is the main culprit.¹²

For most African Americans, the American promise that the Rev. Dr. Martin Luther King Jr. spoke about in his famous 1963 “I Have a Dream” speech, whereby “all men, yes, black men as well as white men, would be guaranteed the unalienable rights of life, liberty, and the pursuit of happiness,”¹³ has not been fully realized. Indeed, more than half a century later, it is clear that America has defaulted on its promises to citizens of color. What most people forget about that speech is that Dr. King also spoke about the “fierce urgency of now” and how now is not the time “to take the tranquilizing drug of gradualism.” Fifty years after his assassination, we are in a similar moment. Bold action is required.

The theory of targeted universalism developed by John A. Powell at the Haas Institute at the University of California, Berkeley, focuses on executing targeted strategies to meet universal goals.¹⁴ This nation can no longer treat differently situated persons similarly in its policy responses. The theory states that universal approaches alone will not bring change and will, in many cases, exacerbate the current divide. The Federal-Aid Highway Act of 1956, for example, used federal dollars to build highways across the country and created the suburbs.¹⁵ This act, while deemed universally beneficial, further entrenched racially isolated urban residents from newly formed, predominately white suburbs.¹⁶ Similarly, following World War II, the U.S. Department of Veterans Affairs (VA) helped millions of American veterans purchase homes and obtain an education.¹⁷ These policies were designed to be race- and gender-neutral but in practice disproportionately helped white men.¹⁸ Moreover, these policies were executed by states, many of which dispersed loans more often to white men, resulting in fewer loans for women and black veterans.¹⁹ In addition, black veterans’ educational benefits were only available for a limited number of black colleges—in many cases, the only institutions of higher education open to blacks—which led to overcrowding at those schools.²⁰

When considering policy recommendations to close the racial wealth gap, one thing must be acknowledged: Poor blacks and poor whites are not similarly situated because whites have been and continue to be treated more favorably than blacks by government institutions. Targeted universalism provides a framework for closing the racial wealth gap because, as Powell notes, it is “inclusive of the needs of both the dominant and the marginal groups but pays particular attention to the situation of the marginal group.”²¹ Furthermore, it is essential that we accept full responsibility for our nation’s history and the  systems in place if the goal is to move forward and close the wealth gap between white and black Americans. Going forward, policymakers should use a targeted universalism framework to design and advance policies that ensure equity.

Much has been made recently about rising income inequality and the concentration of income among America’s richest households. While income inequality certainly remains a pressing policy issue, wealth inequality is worse and deserving of closer attention.

Income and wealth are different and require unique considerations. Income, on the one hand, includes earnings from work, Social Security benefits, and pension benefits, as well as interest and dividends that households use to meet their current spending needs. Wealth, on the other hand, consists of any form of savings, including the value of one’s houses and cars, minus one’s debt. In other words, wealth is the amount of money that people can spend in the future. The combination of income and wealth tells a lot about a household’s current and future economic security. This report focuses solely on wealth, which is substantially more concentrated among America’s richest households than income, and thus leaves many households—especially black households—economically insecure.

Wealth is more concentrated than income

Wealth is a critical tool for families to finance and achieve economic mobility. It allows individuals to change jobs, pursue an education, and start their own business. It also helps people pay their bills during an economic emergency such as a layoff or unforeseen health emergency. Yet wealth is heavily and increasingly concentrated among the richest households. Figure 1 shows the wealth and income shares of the top 20 percent of income earners among blacks and whites.

Several important points are worth noting.²² As mentioned previously, wealth is more concentrated than income. This means that many households have little or no cash saved to use during an emergency. For example, in 2016, the richest 20 percent of blacks owned 64.9 percent of all black wealth but only received 52.6 percent of all black income. Moreover, since 1995, wealth has become increasingly concentrated for both blacks and whites. In the 1990s, the richest 20 percent of blacks owned 51.5 percent of all black wealth compared with 64.9 percent in 2016. The difference between wealth and income concentration is about the same for blacks and whites. The ratio of the share of wealth received by the richest 20 percent of blacks to the share of income they received is 123.3 percent. This compares to a proportion of 123.5 percent for the richest 20 percent of whites.

Wealth is more concentrated than income, and its concentration has grown for both blacks and whites. Even with this concentration, vulnerable subgroups of whites with little wealth still tend to fare much better than economically more secure subgroups of African Americans. That is, the concentration of wealth matters both within groups and across groups, as most blacks increasingly lose out in both directions. As a result, most blacks have few protections in the case of a financial emergency and have limited means for upward mobility.

African Americans systematically have less wealth than whites. Tables 1 and 2 summarize several wealth measures by race including median wealth, average wealth, and the share of households with no or negative wealth.²³ The median black wealth in 2016 amounted to $13,460—less than 10 percent of the $142,180 median white wealth. (see Table 1) The average black wealth was 11 percent that of whites, and slightly more than one-quarter of blacks had no or negative wealth, compared with only a little more than 10 percent of whites. (see Table 2)

The black-white wealth gap has persisted for decades. As shown in Table 1, the median wealth for black nonretirees over the age of 25 has never amounted to more than 19 percent of the median wealth of similarly situated whites since 1989. Additionally, the ratio of average black wealth to average white wealth never exceeded 21.6 percent in 1992. Roughly speaking, the best-case scenario for the past 30 years occurred when blacks had about one-sixth the median wealth of whites in 1998.

But in the wake of the Great Recession, which lasted from 2007 through 2009, America has seen its black-white wealth gap increase sharply and move even farther away from that best-case scenario. In 2016, median black wealth stood at $13,460—about half of the median black wealth recorded just before the Great Recession. (see Table 1) At the same time, median white wealth was only one-quarter less than it was prior to the Great Recession, declining from $188,756 to $142,180. (see Table 1) The average black wealth in 2016 was still about one-third less than it was before the start of the Great Recession—$102,477 compared with $154,557. Over the same period, average white wealth grew by about 15 percent—from $815,063 in 2007 to $935,584 in 2016. (see Table 1) The Great Recession did greater damage to black wealth than it did to white wealth, widening the racial wealth gap even further over the past decade.

A simple calculation puts the persistent and policy-driven black-white wealth gap into perspective. Consider that the racial wealth gap—measured as the ratio of median black wealth to median white wealth—slightly narrowed from 2013 to 2016. (see Table 1) If this pattern continued over time and with no major policy changes, it would take more than 20 years just to return to the racial wealth gap that existed in 1998. Moreover, it would take more than 200 years for median black wealth to equal median white wealth. Leaving wealth inequality to market forces would likely create a massive gulf in economic opportunity and security by race. That said, shrinking the black-white wealth gap in a meaningful way will undoubtedly require large, targeted policy interventions.

Black households are in greater need of wealth

For a variety of reasons, African Americans are more vulnerable to economic insecurity and therefore are in greater need of wealth. This economic insecurity stems from the fact that blacks are more likely to be underpaid, less likely to have adequate savings, and less likely to have sufficient financial resources to respond to an emergency. For example, the primary worry for most families is often how to continue paying household bills when an emergency occurs. Saving for an unforeseen event was the single most important issue among both blacks and whites in 2016. Nearly half of all blacks said that they were saving for such events compared to 46.9 percent of whites. (see Figure 2) In comparison, saving for retirement was a distant second for both blacks and whites.²⁴

Data on household financial distress highlights why families, especially black households, rank saving for short-term liquidity so high. More than five years after the Great Recession ended, in 2016, one-fifth of blacks reported an income shock—meaning their income was less than usual—compared with 14.7 percent of whites. (see Figure 2) Less than half of blacks could receive financial assistance from family or friends in an emergency, compared with almost three-quarters of whites. As a result, blacks were more likely to need to borrow, to postpone payments, and to cut back on spending in an emergency than whites. (see Figure 2) Not surprisingly, blacks are already about twice as likely as whites—10.4 percent to 5.7 percent, respectively—to be behind on bill payments, which reflects their more precarious financial situation. That is, blacks are more in need of short-term savings because of their day-to-day financial struggles. And as the data in the following sections show, blacks have significantly less wealth than whites. The combination of greater income volatility, fewer emergency savings, and less wealth for blacks than whites creates a highly insecure economic situation for many families.

The black-white wealth gap is a result of the institutionalized obstacles blacks face in building wealth. Take assets, for instance: The U.S. tax code prioritizes savings in certain assets over other savings. Retirement savings accounts such as 401(k) plans and individual retirement accounts (IRAs), as well as mortgage borrowing to finance a primary residence, receive preferential treatment under the tax code. Yet blacks are less likely to work in jobs that carry benefits such as retirement savings due to historical occupational segregation.²⁵ Similarly, blacks are much less likely to become homeowners due to systematic housing and mortgage discrimination.²⁶ These obstacles translate into fewer tax advantages and fewer chances to benefit from recent stock and housing market gains, resulting in significantly less wealth for black than for white Americans.

Racial differences also exist with respect to debt. Typically, blacks have more costly—or high-interest—debt, such as auto loans, student debt, and credit card debt, than whites.²⁷ Blacks also pay more for installment loans, such as car loans, than whites.²⁸ These patterns of having more costly debt in part reflect credit steering—when people of color are steered toward particularly costly forms of credit— and credit market discrimination—when people of color are more likely to be denied loan applications for less costly loans, as is often the case with mortgage loans.²⁹

The black-white wealth gap reflects differences both in assets and in debt. And while higher education and increased income offer some benefits, they are insufficient to close the wealth gap.

Table 3 summarizes median wealth by race and several key demographics such as education, marital status, and income in 2016. The data reveal that blacks who have higher education levels, are married households, and obtain higher incomes still acquire significantly less wealth than whites who lack those qualifications. For instance, blacks with at least a college degree still had about 30 percent less wealth than whites without a college degree—$57,250 compared with $81,650, respectively.³⁰ Similarly, the median wealth of married African Americans in 2016 amounted to only two-thirds of the median wealth of unmarried whites. The wealth gap also does not noticeably shrink with age. Blacks between the ages of 55 and 64, for instance, had a median wealth of $18,900—less than 7 percent of the median white wealth. This is similar to the ratio of median wealth for black and white households between the ages of 35 and 44 years—$6,530 to $98,000, respectively. Likewise, higher income does not close the wealth gap. Blacks in the top one-fifth of the income distribution still have less than one-third the wealth of whites in the same income distribution level.

Factors that are generally associated with rising wealth—education, marriage, education, and income—are unevenly distributed by race. Even when controlling fo