THE RACIAL WEALTH GAP: THE CHASM THAT JUST WON'T CLOSE

A little less than a year ago, economists Ellora Derenoncourt, Chi Hyun Kim, Moritz Kuhn, and Moritz Schularich released a highly innovative and insightful study on the racial wealth gap in the United States.

Titled “Wealth Of Two Nations: The U.S. Racial Wealth Gap, 1860-2020,” the authors draw upon census data and state tax records, among other sources, assemble the first ever data base that allows one to track changes in the racial wealth gap that’s inclusive of the entire post-emancipation period.

Thanks to the pioneering work of these economists, we can take a much longer view of the trajectory of the racial disparity in wealth than had been available heretofore.

Because of the importance of this research, over the next couple of months I’ll be posting some short summaries of the author’s findings, with the hope that this will contribute to an ongoing and critical discussion of the trajectory of the racial wealth gap.

What’s more, it’s my hope that the findings of this research will be incorporated into the myriad local venues and institutions within which racial disparities in wealth are increasingly a subject of discussion and action.

A HOCKEY STICK SHAPED TRAJECTORY

One of the things these researchers find is that, between 1860-2020, the trajectory of the racial wealth divide roughly resembles the shape of a hockey stick, with the vertical axis measuring the White/Black wealth ratio and, as you can see, with years plotted on the horizontal axis.

Let’s do a quick walk through the graph (If you hate this kind of stuff, don’t worry; it’s pretty easy).

In 1860—and as illustrated in the graph— the White/Black wealth ratio stood at 56:1. Stated differently, Blacks held less than 2 cents for every dollar of wealth possessed by Whites (you get that figure by simply dividing 1 by 56: 1/56=1.8).

Over the next decade, the racial wealth gap underwent a dramatic shrinkage: By 1870, the White/Black wealth ratio stood at 23:1. Whereas ten years earlier, Blacks held less than 2 cents for every dollar of White wealth, they now possessed 4.3 cents in wealth for every dollar of net worth held by Whites.

By 1920, the gap had declined to 10:1. Blacks now held ten cents for every dollar of White wealth.

What these economists find, then, is that the sixty year period of 1860-1920 represents the era within which the racial wealth gap narrowed the most: The gap went from 56:1 to 10:1. Blacks, in other words, went from holding less than 2 cents to holding 10 cents for every dollar of wealth possessed by Whites.

What has happened since then?

Well, by 1950s, the gap had narrowed some more; now it stood it 7:1. Put differently, by the middle of the twentieth century, Blacks held 14 cents for every dollar of White wealth.

After the 1950s, though, the narrowing of the racial wealth gap essentially comes to a complete halt). In fact, Derenoncourt and her colleagues find that since 1980 the chasm has widened somewhat.

In their own words:

The 1940s through the 1970s saw dramatic changes in the landscape of racial progress and discrimination, as well as an acceleration of Black migration from the South to the North during the Great Migration. Yet such changes, notable for their influence on racial income gaps, appear to have had little impact on racial wealth convergence from a long-run point of view. Indeed, the last 70 years are instead characterized by stagnation in the gap, at a level between 5 and 7 and, in the most recent decades, the wealth gap has actually widened rather than continue to close.

SUMMING UP AND LOOKING AHEAD

To sum up, Derenoncourt and her colleagues find that the post-emancipation trajectory of the racial wealth gap traces out a hockey shaped pattern: The White/Black wealth ratio steeply descends between 1860 and 1920, drops some more over the next three decades (although it does so at a slower rate), flattens out after the 1950s, and begins to diverge or widen during the most recent period ( that is, racial wealth inequality begins to worsen).

If you’re like most people, all of this undoubtedly raises a number of important questions. Among these are probably:

• What explains the rapid decline in racial wealth inequality between 1860 and 1920?

• What causes the racial wealth chasm to cease closing in the post 1950’s period?

• What’s up with the most recent widening of the racial wealth gap?

• Will racial parity in wealth ever be secured?

• What are the implications of all of this for public policy?

In subsequent posts about the racial wealth gap, we’ll lay out and discuss how the team of economists highlighted in this post respond to these and related questions.