Since the 1960s, household income growth for African Americans has actually outpaced that of whites. Median adjusted household income for blacks is currently 59.2 percent that of whites. This is up slightly from 55.3 percent in 1967 (though in dollar terms the gap has widened).
Despite these income gains, the wealth gap between the races has not gotten smaller. After adjusting for inflation, the median net worth for black households in 2011 ($6,446) turned out to be lower than it was in 1984 ($7,150), while white households’ net worth was almost 11 percent higher, reports Pew Research. NYU researcher David Low recently wrote in a working paper that high-earning married black households have, on average, less wealth than low-earning married white households.
Here’s the even stranger part, experts don’t seem to know exactly why income gains haven’t translated into wealth gains for blacks. “Researchers have identified several possible factors — less intergenerational inheritance, higher unemployment and lower incomes, differing rates and patterns of homeownership, marriage and college education — without reaching any consensus on their relative importance,” reports Pew.
Pew decided to look at the differing compositions of black and white household wealth with data from the Federal Reserve’s triennial Survey of Consumer Finances, analyzing different components to determine what’s important to total net worth. The lack of black home ownership is having a big impact on wealth. “Value of primary residence was the single biggest asset for both groups, but much more so for black households: On average, housing wealth accounted for 49% of black household assets, compared with 28% for the average white household. But the average home value was far lower for black households: $75,040 versus $217,150,” explains the Pew report.
Not only is home ownership lower among blacks than whites, but black-owned homes tend not to appreciate in value as much as white-owned homes, according to a 2013 Brandeis University report. Blacks also usually have proportionately more mortgage debt, at higher rates, than whites.
Beyond housing, there’s also the issue of business ownership. According to Pew, equity in businesses was the second-biggest asset class among white households, accounting for 18 percent of average assets, and increased a whopping 106 percent in value between 1983 and 2010. By contrast, in black households business equity accounted for less than four percent of assets on average, and actually decreased in value between 1983 and 2010. After primary residence, the single largest asset type for black households was “other residential property,” which accounted for about 12 of average assets; but that asset class only grew 37 percent in value between 1983 and 2010.
The third-biggest asset class were retirement accounts for both black and white households. While this asset rose in value over the past three decades at similar rates, black households, on average, started out with far less in their accounts: $1,496 in 1983, compared with $9,483 for white households. The Brandeis researchers contend that, due to discriminatory employment patterns, “black workers predominate in fields that are least likely to have employer-based retirement plans and other benefits, such as administration and support and food services.”
Looking at household debt, the average rose steadily for both whites and blacks from 1983 to 2007. White households’ debt continued to rise between 2007 and 2010, to an average $113,598; it fell among black households over the same period, to an average $53,199 — mostly due to a decline in home mortgage debt. But overall blacks still carry more debt relative to their household assets than do whites: 34.5 percent of average assets, versus 14.5 percent for white households.