How Measurement of Inequalities in Wealth by Race/Ethnicity Impacts Narrative and Policy: Investigating the Full Distribution

Researchers, analysts and policymakers who are concerned with economic inequality, family financial security, and poverty in the USA used to focus their analysis entirely on income and consumption. Today, the importance of wealth and asset holdings—not just income streams—in ensuring and maintaining economic well-being is widely recognized. With this shift in understanding, measures of economic security increasingly recognize the importance of wealth1 and assets in gauging household financial well-being (Brandolini et al. 2010; Caner and Wolff 2004; Oliver and Shapiro 2006; Sherraden 1991). Attention to and appreciation of the role that wealth plays in overall economic security highlights even greater inequalities, particularly by race/ethnicity, that exist in the USA in regard to wealth relative to those that exist by income. The typical (median) black household earns 59% of the typical (median) non-Hispanic white household, while the typical Latino household earns 71% (DeNavas-Walt and Proctor 2015). By contrast, typical black and Latino households hold just 8 and 10%, respectively, of the wealth of typical white households as measured at the median using the 2013 Survey of Consumer Finances (SCF). In dollar figures, the median net worth of white households is about $141,900, Abstract In recent decades, analysts and researchers have expanded understanding of economic security by adding wealth to traditional income measures of economic security, documenting substantial and growing inequalities in wealth in the USA that exceed notable income inequalities. Racial disparities in wealth have been well-documented and represent a major barrier to economic equality for communities of color. However, while the racial wealth gap is typically measured at the median due to the substantial skew of the wealth distribution, much remains unknown about racial disparities across the wealth distribution. This study aims to advance analytic discussions about measurement of racial wealth disparities examining recent trends in wealth by race/ethnicity using a more complete view of the wealth distribution. Using the Survey of Consumer Finances (SCF) from 2001 to 2013, results reveal that racial wealth disparities across the distribution are even more widespread than an examination of central tendencies alone can observe. Also, while all households experienced notable wealth declines in recent years during the Great Recession, African American and Latino households across the distribution of wealth were particularly affected. From 2007 to 2013, the 75th percentile of wealth for African Americans and Latinos fell by approximately 50%, while losses for whites at the third quartile were just 15%. Similar differences in impacts of the economic downturn are seen across the distribution. Examination of net worth trends over the period reveals that losses were