income inequality race essay

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Racism & the Economy

How the racial wealth gap has evolved—and why it persists.

October 3, 2022

Article Highlights

• New dataset tracks evolution of racial wealth gap from 1860 to 2020
• Racial wealth gap today is legacy of vastly unequal wealth for Black and White Americans following Civil War
• Racial wealth gap has been stagnant for last 40 years due to differences in Black and White households’ wealth portfolios

— W. E. B. Du Bois , The Souls of Black Folk

The dawn of emancipation in the United States saw 4 million former slaves, 90 percent of the Black American population, gain their freedom. But they did so in poverty, as Du Bois describes: A few years prior, they had been counted as wealth, earning and owning nothing in their own name.

After emancipation, proposals to provide former slaves with land so they could survive economically were largely defeated . Thus in 1870, the wealth gap between Black and White Americans was a staggering 23 to 1 . That's equivalent to just $4 of wealth for Black Americans for every $100 for White Americans.

The mission of the Opportunity & Inclusive Growth Institute  is to conduct and promote research that will increase economic opportunity and inclusive growth for all Americans and help the Federal Reserve achieve its maximum employment mandate. Connect with us  to receive emails with Institute news, insights, and events.

Fast forward 150 years and that gap has narrowed to about 6 to 1—and yet, a significant gap remains: average per capita wealth of White Americans was $338,093 in 2019 but only $60,126 for Black Americans.

In the new Institute working paper “ Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860–2020 ,” former Institute visiting scholar Ellora Derenoncourt and colleagues Chi Hyun Kim, Moritz Kuhn, and Moritz Schularick study the evolution of the Black-White racial wealth gap to understand how it has changed and what forces drove those changes.

“We wanted to see if there was something to be learned for policy: Do we see that certain periods were particularly good, particularly bad in terms of convergence? What conclusions can we draw from that?” Kuhn said about one motivation the author team had for undertaking the research.

Drawing on numerous historical resources, the economists construct a new dataset that fills in around 100 years of missing wealth data, from the 1880s to the 1980s, when modern surveys of wealth began. They then use a model of wealth accumulation to investigate the sources of the wealth gap.

So where does wealth come from? Yesterday’s wealth, mostly. Unlike income, which can change quickly—lose a job, take a new job—wealth builds slowly from interest on previous wealth and new savings from income. For that reason, “it takes a lot of time to build wealth and to close an existing wealth gap, especially if the world around you is not stopping to accumulate wealth,” Kuhn said.

The economists’ analysis suggests that, more than 150 years after the end of slavery, today’s racial wealth gap is the legacy of very different wealth conditions after emancipation. While the White-Black income gap has narrowed over time, differences in Black and White Americans’ capital gains rates and savings rates throughout history have slowed the convergence (closing the gap) between Black and White wealth.

The result: An enduring wealth gap that shows no sign of resolving. “It was interesting for us to see how extremely persistent the racial wealth gap is. We saw a lot of things changing in the U.S. economy in the last 70 years, but the racial wealth gap seems to be pretty ignorant of all that,” Kuhn observed.

Evolution of the racial wealth gap

Tracing 150 years of the racial wealth gap 1 reveals rapid early progress followed by frustrating stagnation (Figure 1).

Dawn of emancipation: 1870 to 1900

The thirty years following emancipation saw rapid narrowing of the racial wealth gap, falling from a ratio of 56 to 1 in 1860 on the eve of the Civil War to 23 to 1 in 1870 following emancipation and 11 to 1 in 1900. (In 2019 dollars, that comes to average wealth of $34,000 for a White American and $3,100 for a Black American.) White slaveholders’ loss of slaves as “wealth” explains about a quarter of this convergence. The rest was due to a higher wealth accumulation rate for Black Americans than White Americans.

This convergence, however, is more a matter of statistics than reflection of meaningful economic or political change. Because Black Americans’ wealth was so low in 1870, even small gains translated to big percent increases in wealth and thus large reductions in the wealth gap, even though the difference in the amount of average wealth held by Black Americans and White Americans remained large.

Unfortunately, this period of rapid convergence was relatively short-lived. Proposals to redistribute property to former slaves, such as General William Sherman’s field order allowing freed slaves to establish 40-acre farms on federal land, ultimately failed to garner sufficient political support, and early enforcement of Black Americans’ rights were similarly reversed. By 1900, a racist economic and social order was largely restored.

Racist resurgence: 1900 to 1930

Between 1900 and 1930, the racial wealth gap narrowed tepidly, at a rate around 0.3 percent a year. During this period, Black Americans’ share of national wealth stayed fairly constant, at 1 percent (Figure 2).

“Barriers to Black economic progress were pervasive in the post-Reconstruction era,” the economists observe. For instance, Black Americans had limited access to financial institutions or credit ; they had little opportunity to purchase land; they experienced the violent destruction of their property; they faced widespread discrimination in education and the labor market. In the South, the vast majority of Black farmers were renters or sharecroppers in an economic system that hindered Black workers’ economic progress because White landlords were able to capture their tenants’ improvements to the land simply by not renewing the lease.

Global upheaval: 1930 to 1960

Wealth convergence picked back up modestly during this period, and by 1960 the gap was 8 to 1. (In 2019 dollars, that translates to average wealth of $76,000 for White Americans and $9,000 for Black Americans.) A closer look at the timing reveals this does not appear to be the result of New Deal economic relief or new social insurance policies, which tended to exclude sectors with large representations of Black workers. Rather, labor market dynamics around the time of World War II led to Black workers moving into higher-paying occupations, notably related to war production and defense, which reduced the racial income gap and led to greater gains in Black Americans’ wealth. This movement was facilitated by President Franklin D. Roosevelt’s Executive Order 8802 , which banned “discrimination in the employment of workers in defense industries or government because of race, creed, color, or national origin.”

Civil rights: 1960 to 1980

The civil rights movement was responsible for the fastest period of racial wealth convergence since 1900. Tireless efforts by Black activists to demand equal rights and protections led to the passage of numerous laws that reduced social, political, and economic discrimination, including the Civil Rights Act of 1964, the Voting Rights Act of 1965, the Fair Housing Act of 1968, and expansions to the Fair Labor Standards Act, which sets federal minimum wage policies.

These legislations helped narrow the racial income gap, which in turn narrowed the wealth gap; it fell from 8 to 1 in 1960 to 5 to 1 in 1980. Figure 2 shows that Black Americans’ share of national wealth started increasing more rapidly in 1960 even as the total U.S. population of Black Americans was also increasing.

Stagnation: 1980 to 2020

And then—convergence stopped. In the 40 years between 1980 and 2020, the racial wealth gap actually increased by the equivalent of 0.1 percent a year. The reasons for this stagnation are discussed in the section “A widening gap: The role of capital gains” below.

Unequal initial wealth, unequal wealth accumulation

The next step in the economists' research is to analyze the causes of the racial wealth gap. To do this, they engage in a thought experiment: What if Black and White Americans started with the radically different levels of wealth in 1870 that they did in real life, but their wealth accumulation rates were identical after that? The resulting wealth gap in 2020 would be about 3 to 1 ($100 dollars of White wealth for every $33 dollars of Black wealth). That’s about half of what the actual wealth gap is today, suggesting that unequal levels of wealth in 1870 are a major source of today’s racial wealth gap.

The fact that today’s racial wealth gap is larger than it would be under this optimistic scenario is due to unequal wealth accumulation rates, which of course haven’t been identical for White and Black Americans, as the brief history above of political and economic exclusion makes plain.

Wealth accumulation can be described as a fairly straightforward equation. It starts with yesterday’s wealth and the interest earned on that wealth (capital gains rate). Add to that new savings from income, which is the product of yesterday’s income level, how much income has changed (income growth rate), and how much of that income is saved (savings rate).

While historical data on these rates is difficult to come by, since at least 1950, White Americans have enjoyed a higher average savings rate and capital gains rate than Black Americans (see Table 1).

What drove wealth convergence, then? The income growth rate. The economists estimate that the average annual income growth rate for Black Americans was larger than that of White Americans from 1870 to about 1980. At that point, income convergence stalled; over the last 40 years, the annual income growth rates for Black and White Americans have been essentially the same.

A widening gap: The role of capital gains

Now that income convergence has stalled, the difference in the capital gains rate experienced by Black and White households is the main factor pushing their wealth apart.

The role of capital gains is particularly important here. The high rate of return to capital holdings over the last 40 years—economic parlance for “stocks have really gone up a lot”—is a leading cause of the wealth dispersion in the United States today. According to analysis by economist Emmanuel Saez and others, wealth has become significantly more concentrated during this period: In 1980, the richest 0.1 percent of Americans—about 160,000 households—owned 7.7 percent of national wealth. In 2020, they owned 18.5 percent.

“Given that there are so few Black households at the top of the wealth distribution,” Derenoncourt and co-authors write, “faster growth in wealth at the top will lead to further increases in racial wealth inequality.”

And that’s what’s happening now. On average between 1950 and 2010, Black households held about 7 percent of their wealth in stock equity; among White households, it was 18 percent (Table 2). The portfolios of White households are also more diversified than Black households, which are concentrated in housing wealth. Housing has appreciated since the 1950s, but stock equity has appreciated five times as much.

“At a more general level,” Kuhn stated, “this research emphasizes how important portfolio choice and investment behavior is. It’s not only about putting money aside, but where you put it.”

Why wealth matters

The distribution of wealth in the United States comes under frequent scrutiny because of how skewed it is—and because wealth is a determinant of social and economic outcomes far beyond what someone can buy.

“Wealthier families are far better positioned to finance elite independent school and college education, access capital to start a business, finance expensive medical procedures, reside in higher amenity neighborhoods, lower health hazards, etc.; exert political influence through campaign financing; purchase better counsel if confronted with the legal system, leave a bequest, and/or withstand financial hardship resulting from any number of emergencies,” Institute advisor William Darity Jr. and Darrick Hamilton wrote in a 2010 article analyzing policies to address the wealth gap.

It matters a great deal, then, that White Americans hold 84 percent of total U.S. wealth but make up only 60 percent of the population—while Black Americans hold 4 percent of the wealth and make up 13 percent of the population. Put another way: The wealth of the richest 400 Americans is approximately equal to that of 43 million Black Americans.

The historical analysis and counterfactual simulations by Derenoncourt, Kim, Kuhn, and Schularick provide useful context for thinking about policies to address the racial wealth gap. Without redistribution, the wealth gap will likely persist for centuries. But redistribution alone, without attending to disparities in wealth accumulation, will see the gap reemerge. These approaches, the economists argue, are complimentary.

They are also necessary if the wealth gap is to meaningfully narrow before another 150 years slip by.

Suggested citation: Lisa Camner McKay, “How the Racial Wealth Gap Has Evolved—And Why It Persists,” Federal Reserve Bank of Minneapolis, October 3, 2022, https://www.minneapolisfed.org/article/2022/how-the-racial-wealth-gap-has-evolved-and-why-it-persists .

1 The economists actually compare Black wealth to non-Black wealth—that is, the average wealth among all groups except Black Americans—because the data does not allow them to separate out the wealth of other racial/ethnic groups. As a check, they compare their estimate of non-Black wealth to an estimate of White wealth in the periods 1860–1880 and 1960–2020; the estimates are very similar. Racial/ethnic groups other than White and Black were quite small in the United States prior to 1950. And because White Americans are the wealthiest racial/ethnic group in the United States, using “non-Black wealth” likely underestimates White wealth and therefore underestimates the Black-White wealth gap.

Lisa Camner McKay is a senior writer with the Opportunity & Inclusive Growth Institute at the Minneapolis Fed. In this role, she creates content for diverse audiences in support of the Institute’s policy and research work.

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Harvard Staff Writer

A look at how and why we got there and what we can do about it

“Unequal” is a series highlighting the work of Harvard faculty, staff, students, alumni, and researchers on issues of race and inequality across the U.S. This part looks at the racial wealth gap in America.

The wealth gap between Black and white Americans has been persistent and extreme. It represents, scholars say, the accumulated effects of four centuries of institutional and systemic racism and bears major responsibility for disparities in income, health, education, and opportunity that continue to this day.

Consider that right now the net wealth of a typical Black family in America is around one-tenth that of a white family. A 2018 analysis of U.S. incomes and wealth written by economists Moritz Kuhn, Moritz Schularick, and Ulrike I. Steins and published by the Federal Reserve Bank of Minneapolis concluded, “The historical data also reveal that no progress has been made in reducing income and wealth inequalities between black and white households over the past 70 years.”

It’s no surprise. After the end of slavery and the failed Reconstruction, Jim Crow laws, which existed till the late 1960s, virtually ensured that Black Americans in the South would not be able to accumulate or to pass on wealth. And through the Great Migration and after, African Americans faced employment, housing, and educational discrimination across the country. After World War II many white veterans were able to take advantage of programs like the GI Bill to buy homes — the largest asset held by most American families — with low-interest loans, but lenders often unfairly turned down Black applicants, shutting those vets out of the benefit. (As of the end of 2020 the homeownership rate for Black families stood at about 44 percent, compared with 75 percent for white families, according to the Census Bureau.) Redlining — typically the systemic denial of loans or insurance in predominantly minority areas — held down property values and hampered African American families’ ability to live where they chose.

The 2020 pandemic and its economic fallout had a disproportionate toll on people of color, and many expect that it will widen the gap in various areas, including wealth. At Harvard, experts from different disciplines are studying the problem to find its roots and possible ways to level the playing field to ensure all have an equal chance to achieve the American dream. Here we will take a look at a few, several of which focus on education as a long-term path out.

A history older than the nation

Khalil Muhammad , Ford Foundation Professor of History, Race, and Public Policy at the Harvard Kennedy School, traces the roots of disparity to the Colonial period, when the European settlement and conquest of North America took place.

The process began in the second half of the 17th century, said Muhammad, when European settlers stripped Natives of their lands and used Africans as enslaved labor, preventing them from fully participating in the economy and reaping the fruits of their work.

“If we want to undo the cultural infrastructure that is hand in glove with the economic and political racism and domination of people, we have to start very young,” says Khalil Muhammad of the Kennedy School and Harvard Radcliffe Institute.

Photo by Martha Stewart

“The two dominant non-European populations, Indigenous and Africans, were subjected to various coercive forms of labor that would be distinct from the experience of indentured European servants,” said Muhammad, who is also the Suzanne Young Murray Professor at the Harvard Radcliffe Institute . “And as such, racism became an economic imperative to harness land and labor for the purpose of wealth creation, and that did not change in any substantial way until really about the 1960s.”

In fact the founders discovered that the issues of Black slavery and equality were so divisive that they opted to kick the can down the road, hoping some future generation would prove wiser or better.

With the Voting Rights Act of 1965, a crowning achievement of the Civil Rights Movement, African Americans finally gained full citizenship. Many believed that would end the era of Black inequality, but it did not, said Muhammad, because that thinking failed to account for how deeply systemic the problem had become.

Such misconceptions have tended to make it difficult to gain widespread public support for the implementation of policies to close the disparities between Blacks and whites. That’s why it’s important to institutionalize anti-racist practices and policies in civil society and government, said Muhammad, as well to better enforce anti-discrimination laws and investment in schools in low-income neighborhoods. But he also believes a “massive commitment to anti-bias education” starting in kindergarten is necessary.

“If we want to undo the cultural infrastructure that is hand in glove with the economic and political racism and domination of people, we have to start very young,” said Muhammad. “Anti-bias education is a social vaccine to vaccinate our children against the disease of racism. Imagine what the world would look like in a generation.”

A legacy that benefits some and hurts others

Over the past decades, many scholars have examined the Black-white gap in household wealth. But it was in 1995 that sociologists Thomas Shapiro and Melvin Oliver put wealth inequality on the map with their groundbreaking book, “Black Wealth, White Wealth.” Their research analyzed the role of wealth, or accumulated assets, rather than that of income in the persistent racial divide.

“Wealth is distinctive because it can be used as a cushion, and it can be directly passed down across generations,” providing greater opportunity in the present and the future, says Alexandra Killewald, professor of sociology in the Faculty of Arts and Sciences.

Kris Snibbe/Harvard Staff Photographer

“Income is unequal, but wealth is even more unequal,” said  Alexandra Killewald , professor of sociology in the  Faculty of Art and Sciences , who studies inequality in the contemporary U.S.

“You can think of income as   water flowing into your bathtub, whereas wealth is like the water that’s sitting in the bathtub,” she said. “If you have wealth, it can protect you if you lose your job or your house. Wealth is distinctive because it can be used as a cushion, and it can be directly passed down across generations,” providing families more choices and greater opportunity in the present and the future.

Most scholars agree that the legacy of slavery and other subsequent forms of legal discrimination against African Americans have hindered their ability to accumulate wealth. “Today’s African American adults and children are living with the legacy of discrimination, inequality, and exclusion, from slavery to redlining and other discriminatory practices,” said Killewald. “And in turn, white Americans are benefiting from legacies of advantage.”

The typical white American family has roughly 10 times as much wealth as the typical African American family and the typical Latino family. In other words, while the median white household has about $100,000-$200,000 net worth, Blacks and Latinos have $10,000-$20,000 net worth. Depending on the year or how it’s measured, those numbers may change, as shown by a report by the Pew Research Center, but the wealth racial gap has continued for decades . “It’s a staggeringly large number,” said Killewald.

The divide persists across generations, said Killewald, who researched the subject with co-author Fabian Pfeffer of the University of Michigan in an  article  that included striking visualizations. One  of them shows that Black parents tend to have much lower wealth than white parents, and that Black and white children tend to follow the wealth position of their parents, reproducing inequality across generations. The study concludes that “today’s black-white gaps in wealth arise from both the historical disadvantage reflected in the unequal starting position of black and white children and contemporary processes, including continued institutionalized discrimination.”

How inequality affects education

Many scholars consider education to be the key to narrowing the gap, and economist Richard Murnane is one of them.

During the last 40 years, Murnane examined the interactions between the U.S. economy and its educational system and the ways in which it has affected the educational opportunities of low-income children, who are disproportionately Black or Latinx.

“The extraordinary income inequality in the United States diminishes opportunities for low-income families and for children of color,” said Murnane, Juliana W. and William Foss Thompson Research Professor of Education and Society at the Graduate School of Education .

Rising inequality has led to growing gaps in educational resources and learning opportunities between high-income families and their low-income counterparts, as well as residential and educational segregation by income. As a result, inequality poses a danger to the promise that U.S. public education provides children with an equal chance at a better life than their parents.

Unequal distribution of economic growth has played a major role in why children who earn more than their parents has declined sharply in America over the past half century, says Raj Chetty, a professor of economics and co-author of the study “The Fading American Dream: Trends in Absolute Income Mobility Since 1940.”

Stephanie Mitchell/Harvard file photo

“One statement that most everybody across the political spectrum agrees with is that if a child grows up poor, but works hard and takes advantage of opportunities, that child’s children will have a better life,” said Murnane. “That’s less true now.”

A study on the “fading American dream” co-authored by Raj Chetty , William A. Ackman Professor of Economics, and others concluded that “absolute mobility — the fraction of children who earn more than their parents — has declined sharply in America over the past half century primarily because of the growth in inequality.”

Economic mobility rates are lower in the U.S. than in some European countries, and the American dream seems to grow more unreachable as inequality grows. Murnane warns that the government must address the problem as large sectors of the American population sink into despair and frustration.

“A great many people, especially males, have grown up thinking they would take care of their families, and the inability to do that has left them angry, frustrated, and depressed,” said Murnane. “That was what they grew up expecting, and that has not been possible for them. That’s a deep challenge to how people feel about themselves. And that’s a fundamental problem.”

The American dream: Out of reach

Economists Claudia Goldin , Henry Lee Professor of Economics, and Lawrence Katz , Elizabeth Allison Professor of Economics, believe that the solution to reducing income inequality, which is strongly tied to the wealth gap, is to close the educational divide.

Goldin and Katz examined wages and income inequality in the U.S. from the end of the 19th century to the early 21st century in their trailblazing book “The Race Between Education and Technology.”

What they found was that in periods where there was improved access to education amid technological change, as in the early 1900s when public high schools sprouted across the nation amid the Industrial Age, workers’ earnings rose. Inequality began to grow in the 1980s as the economy started to shift toward knowledge-based industries and the supply of highly trained workers fell below demand.

Expanding access to higher education could actually help reduce inequality, say economists Claudia Goldin and Lawrence Katz.

File photos by Rose Lincoln and Kris Snibbe/Harvard Staff Photographers

Around that time, the rates of college graduation began to decrease and overall high school graduation numbers leveled off. For Goldin and Katz, expanding access to higher education could actually help reduce inequality.

“You could wipe out a large fraction of inequality by ramping up the education of individuals who are limited in their ability to access and finish a college education,” said Goldin.

The problem of wealth inequality is more extreme than income inequality since the former builds on the latter, said Katz, and their effects persists across generations. The legacies of the Jim Crow era and racism against Blacks are expressed today in residential segregation, housing discrimination, and discrimination in the labor market.

For Katz, who has been studying housing discrimination and its effects on upward mobility, public policies can be implemented to reduce residential segregation. A study Katz co-authored with Chetty and Nathaniel Hendren , professor of economics, found that when low-income families move to lower-poverty neighborhoods, with help of housing vouchers and assistance, it is “likely to reduce the persistence of poverty across generations.” Chetty and Hendren, along with John Friedman of Brown University, were the co-founding directors of the Equality of Opportunity Project, now expanded and called Opportunity Insights, based at Harvard.

Growing inequality is spoiling the chances to have a better life than the previous generation. Recent numbers show that the top 1 percent has seen their wages grow by 157 percent over the last four decades, while the wages of the bottom 90 percent grew by only 24 percent.

Inequality is one of the factors keeping the American dream out of reach, said Goldin.

“The American dream has sort of shifted from one in which the economic growth of the nation was shared more across the income distribution, where the growth rate of the income of those at the bottom quartile was about the same, if not more, than the growth at the top quartile,” said Goldin. “And today it’s not that way at all: the bottom quartile isn’t going anywhere and the top is going rapidly up.”

To keep the American dream alive and return to the era of shared prosperity, the government must act, said Katz. Both Goldin and Katz believe that an expansion of investment in higher education infrastructure and access to a high-quality college education would have a powerful impact in the lives of many Americans. It could be similar to the effects of the high school movement, which lifted millions of American families out of poverty during the first half of the 20th century.

“In the early 20th century, we allowed everyone access to high school,” said Katz. “We have never done that for college, even though college is as essential today as high school was 100 years ago.”

Additional benefits of higher education

The economic returns of a college degree are important, but the social returns are also valuable, said Anthony Jack , assistant professor of education at the Graduate School of Education.

“Workers who are more educated tend to be in jobs that are more recession- and pandemic- proof,” said Jack, who also holds the Shutzer Assistant Professorships at the Radcliffe Institute. “They also tend to live longer, have better health outcomes, and be more civically engaged. Education means more than just extra dollars in the bank. It’s also the constellation of things that come along with it.”

But the road to college has become increasingly harder, especially for low-income people, even though access to college for disadvantaged students has increased over the past two decades. A report by the Pew Research Center found that the number of enrolled undergraduates from lower-income backgrounds grew from 12 percent in 1996 to 20 percent in 2016. Most of that growth has taken place in public two-year colleges and less-selective institutions.

“Education may be the great equalizer, but access to an equal education has never been part of the American story,” says Anthony Jack, assistant professor of education at the Graduate School of Education.

Selective universities have also opened their gates to poor students, however. In 1998, Princeton became the first Ivy League university to offer full financial aid to low-income students, and others followed suit. At Harvard, 55 percent of undergraduates receive need-based scholarships, and the 20 percent of Harvard parents who have total incomes below $65,000 don’t pay anything at all.

Still, access to college “varies greatly by parent income,” according to a study by Opportunity Insights. Children with parents in the top 1 percent are 77 times more likely to attend elite colleges and universities than children with parents in the bottom 20 percent.

To Jack, those numbers showcase that access to college is highly unequal and is influenced by income, race, wealth, and ZIP code. “Education may be the great equalizer, but access to an equal education has never been part of the American story,” he said. “Higher education is highly stratified. The wealthier the family, the higher the likelihood that students will enter a selective college. The inequality doesn’t end there. What happens if you are one of the few low-income students who make it into these elite schools?”

For Jack, that is not a rhetorical question. The middle son of a single mother who worked as a school security guard, Jack rose from a working-class neighborhood in Coconut Grove, Fla., to attend Amherst College, with the help of financial aid. He then came to Harvard, where he graduated with a doctorate in sociology in 2016. Two years later, Jack wrote the book “The Privileged Poor: How Elite Colleges are Failing Disadvantaged Students” about what it’s like to be a low-income student in selective universities, partly inspired by his own life.

Elite universities have made progress in recruiting more low-income students to their campuses, but there is much more work to be done to ensure that those students use their four years there as a springboard to a better future the same way their richer counterparts do, said Jack.

“The real question is not only how to increase access to colleges and universities,” said Jack. “We must pay attention to what happens once those low-income students move into campus, because that’s where inequality gets reproduced in ways that are sometimes invisible but no less insidious.”  

A Marshall Plan for higher education

  So if greater access to public higher education would help close the wealth gap, what we need is a kind of Marshall Plan to fix the system, says economist David J. Deming , professor of public policy and director of the Malcolm Wiener Center for Social Policy at Harvard Kennedy School .

That U.S. government initiative helped rebuild infrastructure and economy in Europe after the destruction of World War II. Deming’s ambitious proposal would likewise focus resources on overhauling and expanding the size and number of two- and four-year public institutions, with a goal of making access to college virtually universal.

“We ought to set a goal of increasing access to higher education for low-income students and students of color, to basically equalize education opportunity,” said Deming. “We need to invest in public higher education because it actually would make a difference in terms of intergenerational mobility.”

For one, public higher education is where most of the nation’s post-secondary schooling takes place. A report by the National Center for Education Statistics found that of the 19.7 million college students enrolled in the fall of 2019, 14.5 million attended public colleges and universities compared with 5.1 million enrolled in private institutions.

David J. Deming’s vision involves far-reaching investment across two-year colleges and four-year universities.

Kris Snibbw/Harvard file photo

The number of students enrolled in post-secondary education has skyrocketed over the past five decades. The report predicted that by the fall of 2029, more than 20 million students will be enrolled in college. Of them, nearly 15 million will attend public institutions.

Deming’s vision would involve far-reaching investment across two-year colleges and four-year universities, many of which have been historically underfunded and understaffed. Instructors are often adjunct faculty who teach large classes and have high course loads, and many institutions lack tutoring and counseling services to help less-prepared students navigate through college.

In terms of investment per student, the scale of inequality in resources is much greater in higher education than it is at the K-12 level. As an example, Deming points out that a rich school district might spend 20 percent more per student than a poor school district, whereas Harvard spends more than $100,000 per year per student, and Bunker Hill Community College spends about $10,000 or $15,000 per year per student.

“Just purely in terms of dollars and cents, the disparity is much, much greater at the higher education level,” said Deming.

Investing in higher public education won’t solve all the myriad problems that affect inequality, such as the declining minimum wage and discrimination in the labor market, among others. But it would be a big first step, he said.

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Racial economic inequality is prevalent throughout the United States, and everyone suffers from it. Learn more.

Systemic racism has contributed to the persistence of race-based gaps that manifest in many different economic indicators. The starkest divides are in measures of household wealth, reflecting centuries of white privilege that have made it particularly difficult for people of color to achieve economic security. This series of charts begins with a look at how the pandemic has exacerbated racial inequalities.

The Racial Wealth Divide

Racial income inequality, race and gender inequality, racial inequality and covid-19.

By the middle of the 21st century, the United States will be a “majority minority” nation. If we hope to ensure a strong middle class, historically the backbone of the national economy, then improving the financial health of households of color will become even more urgent than it is today. Closing the persistent “wealth divide” between white households and households of color, already a matter of social justice, must become a priority for broader economic policy.

Public policies that favor white Americans and the very wealthy have perpetuated both the extreme concentration of wealth and an extreme racial wealth divide. According to the Federal Reserve , white households held 84.5 percent of all U.S. wealth as of the fourth quarter of 2023, while making up only 77 percent of households. By contrast, Black households held only 3.4 percent and Latinos held only 2.3 percent of national wealth. These wealth figures include the value of consumer durable goods, such as vehicles.

According to  Survey of Consumer Finances data , the median Black family has $24,100 in wealth (not including durable goods). This is just 12.7 percent of the $189,100 in wealth owned by the typical white family. The median Latino family, with $36,050, owns just 19.1 percent of the wealth of the median white family. The Institute for Policy Studies Racial Wealth Divide report provides more detail on this disturbing trend and proposed solutions.

Families that have zero or even “negative” wealth (meaning the value of their debts exceeds the value of their assets) live on the edge, just one minor economic setback away from tragedy. Institute for Policy Studies  analysis of Federal Reserve data show that while the racial wealth gap has improved slightly, an estimated 28 percent of Black households and 26 percent of Latino households had zero or negative wealth in 2019, twice the level of whites.

As with total wealth, home ownership is heavily skewed towards white families, our 2023 report with the National Community Reinvestment, Still a Dream , shows. Between 1960 and 2020, the  rate of Black home ownership increased but the gap in ownership rates between Black and white families widened, from 26 percentage points to 30. Structural barriers, including lower incomes, higher rates of mortgage denials, and racial segregation, deny many Black families the opportunity to acquire this wealth-building asset. 

Black people also have to deal with larger student debt burdens. Black students on average have to take out larger loans to get through college than their white peers. A National Center for Education Statistics study reveals that Black Bachelor’s degree and Associate’s degree graduates face 13 percent and 26 percent more student debt, respectively, than their white peers. The challenge of paying off greater student debt is also worsened for Black graduates due to their lower average incomes. Black Bachelor’s degree and Associate’s degree holders earn 27 percent and 14 percent lower incomes , respectively, than whites with the same degree.

In 2021, Fortune 500 CEOs, who earned  $18.3 million  on average, included just  four Black and 17 Latino people  — just 4 percent of the total. By contrast, these groups made up 43 percent of the U.S. workers who would benefit from a raise in the federal minimum wage to $15 per hour by 2025, according to Institute for Policy Studies analysis of  Economic Policy Institute  data. Black and Latino people  comprise 31 percent  of the entire U.S. labor force.

The world’s wealthiest country is home to numerous communities that have been poor for generations: think parts of Appalachia, the Mississippi Delta, the southern border, and Chicago’s South Side. An Economic Innovation Group report finds that people of color are far more likely to live in “persistently poor” communities – defined as those with poverty rates of 20 percent or higher for at least 30 years – than white Americans.

Racial discrimination in many forms, including in education, hiring, and pay practices, contributes to persistent earnings gaps. As of the third quarter of 2023, the median white worker made 24 percent more than the typical Black worker and around 28 percent more than the median Latino worker, according to  BLS data .

Within racial groups, Bureau of Labor Statistics data show the largest pay gaps between men and women appear among whites and Asians — not because Latinas and Black women have made faster progress towards equity but because average pay for men in these groups falls far below the compensation of white and Asian men.

While student loan burdens have grown significantly for all racial groups, they are particularly heavy for Black students — especially women. According to Center for Economic and Policy Research analysis of Americans who have attended college, 43.3 percent of Black women are shouldering student loan debts, compared to just 15.7 percent of white men. 

Racial inequality in terms of the official poverty rate is also particularly acute for women of color. As  National Women’s Law Center research shows, while in 2019 the U.S. poverty rate for white men is 6.0 percent, it is 18 percent for Black women, 15 percent for the Latino community, and 18 percent for Native American women.

According to APM Research Lab , white and Asian Americans have substantially lower Covid-19 mortality rates than those of other racial and ethnic groups. Between the start of the pandemic and October 2, 2022, indigenous people suffered 582 deaths per 100,000 people – more than twice the death rate for whites and Asians. 

People of color are more likely to suffer severe illness from Covid-19, regardless of their age. According to CDC data , hospitalization rates have been highest among indigenous and Black Americans. About 2,100 indigenous and 1,700 Black Americans were hospitalized for Covid-related symptoms per 100,000 people in their respective ethnic and race groups between the beginning of the pandemic and October 22, 2022.

The racial disparities in Covid-related health indicators have contributed to a steeper decline in the U.S. life expectancy for people of color, according to data from the National Center for Health Statistics and the CDC. Between 2019 and 2021, American Indians and Alaska natives experienced the biggest drop, with life expectancy at birth plunging by more than 6 years to 65.2. The Latino and Black communities both experienced a drop of four years, while Asian and white Americans have seen a decrease of about two years since the start of the pandemic.

The pandemic-related economic crisis in 2020 was particularly devastating for people of color. When the shutdown sent unemployment levels skyrocketing in March and April of that year, Black and Latino workers were much more likely to be jobless than white workers, according to  BLS data . This remained true despite the fact that people of color made up a  disproportionate share of essential workers  who had to remain on the job at the start of the pandemic. While the overall unemployment rate has dropped significantly, racial disparities remain. As of October 2023, the unemployment rate for Black workers was 5.8 percent, compared to just 3.9 percent for U.S. workers as a whole.

The Covid-19 pandemic has increased the share of U.S. workers who are teleworking for health reasons, but not everyone has the same ability to work from home. According to the Centers for Disease Control and the National Institute for Occupational Safety (NIOSH) and Health, Black and Non-white Hispanic workers are less likely to report being able to telework than white and Asian workers. Some 38 percent of Asian workers and 24 percent of white workers reported working from home between May 2020 and July 2021. By contrast, only 19 percent of Black and 14 percent and Non-white Hispanic workers reported working from home in that same time period. The researchers attributed 80 percent of this divide to racial education gaps, since college graduates are more likely to be able to telework. Workers of color with public-facing jobs have been exposed to greater virus risks. 

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The Stark Racial Inequity of Personal Finances in America

Economic equality is crucial to racial equality. But at nearly every stage of their lives, black Americans have less than whites.

By Ron Lieber and Tara Siegel Bernard

We cannot quantify the injustice of a white policeman holding his knee on the neck of a handcuffed, dying black man. And mere numbers cannot fully express the power imbalance involved in the deaths of George Floyd and too many others like him.

But we can measure the economic inequity that serves as their backdrop.

Dollars are like air — crucial to vitality. And when it comes to wealth, black Americans have less at nearly every juncture of life, from birth to death.

Perversely, having less can cost more. Black students borrow more to go to college, don’t finish as often and more frequently default on their student loans. They earn less, and generally have lower credit scores — so they pay higher interest rates. It’s harder for them to save for retirement, and they leave less to the next generation when they die.

An imbalance of societal power cannot be separated from cradle-to-grave economic inequality . This is what that looks like.

Young black families earn far less than similar white families

From board books for toddlers to quality care, it can be costly to get a child started in life. And black families typically have fewer financial resources to draw on.

Black families with a new baby have a median household income of $36,300, according to an analysis of 2018 census data by the Center on Poverty & Social Policy. For white families, it was more than twice as much: $80,000.

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Race Matters: Income Shares, Income Inequality, and Income Mobility for All U.S. Races

This paper presents income shares, income inequality, and income immobility measures for all race and ethnic groups in the United States using the universe of U.S. tax returns matched at the individual level to U.S. Census race data for 2000–2014. Whites and Asians have a disproportionately large share of income in top quantiles. Income for most race groups ranges between 50–80 percent of the corresponding White income level consistently across various percentiles in the overall income distribution—suggesting that class alone cannot explain away overall income differences. The rate of income growth at the 90th percentile exceeds that of the 50th and 10th percentiles for all race and ethnic groups; divergence is largest for Whites, however, in the post-Great Recession era. Income immobility is largest for the highest-income races. Overall, these results paint a picture of a rigid income structure by race and ethnicity over time.

This draft is released to inform interested parties of research and to encourage discussion. The views expressed are those of the authors and not necessarily those of the U.S. Census Bureau. We would like to thank participants at the UCLA Center for Population Research seminar and seminars at Dartmouth University and the University of Kentucky, as well as Moshe Buchinsky, David Card, Raj Chetty, Sandy Darity, Rajeev Dehejia, Nicole Fortin, John Friedman, Tim Halliday, Darrick Hamilton, Nathan Hendren, Chinhui Juhn, Adriana Kugler, Adriana Lleras-Muney, Paul Ong, Sarah Reber, Mark Rosenzweig, Matthias Schuendeln, Steven Stillman, and Till von Wachter for helpful comments and feedback. Any errors are ours alone. Akee acknowledges financial support for this work from the Institute on Inequality and Democracy at UCLA Luskin School and the UCLA American Indian Studies Center. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

MARC RIS BibTeΧ

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October 22, 2021

Wealth Inequality and the Racial Wealth Gap

Aditya Aladangady , and Akila Forde

In the United States, the average Black and Hispanic or Latino households earn about half as much as the average White household and own only about 15 to 20 percent as much net wealth. As we see in Figure 1 below, this wealth gap has widened notably over the past few decades (left panel). 1 At the same time, overall wealth inequality—as measured by the Gini in the right panel—has also grown. In this Note, we introduce a novel method to decompose measures of inequality. Our decomposition allows us to compare actual wealth inequality with a counterfactual world without racial wealth gaps, but where inequality overall remains as in the data. The decomposition allows us to quantitatively answer a number of questions: How do differences in racial composition at various points in the wealth distribution contribute to overall inequality? How have these differences evolved over time, and how do widening racial wealth gaps contribute to rising inequality? And how have differences across racial and ethnic groups in portfolio composition and returns affected inequality?

Figure 1. Household net worth and income, by race and ethnicity

Source: Survey of Consumer Finances.

Accessible version

A racial equality counterfactual

In order to quantify how far our world is from racial equality—and how this wedge has evolved in recent history—we need to first define what "racial equality" means. In this note, we adopt a specific racial equality counterfactual which assumes households of all races are equally represented at all points in the wealth distribution in proportion to their population shares. That is, households in the bottom 10 percent of the wealth distribution have exactly the same racial composition as those in the top 10 percent or any other point in the distribution. This situation represents one where there is no inequality between races, but overall wealth inequality remains as it is in the US.

One way to view this counterfactual is through the lens of a Oaxaca-Blinder or similar decomposition that allows us to separate between-group and within-group inequality. The racial equality counterfactual we consider reduces between-race inequality to zero and raises within-race inequality for each race in order to keep overall inequality as it is in the data. By doing so, our counterfactual world can somewhat abstract from concerns about how changes in the wealth distribution may impact aggregate savings, interest rates, or other macroeconomic outcomes. 2

Reality differs considerably from this counterfactual. Looking at the population as a whole, White households hold 86.8 percent of overall wealth in the country according to the 2019 SCF, though they account for only 68.1 percent of the households in the survey. 3 By comparison, Black and Hispanic households hold only 2.9 and 2.8 percent of wealth, respectively, while accounting for 15.6 percent and 10.9 percent of the US population respectively, reflecting the fact that wealth is disproportionately skewed towards White households. In fact, under racial equality, Black households would hold over 5 times the amount of wealth they currently do, and Hispanic households would hold nearly 4 times as much.

A shift to the racial equality counterfactual would affect households at various points in the wealth distribution differently. Table 1 shows how the average net worth of households of each race would change for each quartile of the wealth distribution. The average Black household in the top quartile of wealth would have over twice the amount of wealth under the racial equality counterfactual than they do currently, and the average Hispanic household in the top quartile would see an 86 percent increase. Meanwhile, White households in the top quartile would give up around 5 percent of their wealth. 4

Table 1: Change in Average Household Net Worth by Moving to Racial Equality Counterfactual

At the other end of the distribution, Hispanic households—who constitute a large share of very low wealth households—would see a 92 percent increase in wealth from shifting to racial equality, and the average Black household in the bottom quartile would see a 22 percent increase. Notably, a shift to racial equality without changing overall inequality hurts low-wealth White households, who would see a 13 percent decline in wealth.

The middle of the distribution—particularly around the third quartile—appears quite close to racial equality currently, and a shift to the racial equality counterfactual would result in relatively small changes in wealth for the average households at this point in the distribution. 5 Overall, the results suggest racial inequities are concentrated at the extremes of the distribution, with White households disproportionately accounting for very high wealth segments and Black and Hispanic households disproportionately accounting for lower wealth segments.

Quantifying racial wealth gaps using a Gini decomposition

Given the racial equality counterfactual we laid out, we need a metric to quantify how far the actual wealth distribution is from the counterfactual, and how this gap has evolved over time. In order to quantify how far we are from racial equality, we introduce a new decomposition of the Gini coefficient—a standard metric of inequality—that allows us to summarize the distance we are from racial equality and how various groups are contributing to this gap. In particular, the decomposition allows us to quantify how the Gini would change if each racial group held wealth in a distribution similar to the aggregate wealth distribution.

The Gini coefficient is based on the Lorenz curve for household wealth, a function that tells us the fraction of overall wealth in the country owned by the bottom x  percent of the population for various values of x . Figure 2 plots the Lorenz curve for net worth using the 2019 wave of the SCF. Under perfect equality, the curve would lie precisely on the 45-degree diagonal (the dashed line), such that the bottom 50 percent of households ranked by wealth would hold 50 percent of overall wealth, etc. Instead, the curve is significantly bowed down, such that the bottom 50 percent of households own just 1.5 percent of overall household wealth. 6

Figure 2. Lorenz Curve for Net Worth

Source: Survey of Consumer Finances, 2019.

The Lorenz curve also provides a means to decompose wealth across types of households, such as households of different races. The top-left panel of Figure 3 takes the same Lorenz curve as in Figure 2 (the solid black line just above the shaded regions) and splits it into the fraction of wealth held by White/non-Hispanic households (blue), Black/non-Hispanic households (yellow), Hispanic/Latino households (green), and households of other races (red). The figure shows that White households (the blue region) accounts for a high share of the area under the curve—in fact, more than their population share, as mentioned previously. This is consistent with the fact that minority households are concentrated toward the bottom of the wealth distribution, whereas White households are concentrated at high wealth levels, as shown in the bottom-left panel which shows population shares by race at each wealth quantile.

Figure 3. Net Worth Lorenz Curves by Race – Actual versus Racial-Equality Counterfactual

Note: Shaded regions appear in order of legend from top to bottom. Source: Authors' calculations using Survey of Consumer Finances.

The right panels show how this same decomposition looks in the "racial equality" counterfactual. Given our definition of racial equality, we see in the bottom-right panel that the racial composition does not vary across the wealth distribution, and the top-right shows the overall Lorenz curve remains the same, since the wealth distribution is unaltered. However, the decomposition is shifted such that White households hold much less wealth (i.e., the overall blue region is smaller) and minorities hold more wealth in the upper parts of the wealth distribution (i.e., the other regions are more concentrated toward higher wealth levels).

The Lorenz curves in Figure 3 provide a detailed view into the racial composition of wealth holdings across the distribution, similar to what we saw in Table 1. In addition, the Lorenz curve allows us to summarize the decomposition using a standard metric of inequality, the Gini coefficient. In particular, the Gini coefficient is given by $$G=1-2*A$$ where $$A$$ is the area under the Lorenz Curve (all the colored regions in the top-left of Figure 3). Higher values of the Gini suggest the Lorenz Curve is further from the line of equality, and overall wealth inequality is higher. Since the actual and counterfactual Lorenz Curves are identical, their overall Gini coefficients are both the same (0.852 in 2019). However, the composition of the area A differs between the two, based on how much households of each race are under- or over-represented at each quantile of wealth and what share of overall wealth is held by that quantile. The difference between the composition in each panel can provide a measure of how much households of each race are contributing to overall inequality relative to the racial equality counterfactual, as summarized by the Gini. 7 In particular, the difference in each colored region (for each race) tells us how overall inequality would change if the wealth among households of each race were distributed the same as the aggregate wealth distribution—as in the racial equality counterfactual—instead of how it is in the actual data.

Figure 4. Change in Gini from Shift to Racial Equality

Note: Bars denote difference in Gini contribution for each race in racial equality counterfactual versus actual SCF data in 2019 and are derived by differencing the shaded regions in the top panels of Figure 3. Each bar represents the change in Gini achieved by shifting the distribution of each race's wealth to match the aggregate wealth distribution. Contributions sum to zero by assumption. Source: Authors' calculations using Survey of Consumer Finances.

Figure 4 above provides this decomposition. Shifting the wealth of White households to match the overall wealth distribution—as in the racial equality counterfactual—would lower the Gini by 1.7 points, or about a quarter of the increase in inequality seen over the past three decades. Doing the same for Black and Hispanic households would raise inequality by 1.2 and 0.6 index points since these groups hold much less wealth than the average American. Households of other races are more evenly represented across the distribution on average, as reflected by the small change relative to racial equality. However, this result likely masks considerable heterogeneity between subpopulations grouped into this category. Of course, on net, overall inequality would be unchanged by shifting to the racial equality counterfactual by assumption, and the bars for each racial group in Figure 4 sum to zero by construction.

It is a well-known fact that income inequality has been on the rise in recent decades, and wealth inequality has largely followed a similar pattern (Piketty & Saez, 2003; Saez & Zucman, 2016; Bricker et al, 2016). Indeed, we saw in Figure 1 that the Gini coefficient from the SCF data has risen from .787 in 1989 to .852 in 2019. We can use the decomposition above to also understand how racial disparities interplay with trends in inequality over time.

Figure 5 decomposes the change in the Gini coefficient since 1989 into contributions from each racial group. The Gini rises by exactly the same amount in both the true data (solid line, top-left) and the racial equality counterfactual (top-right), but the contributions of each racial group to the increase in inequality differs. Of course, the larger population share of White households leads them to contribute more to inequality growth even in the counterfactual, but the increase is driven disproportionately by this group in the true data. To make the differences between the panels more clear, the bottom panel shows how much extra each race contributes to inequality growth compared to the racial equality counterfactual. 8 Since the overall Gini is the same, the bars add to zero, but growth in inequality is clearly driven disproportionately by White households.

Figure 5. Decomposing Changes in Gini by Race

Note: Contributions to difference appear from top to bottom in order they appear in legend, except in 1992 and 1995 when "Other" appears just below "White." Source: Authors' calculations using Survey of Consumer Finances.

The result above pools all White households together, though we know from existing studies that inequality growth is driven in large part by the top tail of the distribution pulling further away from the rest (Piketty & Saez, 2003; Saez & Zucman, 2016; Bricker et al, 2016). As we have shown previously, this tail is largely comprised of White households. As these households pull away, they exacerbate racial wealth gaps, and also raise within-White inequality. As such, the blue bars above contribute an outsized amount to rising inequality. However, the truth is more complex than just that, as Suarez & Thompson (2019) point out. In their paper, they show that even conditional on many observable characteristics, minority households hold lower wealth than their White counterparts, particularly at the top of the wealth distribution . As such, some factors correlated with race are holding back minority households' ability to accumulate wealth and reach the top of the distribution at the same rates as Whites.

A number of possible factors may drive the growing wedge. One reason wealth disparities may persist is due to differences in initial wealth, income, and saving rates. As we have seen in Figure 1, a long history of discrimination has left Black and Hispanic households with substantially less wealth even in the beginning of our sample period. Moreover, Black and Hispanic households earn considerably less than White households, limiting their ability to save and build wealth. 9 Indeed, Suarez & Thompson (2019) find that income differences do explain a part of the racial wealth gap, though a substantial gap exists even after conditional in earnings. 10 Wealth gaps may also persist across generations as young minority households are less likely to receive intergenerational transfers from their parents. As Feiveson & Sabelhaus (2018) show, both intra-vivos transfers and end-of-life bequests are concentrated among higher-wealth and predominantly White households.

Another reason racial disparities in wealth may persist is due to differences in the types of assets households hold and the returns on these assets. In fact, portfolios look quite different across the wealth distribution, as shown in Figure 6 below. Households at the bottom hold very little wealth, often in the form of liquid financial assets—bearing relatively low levels of interest--countered by considerable debts. The physical assets they do have tend to be things like cars (captured in "Other net wealth"), which tend to depreciate in value quickly. As we go up the distribution, portfolio shares shift toward home equity, with business and financial wealth becoming a larger share towards the very top. Importantly, the asset classes held by high wealth households also generate positive returns through both interest income and capital gains. Notably, capital gains are taxed at lower rates than income, thereby providing a higher after-tax flows which can be further saved.

Figure 6. Portfolio Composition by Wealth Rank

Note: Contributions appear from x-axis up in the order they appear in the legend, with exception of Other Debts, which appears below the x-axis. Portfolio shares for bottom quantiles with negative net wealth not plotted. Source: Survey of Consumer Finances, 2019.

In addition to differences in portfolio composition, returns within a specific asset class may differ across households (Fagereng, et al 2020). Quantifying the importance of these differences is difficult in our data, as we do not observe returns directly. Therefore, we focus on housing, which is both an important driver of inequality and also an asset for which we can observe returns based on local house price dynamics and leverage. 11 Relative to other broad asset classes, heterogeneity in housing returns may also be less likely to reflect risk preferences or other factors that typically influence portfolio choice, and instead be driven by preferences for neighborhoods, access to labor markets in a given city, or housing supply limitations in the area.

In the chart below, we attempt to quantify average returns on housing and home equity for households of various races. To do this, we construct an average return on housing by weighting county-level house price growth by the distribution of households of a given race in those areas. 12 Though our county-level analysis masks neighborhood-level heterogeneity in house prices within counties, it provides a bound on differences in housing returns across races. 13

Figure 7. Average House Price and Home Equity Returns by Race

Note: Legend entries appear in the graph from left to right. Home ownership rates from 2000-2004 are from 2000 Census, 2005-2019 are from 1-year ACS in each year.

Source: Authors' calculations using 2000 Decennial Census, 2005-2019 American Community Survey, CoreLogic, Inc, HPI data, and Black Knight McDash.

In the left panel, we can see that the average Black and White homeowners saw their homes appreciate and depreciate by similar amounts, while Hispanic owners saw a bit more volatility in house price growth. However, the amount of leverage—the fraction of home value financed by a mortgage—can amplify the gain or loss in housing values as a percent of their net wealth in housing. Once we account for leverage, as we do in the right panel, it appears non-White households fared considerably worse in the financial crisis. In the five years after the financial crisis, returns were somewhat higher for the average Hispanic household than both Black and White households, but returns seem similar across groups since 2015 or so. While our evidence may be a lower bound on the heterogeneity in returns, it is consistent with recent evidence that minority households—whose neighborhoods are more prone to foreclosures and distressed sales—may suffer more volatility in returns and sharper declines during bad times (Kermani & Wong, 2021).

The fact that Black households have fared poorly in the wake of the financial crisis is likely exacerbated by the fact that the home ownership rate among Black households declined steadily from 2005 to 2015 and then bottomed out near its level in the mid-1990s. We see this in Figure 8, which indexes ownership rates by race to 1994 to highlight changes over time. (Ownership rates among White households have remained considerably higher than for minorities, with White home ownership at 73.7 percent at the end of 2019 compared to 44 percent for Black households and 48.1 percent for Hispanic households.) Notably, White and Hispanic households fared better over this period, with Hispanic households actually closing the ownership gap with White households some. Nonetheless, the lower homeownership levels suggest minority households, and Black households in particular, did not reap the benefits of rising home prices over recent years.

Figure 8. Homeownership by race, Indexed to 1994

Source: U.S. Census, Housing Vacancies and Ownership.

Our results quantifying racial wealth gaps through the lens of a Lorenz curve decomposition and a racial equality counterfactual, complementing existing studies that document pre-existing wealth gaps across racial lines. In particular, our decomposition allows us to compare our world with a counterfactual where overall wealth inequality is the same as reality, but there are no differences in the distribution of wealth holdings across race. By doing so, we can isolate the impact of racial disparities relative to changes in overall inequality, which may impact other features of the economy in general equilibrium.

The decomposition allows us to highlight a few major facts. First, White households hold a much larger share of wealth than their population share, with Black and Hispanic households disproportionately concentrated at low, or even negative net wealth ranges. In fact, shifting the distribution of wealth among White households to match the aggregate distribution would lower inequality by 1/4 of its increase over the past three decades. Second, White households as a whole contribute more to both the level and growth in inequality than they would under a racial equality counterfactual. This reflects the fact that high-wealth households, who are predominantly White, have pulled away from the rest of the distribution over time. The divergence likely reflects a combination of ability to save, access to high-return assets, and other factors mean White households are, on average, more able to accrue and grow their wealth than minorities. One of the most prevalent means of accruing wealth for minority households, homeownership, has become less common among Black households in recent years, allowing the wealth gap to widen.

These pre-existing differences in wealth holdings across races may interact with how households are able to weather the strains brought about by the pandemic and subsequent recession. In particular, minority households are less likely to own assets to mitigate the impacts of job losses, or own homes or stocks which would allow them to gain from the unusually solid stock market and house price gains after the Great Recession. Differences across races in home ownership and leverage may also mean minority households disproportionately benefit from rent moratoriums and forbearance programs (An et al., 2021).

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Bricker, Jesse and Goodman, Sarena and Moore, Kevin B. and Henriques Volz, Alice and Ruh, Dalton, (2020). "Wealth and Income Concentration in the SCF: 1989–2019," FEDS Notes No. 2020-09-28-1 https://doi.org/10.17016/2380-7172.2795 , Available at SSRN: https://ssrn.com/abstract=3703686

Bricker, Jesse, A. Henriques, J. Krimmel, and J. Sabelhaus, (2016). "Measuring income and wealth at the top using administrative and survey data." Brookings Papers on Economic Activity, Spring 2016.

Dettling, Lisa, Hsu, Joanne, Jacobs, Lindsay, Moore, Kevin, and Thompson, Jeffrey, (2017). "Recent Trends in Wealth-Holding by Race and Ethnicity: Evidence from the Survey of Consumer Finances." FEDS Notes. 2017. 10.17016/2380-7172.2083.

Dettling, Lisa J., Joanne W. Hsu, and Elizabeth Llanes (2018). "A Wealthless Recovery? Asset Ownership and the Uneven Recovery from the Great Recession ," FEDS Notes. Washington: Board of Governors of the Federal Reserve System, September 13, 2018, https://doi.org/10.17016/2380-7172.2249.

Fagereng, A., Guiso, L., Malacrino, D. and Pistaferri, L. (2020), Heterogeneity and Persistence in Returns to Wealth. Econometrica, 88: 115-170. https://doi.org/10.3982/ECTA14835

Feiveson, Laura and Sabelhaus, John, (2018). "How Does Intergenerational Wealth Transmission Affect Wealth Concentration?" FEDS Notes No. 2018-06-01, Available at SSRN: https://ssrn.com/abstract=3196446 or http://dx.doi.org/10.17016/2380-7172.2209

Haughwout, Andrew, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw. "Inequality in U.S. Homeownership Rates by Race and Ethnicity." Federal Reserve Bank of New York Liberty Street Economics , July 8, 2020, https://libertystreeteconomics.newyorkfed.org/2020/07/inequality-in-us-homeownership-rates-by-race-and-ethnicity.html .

Kermani, Amir and Wong, Francis, The Determinants of Racial Disparities in Housing Returns (May 14, 2021). Available at: http://dx.doi.org/10.2139/ssrn.3846569

Kuhn, M., Schularick, M., & Steins, U. I. (2020). Income and wealth inequality in america, 1949–2016. Journal of Political Economy , 128 (9), 3469-3519.

McIntosh, Kriston, Emily Moss, Ryan Nunn, Jay Shambaugh, (2020). "Examining the Black-white wealth gap," Up Front, Feb 27, 2020. Brookings Institute.

Piketty, T., and E. Saez. "Income Inequality in the United States, 1913–1998." Quarterly Journal of Economics , 118(1), 2003, 1–39.

Rognlie, Matthew. (2015) "Deciphering the fall and rise in the net capital share," Brookings Papers on Economic Activity , Spring 2015.

Saez, E., and G. Zucman. "Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data." Quarterly Journal of Economics , 131(2), 2016, 519–78.

Thompson, Jeffrey P. and Suarez, Gustavo, (2019). "Accounting for Racial Wealth Disparities in the United States" FRB of Boston Working Paper No. 19-13, Available at SSRN: https://ssrn.com/abstract=3502647 or http://dx.doi.org/10.29412/res.wp.2019.13

1. Several researchers have highlighted these differences in average net worth and income in the past. Our work complements existing results using the Survey of Consumer Finances (SCF) and other data sources to quantify inequality and the racial wealth gap ( Bricker, et al, 2020 ; Bhutta, et al, 2020 ; McIntosh, et al, 2020 ; Dettling, et al, 2017   Suarez & Thompson, 2019 ). Return to text

2. For example, a redistribution of wealth would result in fewer very high or low wealth households, potentially altering aggregate savings, interest rates, and other factors that may, in turn, influence saving behavior. To the extent that factors impacting savings behavior are external to the household, our reshuffling of households would not impact aggregate savings. Of course, reshuffling may still result in households with different preferences at different points in the distribution, thereby impacting aggregate savings. Return to text

3. Race and ethnicity for each household are defined by the first/primary response to the question on race and ethnicity for the respondent to the survey. The survey does not collect race and ethnicity on other household members. This definition differs slightly from the definition used in Bhutta et al (2020), which categorizes households with multi-race respondents along with the "other races" category, resulting in lower average wealth for this group. We define net worth as the difference between a family's gross assets and gross liabilities. Return to text

4. Note that a shift to the racial equality counterfactual would also alter wealth rankings, so changes in the mean wealth in a quartile may not correspond to the experience of a specific household without knowledge of exactly how wealth is redistributed to achieve racial equality. Many possible redistributions can lead us from the current distribution to the racial equality counterfactual, and each would imply a different household-level shift in wealth. We do not take a stand on which specific redistributions leads to the counterfactual distribution. The table, nonetheless, provides a broad view of where in the distribution racial wedges are the largest. Return to text

5. This does not necessarily mean that middle-income households would be unaffected by a shift to the racial equality counterfactual. As mentioned in footnote 4, this depends on the specific redistribution used to achieve racial equality, and many redistribution mechanisms can lead to this same outcome. As an example, a fraction of wealth held by high-wealth White households could be redistributed across minorities, with more of it going to the bottom. In doing so, high-wealth White households would fall in wealth rank as all minority households would rise. On the other hand, redistributions to specific households may leave some middle-income households unchanged. Return to text

6. On net, households at the bottom of the net wealth distribution report having more debts than assets, resulting in negative net worth. This means the Lorenz curve for net worth falls below 0 for low wealth ranks in Figure 1. This does not pose an issue for computation of Lorenz curves, Gini coefficients, or decompositions used in this note, and all results discussed in the note account for households with negative net worth according to the SCF. Return to text

7. In particular, for the top-left and top-right panels, we can decompose the Gini as $$G=1-2*\sum_i{a_i}$$ where $$a_i$$ represents the portion under the Lorenz curve accounted for by wealth of a given race. Letting the superscript $$re$$ denote the racial equality counterfactual, we can then compute the difference between the decompositions I the true (top-left) and counterfactual (top-right) panels of Figure 3 as $$\Delta G = G^{re} - G = 2 * \sum_i(a_i-a_i^{re}) = 0$$. The sum of contributions from each race $$i$$ must add to zero since overall inequality, and therefore the Gini, is the same. The contributions $$2(a_i^{re} - a_i)$$ provide a measure of how each race is over- or under-represented relative to racial equality at each point in the wealth distribution, with contributions weighted by the relative share of wealth held. Because the Gini is sensitive to fluctuations in the top tail, the decomposition also places more weight on the top tail. Return to text

8. The top panels of Figure 5 compute contributions to changes in the Gini from 1989 as $$G_t - G_{1989} = 2 * \sum(a_{i,1989} - a_{i,t})$$ for each race group $$i$$ in both the actual data and counterfactual. The bottom panel of Figure 5 is the inequality growth counterpart to what Figure 4 shows for cross-sectional inequality. Specifically, Figure 4 plotted $$2*(a_{i,2019}-a_{i,2019}^{re})$$ for each race $$i$$, which cumulates to $$\Delta G_{2019} = 2*\sum_i(a_i-a_i^{re}) = 0$$. To arrive at Figure 5, we can simply difference this formula from the 1989 baseline: $$\Delta G_t - \Delta G_{1989} = 2*\sum(a_{i,t}-a_{i,t}^{re}) - 2*\sum(a_{i,1989} - a_{i,1989}^{re}) = 0$$. Each term $$(a_{it} - a_{it}^{re}) - (a_{i,1989} - a_{i,1989}^{re})$$ provides a measure of how race i 's deviation from racial equality has contributed to the rise in inequality as measured by the Gini. We can think of this as how the actual data differ from a situation in which racial equality holds at each point in time, but overall inequality grows as it otherwise would. Along this racial equality growth path, each race would contribute precisely their population shares to inequality growth, accounting for potential changes in racial shares over time. The contributions, therefore, provide a measure of how much inequality growth is driven by each race, accounting for differences in population shares over time. Positive contributions suggest a relatively high contribution to inequality growth than would be suggested solely by population shares alone. Return to text

9. Lower income likely leads to less discretionary buffer after necessities such as food and shelter are accounted for. In addition, lower income levels are often related to higher income volatility, which further reduces the ability of households to accumulate buffers. Return to text

10. Early work by Blau & Graham (1990), Altonji et al (2000), and others suggested earnings differences can only explain a limited portion of the racial wealth gap. Barsky et al (2002) argue that these early estimates may be biased by the fact that most data sets do not offer sufficient overlap between White and Black earnings distributions, requiring researchers to extrapolate the relationship between income and wealth. They instead reweight White households to the income distribution of Black households to compare households on a common set of incomes and find that earnings may explain 2/3 of the wealth gap among low-to-middle income households. Recent work by Thompson & Suarez (2019) determined that differences in human capital account for between one-third and two-fifth of the racial wealth gap, whereas demographic and intergenerational support each contribute to one-fifth and one-third of the gap. Importantly, they find that observable factors in the SCF cannot fully account for differences in wealth between White and Black households, particularly for higher wealth quantiles. Return to text

11. Rognlie (2018) argues housing is a major driver of rising wealth inequality. Kuhn et al. (2020) also study the importance of housing wealth in driving in equality over a longer period (post-WWII). Dettling et al. (2018) show unequal recoveries in wealth across households in the wake of the Great Recession. Return to text

12. Specifically, we use data from the ACS and Decennial Census to determine the distribution of households of each race across counties and whether these households own a home or have a mortgage. We assume homeowners with mortgages have the average LTV ratio from their county based on data from Black Knight, and homeowners receive house price growth equal to growth in the Corelogic house price index in the county. Because we only observe ownership and mortgage status data by race in 2000 and annually after 2005, we are unable to account for moves that occur between waves that may impact results. Return to text

13. Data limitations in our implementation may lead us to understate heterogeneity in returns. As this exercise uses annual homeownership data, it fails to capture migration or changes in ownership between waves. In addition, because we are limited to using county data, we are likely missing heterogeneity in house price movements at a neighborhood level as well as within-county heterogeneity in leverage, which could be correlated with race. All these factors may exacerbate differences in returns across race, and our estimates are likely a lower bound on the heterogeneity in returns. Return to text

Aladangady, Aditya, and Akila Forde (2021). "Wealth Inequality and the Racial Wealth Gap," FEDS Notes. Washington: Board of Governors of the Federal Reserve System, October 22, 2021, https://doi.org/10.17016/2380-7172.2861.

Disclaimer: FEDS Notes are articles in which Board staff offer their own views and present analysis on a range of topics in economics and finance. These articles are shorter and less technically oriented than FEDS Working Papers and IFDP papers.

• /econres/notes/feds-notes/wealth-inequality-and-the-racial-wealth-gap-accessible-20211022.htm

Income and Wealth Inequality: Racial and Ethnic Health Disparities Essay

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Inequality of income and wealth is a growing concern in modern society. For decades, differences between the affluent and poor have been progressively expanding, with the associated economic and social implications becoming increasingly apparent. The purpose of this essay is to assess the causes and consequences of income and wealth disparities in the United States from 1940 through 2020. This paper will provide one strategy for federal policymakers to lessen these inequities by assessing available research and statistics.

Income inequality may be quantified using a variety of approaches. The Gini coefficient, the 90/10 ratio, and the revenue share of the top 1% are examples of these. The Gini coefficient, which runs from 0 (total equality) to 1 (total inequality), is one of the most extensively used indicators of income inequality (Ndulo & Assié-Lumumba, 2020, p. 69). More income disparity is indicated by a higher Gini coefficient. The 90/10 ratio is used to measure the income of the top 10% of earners to that of the poorest 10% (Ndulo & Assié-Lumumba, 2020, p. 69). The top 1% income share relates the top 1%’s income to the overall income received in a nation (Ndulo & Assié-Lumumba, 2020, p. 69). These indicators give several views on income disparity and can be used to guide policy decisions aimed at reducing inequality. In conclusion, the Gini coefficient, the 90/10 ratio, and the income distribution of the top 1% are all techniques for measuring income disparity. Investing in policies targeted at lowering income disparity can help reduce income inequality, leading to better possibilities for people and a healthier economy overall.

The 90/10 ratio is the most often used metric of income disparity among researchers. For example, according to Horowitz et al.’s study “Trends in Income and Wealth Inequality,” income inequality in the United States has risen since 1980. The 90/10 ratio has dramatically increased over time, from 9.1 in 1980 to 12.6 in 2018. (Horowitz et al., 2020, para. 38). When evaluating the trend, it is possible to conclude that it is alarming since it implies that the economic disparity between the richest and poorest Americans is expanding.

The Gini coefficient, which determines the level of disparity in a country’s income distribution, reflects this tendency as well, with a higher figure indicating a more significant distinction. For example, in 2016, the estimated Gini coefficient in the United States was 0.481 (Horowitz et al., 2020, para. 12). Since a Gini coefficient of 0 represents total equality, and a value of 1 shows total inequality, where one household has all of the money or possessions while all others have none, this statistic implies that income inequality in the country is very significant. Furthermore, the authors claim that the Gini coefficient in the United States grew by nearly 20% between 1980 and 2016. (Horowitz et al., 2020, para. 12). Based on this data, the trend in the United States indicator of income inequality from 1940 to 2020 has been toward higher inequality. As a result, the evaluation indicates that this tendency raises concerns regarding economic prospects and mobility for persons at the bottom of the economic ladder.

Additionally, the income disparity trend is particularly prominent among higher-income households. From 1981 to 1990, the richest 5% of households’ income increased at a pace of 3.2% per year, while the bottom quintile’s income decreased by 0.1% per year (Horowitz et al., 2020, para. 21). In the 1990s, the wealthiest 5% of households fared even better, with their income increasing at an annual average rate of 4.1%, compared to 1% or marginally more for other individuals (Horowitz et al., 2020, para. 22). From 2000 to 2018, yearly average family income rate dropped to 0.3%, although the wealthiest families in the United States continued to outperform other families (Horowitz et al., 2020, para. 5). From 1998 to 2007, the average net worth of the wealthiest 5% of American households climbed from $2.5 million to $4.6 million, nearly double the 45% gain in wealth of the top 20% of families altogether (Horowitz et al., 2020, para. 33). These figures indicate that income inequality in the United States is on the upswing, and that income growth has benefitted the highest incomes in recent decades.

The studies discuss the growing concern among researchers, policymakers, and politicians about the increasing economic inequality in the United States. According to a survey by Biewen and Seckler (2019), the rise of globalization and the expanding use of technology has contributed to the widening gap between the wages of high- and low-skilled workers. Globalization has led to the outsourcing of many low-skilled jobs to countries with lower labor costs, leaving fewer job opportunities for low-skilled workers. At the same time, technological advancements have increased the demand for high-skilled workers while reducing the need for low-skilled workers. This effect has resulted in a significant increase in the wages of high-skilled workers, while wages for low-skilled workers have stagnated or declined (Acemoglu & Restrepo, 2021). Overall, it can be concluded that globalization and technological advances have played a significant role in widening income inequality in the United States.

The effect of globalization and technical improvements is one of the reasons leading to this problem, but other factors also contribute to it. As such, Horowitz et al. (2020) offer evidence that the growth in economic disparity since 1980 is partly due to these issues, as well as the fall of unions and the deteriorating value of subsistence wages. The paper contends that income disparity may lead to fewer opportunities and mobility for those at the bottom of the economic ladder, a phenomenon known as The Great Gatsby Curve (Horowitz et al., 2020). Finally, the article emphasizes the detrimental impact of inequality on the political power of the poor, regional division by income, and the economic expansion itself.

Wealth inequality and income inequality are two separate but related metrics of economic inequality. The unequal distribution of wages among people or households is referred to as income inequality (Amacher & Pate, 2018). In contrast, wealth disparity refers to the unequal distribution of assets without liabilities or obligations (Amacher & Pate, 2018). Since money is more concentrated in the wealthiest individuals, wealth disparity has a more significant impact than income disparity (Amacher & Pate, 2018). This concentration of wealth may result in a variety of economic and social issues, including restricted chances for the less rich to enhance their standard of living, a lack of spending on public goods, and political imbalance.

Moreover, wealth disparity has the potential to influence future generations. Wealth concentration can lead to insufficient expenditure on schools, health care, and other necessary services, reducing social mobility and sustaining inequality for future generations (Christophers, 2021). Furthermore, wealth concentration can result in the formation of a financial elite who utilize their wealth and status to influence political choices, resulting in laws that favor the wealthy over the less fortunate (Christophers, 2021). As a result, reducing wealth disparity is critical for establishing a fair and equitable society.

The inequality of wealth in the United States has grown over the last many years. Upper-income families’ share of collective wealth increased from 60% to 79% from 1983 to 2016, while middle-income families’ part fell almost in half from 32% to 17%, and lower-income households had only 4% of the cumulative wealth in 2016, down from 7% in 1983. (Horowitz et al., 2020, para. 31). From 1998 to 2007, the average net worth of the wealthiest 5% of U.S. families climbed from $2.5 million to $4.6 million, indicating an increase in wealth disparity (Horowitz et al., 2020, para. 31). Even after the Great Recession, the wealth disparity between the richest and poorest households in America more than doubled. In 1989, the wealthiest 5% of households had 114 times the wealth of the middle quadrant, $2.3 million compared to $20,300, and by 2016, this proportion had risen to 248 (Horowitz et al., 2020, para. 36). As a result of increased inequality, those in lower economic strata may have less financial freedom and flexibility.

Overall, the tendency of rising wealth disparity in the United States demands more attention and explanation. As such, wealth concentration leads to political inequality, with the interests of the rich taking precedence over those of the less fortunate. Furthermore, when the rich amass more resources, they may be able to utilize their money to produce more wealth, sustaining wealth concentration over time. This dynamic can create a vicious circle of inequity that is hard to eradicate. High levels of wealth disparity, in the end, harm social stability and economic progress by restricting options for those who are not currently affluent.

Inequality in the United States has risen in recent decades, and there are multiple causes for this. One of the primary causes is the unequal distribution of educational possibilities, which leads to income and wealth inequality. Strauss (2017) found that educational attainment is substantially associated with income levels, with persons with greater levels of education earning much more than those with fewer qualifications. Additionally, according to Strauss (2017), unemployment statistics and educational achievement are closely associated, with better-educated persons seeing lower jobless rates even during recessions. This theory indicates that there is a strong demand for highly educated people and a low demand for individuals with fewer qualifications, resulting in income and wealth discrepancies. Significant relationships between education, wealth, and unemployment support this notion. Other aspects, like globalization, technological progress, and changes in tax regulations, should be addressed while evaluating it. As a result, while Strauss’ theory offers valuable information, it is critical to examine numerous aspects when assessing the causes of wealth disparity.

Furthermore, tax loopholes have long been a source of contention in the debate over the origins of wealth disparity. While some regard tax loopholes as a method for the rich to escape paying their fair share of taxes, others see them as an essential tool for stimulating growth in the economy (Alm, 2021). Notwithstanding this, it is crucial to remember that the effect of tax loopholes on wealth disparity is not apparent and is likely to be impacted by a variety of other variables. As such, past discrimination trends, gaps in educational opportunities, and structural biases within the market structure can all contribute.

Healthcare disparity significantly contributes to income and wealth inequality in the United States. Inequalities in healthcare availability and efficacy, according to Abedi et al. (2021), are frequently associated with income and wealth differences since persons with limited earnings are more likely to lack appropriate healthcare insurance and have access to healthcare services. This insufficient access to healthcare can have negative health consequences, such as higher morbidity and death rates, as well as aggravate pre-existing health issues. Moreover, healthcare costs can be a considerable financial drain for low-income families, leading to higher debt and decreasing monetary sustainability (Abedi et al., 2021). These variables contribute to general economic disparities across the country because those with lower incomes and fewer assets have less opportunity to utilize vital medical care and are more likely to have unfavorable health outcomes as a result. As a result, the evaluation found that healthcare disparity is highly linked to income and wealth inequality in the United States. Thus, addressing healthcare disparity is critical for lowering income and wealth inequality in the United States.

Given the information that has been presented thus far, it is reasonable to infer that those who have private health insurance have a substantially larger net worth than those who do not. Based on data from the U.S. Census Bureau (2022), the wealth difference between those who have the benefit of personal insurance compared to those who do not may be estimated. The cost of private insurance can be considerable, and individuals who do not have access to it may be unable to pay it. In 2021, 8.3% of the population, or 27.2 million individuals, lacked health insurance at some time during the year, compared to 91.7% of those who had coverage for all or part of the year (U.S. Census Bureau, 2022, para. 1). The poverty incidence of 11.6% and the Supplemental Poverty Measure rate of 7.8% indicate that a sizable section of the population may not be able to buy private insurance (U.S. Census Bureau, 2022, para. 1). As a result, it is probable that there is a significant wealth gap between those who have possession of personal insurance as opposed to those who do not.

As previously stated, healthcare disparities are a significant factor in income and wealth inequality in the United States. Those with low incomes are more likely to lack sufficient healthcare insurance and have restricted access to healthcare services. Hence poor access to healthcare is typically related to low income and wealth (Abedi et al., 2021). Inadequate availability of medical care can have severe health repercussions, such as increased morbidity and mortality rates, as well as exacerbate pre-existing health concerns. Additionally, healthcare expenditures can be a significant financial burden for low-income households, resulting in increased debt and decreased economic sustainability (Abedi et al., 2021). Therefore, the evaluation suggests that increasing access to low-cost or public healthcare has the ability to minimize income and wealth disparities. Providing all Americans comprehensive healthcare coverage, whether through a government plan or a single-payer program, would assist in resolving healthcare inequities and creating more economic equality. However, it is crucial to emphasize that healthcare is only one element contributing to income and wealth disparity. Supplementary policies addressing education, labor, and taxation may be required to solve this complicated issue.

As a government policymaker, one possible recommendation for lowering income or wealth disparity would be to raise taxes on the most prosperous individuals and businesses. This approach would aid in the redistribution of wealth and the provision of more resources for social welfare programs aimed at decreasing inequality, such as schools, medicine, and cheaper housing. Furthermore, initiatives that promote educational and vocational opportunities for people from low-income families might assist them in improving their economic potential and minimizing income disparity. Finally, instituting minimum wage increases and supporting unions might help raise salaries for low-skilled employees while reducing wealth disparities. It is vital to stress that any policy aiming at lowering income or wealth disparity must be carefully planned in order to prevent unintended effects, and it must be founded on a comprehensive understanding of the root causes of inequality.

In conclusion, since 1980, income and wealth inequality in the United States has been climbing, indicating growing economic imbalance. Globalization and technological improvements have contributed to the United States’ growing economic disparity, resulting in fewer employment prospects for low-skilled people. Wealth disparity has a more considerable impact than income inequality, and it is worsening in the United States. Inadequate access to healthcare is intimately related to income and wealth inequality, and limited access to healthcare can have severe health repercussions. Increased access to low-cost or socialized medicine has the potential to reduce income and wealth inequality. As a federal policymaker, one possible recommendation for reducing income or wealth disparities would be to raise taxes on the most affluent people and companies. Additionally, it is proposed to promote educational and professional opportunities for low-income families and support unions in their efforts to raise wages for low-skilled workers while reducing wealth disparities.

Abedi, V., Olulana, O., Avula, V., Chaudhary, D., Khan, A., Shahjouei, S., Li, J., & Zand, R. (2021). Racial, economic, and health inequality and COVID-19 infection in the United States . Journal of Racial and Ethnic Health Disparities , 8 (3), 732–742. Web.

Acemoglu, D., & Restrepo, P. (2021). Tasks, automation, and the rise in U.S. wage inequality . Econometrica , 90 (5), 1973–2016. Web.

Alm, J. (2021). Tax evasion, technology, and inequality . Economics of Governance , 22 (4), 321–343. Web.

Amacher, R. C., & Pate, J. (2018). Principles of microeconomics (2nd ed.). Bridgepoint Education.

Biewen, M., & Seckler, M. M. (2019). Unions, internationalization, tasks, firms, and worker characteristics: A detailed decomposition analysis of rising wage inequality in Germany . Journal of Economic Inequality , 17 (4), 461–498. Web.

Christophers, B. (2021). A tale of two inequalities: Housing-wealth inequality and tenure inequality . Environment and Planning A , 53 (3), 573–594. Web.

Horowitz, J. M., Igielnik, R., & Kochhar, R. (2020). 1. Trends in income and wealth inequality . Pew Research Center’s Social & Demographic Trends Project. Web.

Ndulo, M. B., & Assié-Lumumba, N. T. (2020). Education and development: Outcomes for equality and governance in Africa . Springer Nature.

Strauss, S. (2017). The connection between education, income inequality, and unemployment . HuffPost. Web.

US Census Bureau. (2022). Income, poverty and health insurance coverage in the United States: 2021 . Census.gov. Web.

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U.S. Racial Wealth Gap Is Persistent And Growing, New Research Finds

DURHAM, N.C. – In his 2024 State of the Union address , President Joe Biden said the country’s racial wealth gap is the smallest it has been in 20 years.

However, a new paper from three collaborators at the Samuel DuBois Cook Center for Social Equity at Duke University provides an important correction: The modern racial wealth gap is in fact growing, in large part because of the cumulative impact of the country’s racial history, and intergenerational transfers of wealth from older generations to younger ones.

“When it comes to wealth inequality, a rising tide lifted all boats … inequitably,” said lead author Fenaba R. Addo, associate professor of public policy at the University of North Carolina-Chapel Hill and a Cook Center faculty affiliate. “Black-white wealth inequality persists, and it has expanded with the onset of the pandemic.”

The study, “Setting the Record Straight on Racial Wealth Inequality,” appeared in the May 2024 edition of AEA Papers and Proceedings and is available online .

Also co-authoring the paper were William A. Darity Jr., the Cook Center’s founding director and a professor of public policy, African and African American Studies and economics at Duke, and Samuel L. Myers Jr., a Cook Center distinguished fellow and the director of the Roy Wilkins Center for Human Relations and Social Justice, Hubert H. Humphrey School of Public Affairs at the University of Minnesota.

From 2019 to 2022, the most recent years in which the Federal Reserve’s Survey of Consumer Finances collected household wealth data, the mean gap in net worth between Black and white households grew from $841,900 to $1.15 million — a 38 percent increase that far outpaced inflation during the same period.

Why is this? A traditional view of how the racial wealth gap has developed — and might be alleviated — centers on human capital. It posits that Black households have lower levels of educational attainment, which in turn generates lower earnings and lower savings that can lead to wealth. By this logic, to eliminate the wealth gap, one must first eliminate the earnings gap.

However, the authors make clear the shortcomings of this narrative. Black households in the middle income quintile possess less than one-third the wealth of white households in the same quintile. Nor does education provide a useful lever: Black households headed by someone with a college degree have less wealth than white households led by one with a high school diploma or GED.

Moreover, the authors continue, it is evident that a more meaningful driver of the racial wealth gap is what the authors term the “intergenerational transmission chain.” The role of gifts and inheritances is often overlooked by economists. But familial wealth transfers enable younger generations to experience a sense of economic security and opportunity.

Indeed, income and earnings depend significantly on the wealth of a person’s parents and grandparents.

In other words, wealth begets wealth, and a lack of wealth begets a lack of wealth. As the authors write, because of perpetually inequitable opportunities for Black Americans to accrue wealth, “The story of Black-White wealth inequality in the United States is one of the typical white households consistently having more and the typical Black household holding a relatively small percentage of white wealth.”

Given this framing, Addo and her co-authors go on to highlight alternative policies that may prove more effective at closing the racial wealth gap.

They emphasize that federal tax laws have enabled wealthy families to pass wealth forward to future generations at low cost. Since this policy has primarily benefitted white families, future analysis and reform could prove beneficial to eliminating the racial wealth gap.

Moreover, the authors support reparations for Black Americans whose ancestors were enslaved in the United States, as that would raise the wealth of Black households while not adversely affecting white wealth.

Regardless, they argue that the first step to eliminating the wealth gap is a proper understanding of what has caused it: The inequitable racial history of the country, and the transmission — and lack of transmission — of resources across generations for white and Black Americans, respectively.

“Misleading narratives about wealth creation and the persistence of wealth inequality need to be challenged and corrected,” said Addo. “We aimed to do this with our paper.”

CITATION: Addo, Fenaba R., William A. Darity Jr., and Samuel L. Myers Jr. 2024. “Setting the Record Straight on Racial Wealth Inequality.” AEA Papers and Proceedings, 114: 169-73. DOI: https://doi.org/10.1257/pandp.20241102

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Racial inequality in the united states.

By: Counselor for Racial Equity Janis Bowdler and Assistant Secretary for Economic Policy Benjamin Harris  

Racial inequality is the unequal distribution of resources, power, and economic opportunity across race in a society. While the discussion of racial inequality in the United States is often focused on economic inequality, racial inequality also manifests itself in a multitude of ways that alone and together impact the well-being of all Americans. This includes racial disparities in wealth, education, employment, housing, mobility, health, rates of incarceration, and more. 1

In her January 2022 remarks at the 2022 ‘Virtual Davos Agenda’ hosted by the World Economic Forum, Secretary of the Treasury Janet Yellen stated, “A country’s long-term growth potential depends on the size of its labor force, the productivity of its workers, the renewability of its resources, and the stability of its political systems.” This concept underpins the Biden Administration’s economic growth strategy, which Secretary Yellen has coined “modern supply side economics.” According to Secretary Yellen, modern supply side economics “prioritizes labor supply, human capital, R&D, and investments in a sustainable environment. These focus areas are all aimed at increasing economic growth and addressing longer-term structural problems, particularly inequality.” 2  This reflects a recognition that despite an aim to advance economic growth, many policies in areas such as access to the labor market, housing, and infrastructure have not benefited all Americans. This has impacted the ability of communities of color, rural communities, and other historically marginalized people to fully participate in and benefit from the nation’s prosperity. Our economy as a whole cannot be as productive as possible unless all individuals are given the opportunity to be as productive as possible. As a result, the legacies of structural racism continue to hamper economic growth for everyone. Furthermore, some economic policies that would directly benefit Americans of all races and ethnicities have been undermined by zero-sum arguments that play to fears that one group will benefit at the expense of another. 

There are, of course, moral, legal, microeconomic, and other reasons to promote a more just and equitable society. In a series of blog posts over the coming months, we will focus on the economic argument for reducing racial inequality. The economic cost of racial inequality is borne not just by the individuals directly faced with limited opportunities, but also has spillovers to the entire U.S. economy. Especially as the country becomes more racially diverse (see Figure 1), inequality poses an ongoing threat to our individual and collective economic welfare.  

Figure 1: Changing Racial and Ethnic Composition of the U.S. Population

Notes: Hispanic refers to anyone of Hispanic ethnicity, regardless of race. The remaining groups exclude anyone of Hispanic ethnicity. Prior to the 1980 decennial census, individuals were not directly asked about whether they were of Hispanic origins. For data before the 1980 decennial census, Hispanic is imputed by IPUMS.  Source: Treasury calculations using U.S. Census Bureau data from IPUMS. Steven Ruggles, Sarah Flood, Sophia Foster, Ronald Goeken, Jose Pacas, Megan Schouweiler and Matthew Sobek. IPUMS USA: Version 11.0 [dataset]. Minneapolis, MN: IPUMS, 2021. https://doi.org/10.18128/D010.V11.0  

Deputy Secretary of the Treasury Wally Adeyemo emphasized this argument in his September 2021 blog post: “The exclusion of communities of color from the ladder of economic opportunity holds back economic growth for the entire country. Pursuing racial equity is a vital opportunity to drive innovation and boost growth across the U.S. economy.” 3  When people gain access to the resources they need to build their economic future and withstand financial shocks, it is not just good for individuals and their families, but it also benefits the communities where they live, work, and invest, with beneficial spillovers to the economy as a whole. Likewise, when investments are made that allow millions of people who have been held back economically to reach their full economic potential, it gives the United States an important advantage in an increasingly competitive global economy. We cannot afford to leave talent and opportunity on the table.

Below we briefly discuss the origins and persistence of inequality in the United States, highlight some of the key economic indicators of its impact, and give an overview of the issues we will explore in more depth in future posts.

Origins and Persistence of Racial Inequality in the United States

Racial inequality in the United States today is rooted in longstanding behaviors, beliefs, and public and private policies that resulted in the appropriation of the physical, financial, labor, and other resources of non-white people. While a review of the origins of racial inequity is beyond the scope of this blog, it is important to note the prominent role of inequitable and harmful policies—dating back to before the country’s founding. These include attacks on Native Americans’ political status and expropriation of their land, the reliance on slavery to underpin a significant portion of the colonial and then U.S. economy, and the Jim Crow laws and other formal and informal policies that enforced segregation and severely limited opportunities for non-white Americans. The millions of African Americans who left the southern United States to escape Jim Crow laws faced formal and informal employment, housing, and educational discrimination in destination cities in the North and West. 4  Native Americans who survived the military conquests of the mid-19th century were subject to policies that disenfranchised them, forced their assimilation and relocation, and removed Native children from their households. Anti-Latino sentiment, which grew in the 19th century as emigration from Mexico to the United States increased in the years following the Mexican-American War, grew further following the Great Depression due to concerns that Mexican Americans were taking jobs from European-Americans. 5  Similarly, anti-Asian sentiment grew following the arrival of Chinese immigrants during the California Gold Rush, which was manifested in the Chinese Exclusion Act prohibiting the immigration of Chinese laborers beginning in 1882, and was ignited again after the bombing of Pearl Harbor, with the establishment of Japanese internment camps by executive order, which resulted in the forced relocation and internment of about 120,000 Japanese Americans. 6

While the most targeted racist laws and policies have been repealed or otherwise abandoned, subsequent policies, uneven enforcement of equal protections, and a failure to invest in individuals harmed by de jure and de facto discrimination has resulted in vastly limited opportunities and stark inequities between white and non-white Americans that have continued to this day. For example, maps drawn by the Home Owners Loan Corporation, a now defunct federal agency, to portray the relative riskiness of lending across neighborhoods in the 1930s were used by banks to deny access to credit to residents of the lowest-rated neighborhoods, who were often racial and ethnic minorities, though these policies also hurt poor white individuals. 7  Moreover, this conduct depressed home ownership rates, house values, and rents and increased racial segregation in low-rated neighborhoods in subsequent decades, highlighting the lasting, negative economic consequences of racism on the community and on future residents of these neighborhoods, regardless of race. 8   These and other policies and actions not only led to continued racial disparities in access to resources and opportunities, they also led to differences in the extent to which people of different races benefit from the resources and opportunities they already possess. 9

These disparities are evident in the persistent over-representation of Black and Hispanic Americans among the population in poverty in the United States and in the widening of the racial wealth gap in recent decades. 10   While the poverty rates for all racial and ethnic groups had been declining prior to the COVID-19 pandemic (see Figure 2), the gaps between the rates for Black and Hispanic Americans and non-Hispanic white Americans has remained relatively constant since the early 2000s. At the same time, the gap in average net wealth between Black and Hispanic households and non-Hispanic white households has widened significantly (see Figure 3).

Figure 2. Poverty Rate by Race and Hispanic Origin: 1959 to 2019

Figure 3. Household Net Worth by Race and Hispanic Origin: 1989 to 2019

Source: Federal Reserve Board, https://www.federalreserve.gov/econres/notes/feds-notes/wealth-inequality-and-the-racial-wealth-gap-20211022.htm  

Racial disparities in outcomes predictive of future success appear early in life. In 2010, math skills at kindergarten entry were over half a standard deviation higher for white students than for Black or Hispanic students, with similar disparities in reading skills. 11  These disparities in educational outcomes continue into higher education. In 2019, 40 percent of white adults had earned a bachelor’s degree compared to just 26, 19, and 17 percent of Black, Hispanic, and American Indian or Alaska Native adults, respectively. 12

Large educational disparities, coupled with racial discrimination in the labor market and other factors, lead to pronounced differences in economic security across racial groups. In 2019, the unemployment rate was 6.1 percent for both Black and American Indian or Alaska Native adults, compared to just 3.3 and 2.7 percent for white and Asian adults, respectively. Similarly, the rate for Hispanic adults was 4.3 percent and only 3.5 percent for non-Hispanics. 13

In addition, Black and Hispanic adults continue to have considerably lower earnings than White or Asian adults. Median household income in 2020 was roughly $46,000 and $55,500 for Black and Hispanic workers, respectively, compared to $75,000 and $95,000 for white and Asian households, as shown in Figure 4. These earnings differences have changed little since 1970 and are one of the primary contributors to the persistence of the racial wealth gap. In 2019, the median white family had $184,000 in family wealth compared to just $23,000 and $38,000 for the median Black and Hispanic families, respectively. 14

Racial disparities in educational and economic outcomes not only impact the economic well-being of racial and ethnic minorities, they have also been shown to inhibit economic growth for the U.S. economy as a whole, which affects the economic security of every American, regardless of race. For example, recent research by economists Chang-Tai Hsieh, Erik Hurst, Charles I. Jones, and Peter J. Klenow shows that up to 40 percent of growth in U.S. GDP per capita between 1960 and 2010 can be attributed to increases in the shares of women and Black men working in highly skilled occupations, likely due to changes in social norms that previously hindered talented women and Black men from pursuing their comparative advantage. 15  This research suggests that sexist and racist social norms prevented the U.S. economy from reaching its full potential and that working to ensure that every American has an equal opportunity to pursue the career he or she chooses should improve economic outcomes for all.

Figure 4. Real Median Household Income by Race and Hispanic Origin: 1967 to 2020

Racial gaps in well-being extend beyond educational attainment and economic security. Health disparities, for example, also begin early in life and persist over the lifespan. Black and Hispanic Americans face higher rates of child abuse, 16  lead exposure, 17  obesity in childhood, 18  and chronic illness in adulthood than white Americans. 19  These groups often experience restricted access to quality health care, an issue further illuminated by the recent global pandemic. Compared to white non-Hispanic Americans, Hispanic, Black non-Hispanic, and American Indian or Alaska Native non-Hispanic Americans are 1.8, 1.7, and 2.1 times more likely to die from COVID-19. 20   Moreover, as the COVID-19 pandemic has shown, the inequitable distribution of healthcare in the United States can negatively impact the health of all Americans, including those with access to high-quality services.

In addition, people of color in the United States are over-represented in neighborhoods with high poverty rates. In 2019, nearly a quarter of American Indians or Alaska Natives, 21 percent of non-Hispanic Black people, and 17 percent of Hispanic people lived in high-poverty neighborhoods, defined as Census tracts with a poverty rate of 30 percent or higher. In contrast, only 4 percent and 6 percent of white and Asian or Pacific Islander people lived in high-poverty neighborhoods. 21  High-poverty neighborhoods often lack vital resources and amenities like good schools, large and affordable grocery stores, reliable public transportation, and safe and clean community spaces that enable residents to succeed in the classroom and on the job.

It is important to note that while we have reliable measures and data sources to define the differences in many outcomes between racial and ethnic groups over the past forty years, our ability to trace racial inequality back further and examine the country’s progress since the end of slavery is limited by the quality and quantity of data available. For example, greater disparities exist within the Asian American and Pacific Islander group than are often evident in aggregate data, and data on Native communities in the United States is usually inadequate for any in depth analyses. Moreover, for some outcomes such as wealth, our ability to measure contemporary differences is also limited by data availability.

Roadmap for this Blog Series

Upcoming posts will discuss in greater depth the extent of racial inequality in economic security and explain how differences in in educational opportunity and attainment, neighborhoods and environmental factors, health and access to healthcare, and employment and job quality, contribute to and are caused by the persistence of racial disparities in economic well-being. Each post will highlight important facts, discuss how key outcomes have evolved over time, and emphasize the connections with other components of economic inequality, with the goal of calling attention to areas where more work is needed to advance racial equity. In addition, we will discuss issues related to data quality and coverage that affect our ability to truly understand the trajectory of racial inequality in the United States.

[1] Shapiro, Thomas M. The Hidden Cost of Being African American: How Wealth Perpetuates Inequality . Oxford: Oxford University Press, 2004.

[2] https://home.treasury.gov/news/press-releases/jy0565

[3] https://home.treasury.gov/system/files/136/American-Rescue-Plan-Centering-Equity-in-Policymaking.pdf

[4] Derenoncourt, Ellora. 2022. “Can You Move to Opportunity? Evidence from the Great Migration.” American Economic Review 11 (2): 369-408.

[5] https://www.history.com/news/the-brutal-history-of-anti-latino-discrimination-in-america

[6] https://www.britannica.com/event/Japanese-American-internment. For additional details on the economic impacts of inequitable government policy, see:

• Aaronson, Daniel, Daniel Hartley, and Bhashkar Mazumder. 2021. “The Effects of the 1930s HOLC ‘Redlining’ Maps.” American Economic Journal: Economic Policy 13 (4): 355-92.
• Carruthers, Celeste K., and Marianne H. Wanamaker. 2017. “Separate and Unequal in the Labor Market: Human Capital and the Jim Crow Wage Gap.” Journal of Labor Economics 35 (3): 655-696.
• Jones, Maggie E.C. 2021. “The Intergenerational Legacy of Indian Residential Schools.” Unpublished working paper. Available at: https://maggieecjones.files.wordpress.com/2021/02/intergenerationalrs.pdf
• Rothstein, Richard. The color of law: A forgotten history of how our government segregated America . Liveright Publishing, 2017.

[7] https://www.britannica.com/topic/redlining

[8] Aaronson, Daniel, Daniel Hartley, and Bhashkar Mazumder. 2021. “The Effects of the 1930s HOLC ‘Redlining’ Maps.” American Economic Journal: Economic Policy 13 (4): 355-92.

[9] Pfeffer, Fabian T., and Alexandra Killewald. 2018. “Generations of Advantage: Multigenerational Correlations in Family Wealth.” Social Forces 96 (4): 1411-42.

[10] Wealth is the total financial value of what an individual or household owns (assets) minus all debts (liabilities), representing the sum of financial resources available to an individual or household at a point in time. Assets include the value of a home, retirement savings, stocks, bonds, money in the bank, and other items of value, while liabilities include home mortgages, auto loans, credit card debt, and student debt. The racial wealth gap is the difference in wealth held by different racial and ethnic groups.

[11] Reardon, Sean F., and Ximena A. Portilla. 2016. “Recent Trends in Income, Racial, and Ethnic School Readiness Gaps at Kindergarten Entry.” AERA Open 2(3): 1-18. https://doi.org/10.1177/2332858416657343.

[12] https://nces.ed.gov/programs/digest/d20/tables/dt20_104.10.asp

[13] https://www.bls.gov/opub/reports/race-and-ethnicity/2019/home.htm

[14] https://www.stlouisfed.org/open-vault/2020/december/has-wealth-inequality-changed-over-time-key-statistics

[15] Hsieh, Chang-Tai, Erik Hurst, Charles I. Jones, and Peter J. Klenow. 2019. “The Allocation of Talent and U.S. Growth.” Econometrica , 87 (5): 1439-1474.

[16] Dakil, Suzanne R., Matthew Cox, Hua Lin, and Glenn Flores. “Racial and Ethnic Disparities in    Physical Abuse Reporting and Child Protective Services Interventions in the United States.” Journal of the National Medical Association 103(9-10): 926-931.

[17] Teye, Simisola O., Jeff D. Yanosky, Yendelea Cuffee, Xingran Weng, Raffy Luquis, Elana Farace, and Li Wang. 2021. “Exploring Persistent Racial/Ethnic Disparities in Lead Exposure among American Children Aged 1-5 Years: Results from NHANES 1999-2016.” International Archives of Occupational and Environmental Health 94: 723-730.

[18] Anderson, Sarah E., and Robert C. Whitaker. 2009. “Prevalence of Obesity Among US Preschool Children in Different Racial and Ethnic Groups.” Arch Pediatr Adolesc Med. 163(4):344–348. doi:10.1001/archpediatrics.2009.18

[19] Quiñones, Ana R., Anda Botoseneanu, Sheila Markwardt, Corey L. Nagel, Jason T. Newsom, David A. Dorr, Heather G. Allore. 2019. “Racial/Ethnic Differences in Multimorbidity Development and Chronic Disease Accumulation for Middle-Aged Adults.” PLoS ONE 14(6): e0218462. https://doi.org/10.1371/journal.pone.0218462

[20] https://www.cdc.gov/coronavirus/2019-ncov/covid-data/investigations-discovery/hospitalization-death-by-race-ethnicity.html

[21] https://nationalequityatlas.org/indicators/Neighborhood_poverty#/?geo=01000000000000000

Report | Program on Race, Ethnicity and the Economy (PREE)

Advancing anti-racist economic research and policy Racial and ethnic disparities in the United States : An interactive chartbook

Report • June 15, 2022

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This interactive chartbook provides a statistical snapshot of race and ethnicity in the United States, depicting racial/ethnic disparities observed through: (1) population demographics; (2) civic engagement; (3) labor market outcomes; (4) income, poverty, and wealth; and (5) health. The chartbook also highlights some notable intersections of gender with race and ethnicity, including educational attainment, labor force participation, life expectancy, and maternal mortality. The findings are bracing, as they show how much more work we need to do to address longstanding and persistent racial inequities. Most charts include data for five racial/ethnic groups in each of the charts—white, Black, Hispanic, Asian American and Pacific Islander (AAPI), and American Indian and Alaska Native (AIAN). In the charts and text, “Americans” refers to all U.S. residents, regardless of citizenship status.

Demographics charts

Civic engagement charts

Labor market charts

Income, poverty, and wealth charts

Health charts

In several instances, data for AAPI and AIAN populations were not available from the federal government sources used. Researchers seeking disaggregated data and statistics for these groups are encouraged to look at sources cited in the companion essays in the Anti-Racist Economic Research and Policy Guide: AAPI Data and the Center for Indian Country Development at the Federal Reserve Bank of Minneapolis.

As our efforts illustrate, collecting and maintaining data sources that are representative of the entire U.S. population is an essential first step toward overcoming the invisibility, neglect, and lack of understanding experienced by many communities of color. Future work on this project will involve identifying comparable data from alternative sources that fill in as much of the missing information in the chartbook as possible.

In this interactive chartbook, additional notes and source information can be accessed by clicking on the ellipses ( … ) in the notes and sources lines under the charts.

Population demographics

The u.s. has become more racially and ethnically diverse over the last two decades : share of u.s. population by race and ethnicity, 2000, 2010, and 2020.

The data below can be saved or copied directly into Excel.

The data underlying the figure.

Notes:  AAPI refers to Asian American and Pacific Islander, AIAN refers to American Indian and Alaskan Native. Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, AAPI non-Hispanic, AIAN non-Hispanic, and Hispanic any race).

Sources: Economic Policy Institute analysis of U.S. Census Bureau Decennial Census Summary File 2, Table DP1, for 2000, and Decennial Census Redistricting Data, Table P2, for 2010 and 2020.

Sources: Economic Policy Institute analysis of U.S. Census Bureau Decennial Census Summary File 2, “Table DP1. Profile of General Demographic Characteristics: 2000” for Not Hispanic or Latino and for Hispanic or Latino ; Decennial Census Redistricting Data, “Table P2. Hispanic or Latino, and Not Hispanic or Latino by Race” for 2010 and for 2020 . Accessed February 2022.

Each decennial Census since 2000 has revealed a more racially and ethnically diverse U.S. population. While the share of people who identify as Black (about 12%) or American Indian and Alaskan Native (0.7%) has remained constant, the non-Hispanic white share of the population has declined from 69.1% in 2000 to 57.8% in 2020. On the other hand, a growing share of U.S. residents identify as Hispanic (increasing from 12.5% in 2000 to 18.7% in 2020) or Asian American and Pacific Islander (increasing from 3.7% in 2000 to 6.1% in 2020). These changing population demographics reflect different trends in birth, mortality, and immigration rates across groups. Since 2000, there have also been significant changes in how people identify racially. Notably, a growing share of people identify as being of two or more races (this would include people who, for example, identify as Black and AAPI, but would not include people who identify as Black and Hispanic, as they are identifying Black alone as their race and Hispanic as their ethnicity). Also, a growing but still small share of people identify as being of a race other than those explicitly defined by the Office of Management and Budget (OMB).

As Trevon Logan notes in his essay, it is the OMB that issues regulations regarding the classifications of race and ethnicity by federal agencies, including the U.S. Census Bureau, which conducts the major household and business surveys used by researchers. There are six permitted race categories and two ethnicity classifications, Hispanic and non-Hispanic. As such, everyone is a member of both a race and ethnicity. For more on the current classifications, see Logan’s essay .

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While U.S. residents are overwhelmingly citizens, Asian American/Pacific Islander and Hispanic citizens are more likely to be first-generation immigrants : Share of U.S. population by race/ethnicity and nativity, 2019

Notes: AAPI refers to Asian American and Pacific Islander, AIAN refers to American Indian and Alaskan Native. All race categories are single race and do not distinguish Hispanic ethnicity from non-Hispanic ethnicity, except for white, which is exclusive of Hispanic ethnicity (i.e., non-Hispanic white alone, Black alone, AAPI alone, and AIAN alone). Hispanic can be of any race. 

Sources: Economic Policy Institute analysis of U.S. Census Bureau 2019 American Community Survey 1-Year Estimates Detailed Tables B05003H, B05003B, B05003D, B05003E, B05003C, and B05003I.  

Sources: Economic Policy Institute analysis of U.S. Census Bureau. 2022. 2019 American Community Survey 1-Year Estimates Detailed Tables B05003H. Sex by Age by Nativity and Citizenship Status (White Alone, Not Hispanic or Latino) ; B05003B. Sex by Age by Nativity and Citizenship Status (Black or African American Alone) ; B05003D. Sex by Age by Nativity and Citizenship Status (Asian Alone);  B05003E. Sex by Age by Nativity and Citizenship Status (Native Hawaiian and Other Pacific Islander Alone) ;  B05003C. Sex by Age by Nativity and Citizenship Status (American Indian and Alaska Native Alone) ;  B05003I. Sex by Age by Nativity and Citizenship Status (Hispanic or Latino) . Accessed February 2022. Note that Asian and Native Hawaiian/Pacific Islander data were combined to furnish data for the AAPI category. 

Across all racial and ethnic groups, an overwhelming majority of people in the United States are U.S. citizens, according to data from the Current Population Survey. However, nativity shares vary across racial groups. White persons (97.8%), American Indian and Alaskan Native persons (92.2%), and Black persons (87.4%) are most likely to have been born citizens (born in the United States or to United States citizens abroad), compared with just over half of the Hispanic population (55.1%) and about one-fourth (24.8%) of the Asian American and Pacific Islander (AAPI) population.

Immigration status also varies widely. AAPI residents are most likely to be immigrants: nearly half (46.2%) were not born U.S. citizens but became U.S. citizens (i.e., are naturalized U.S. citizens), while another 29.0% are not citizens. Hispanic residents are next most likely to be immigrants: 18.4% are naturalized citizens and 26.5% are not citizens. These statistics highlight only a fraction of the diversity represented within and across different racial and ethnic groups. As several essays in the Advancing Anti-Racist Economic Research and Policy guide explain, analyses that use categories or group descriptions that are too broadly defined can lead to inaccurate conclusions.

The uneven geographic distribution of racial and ethnic populations highlights the influence of state and local policy on racial inequality : Share of state population by race and ethnicity, 2020

Notes:  AAPI refers to Asian American and Pacific Islander. AIAN refers to American Indian and Alaskan Native. The “Two or more” category captures the share of people who identify as being of two or more races, and persons in this category are not included in the single race categories.

Source: Economic Policy Institute analysis of U.S. Census Bureau Decennial Census Redistricting Data, Table P1.

Source: Economic Policy Institute analysis of U.S. Census Bureau Decennial Census Redistricting Data, “ Table P1. Race .” Accessed March 2022.

The U.S. Census Bureau projects that Black, Hispanic, AAPI, and other people who do not identify as white will collectively account for over half of the population of the United States by 2044. In California, Hawaii, Maryland, Nevada, New Mexico, Texas, and the District of Columbia, the white population is already in the minority, and in Arizona, Florida, Georgia, New Jersey, and New York, white persons make up just over half of the population. This interactive map shows areas of population density for each race or ethnic group (click on a race or ethnic group) along with the racial and ethnic distribution of each state’s population (click on a state). It shows that Southern states and the District of Columbia have the largest shares of residents who are Black, with the highest shares in the District of Columbia (40.9%), Mississippi (36.4%), and Louisiana (31.2%). Southwestern and Western states are home to a large percentage of Latinos, with the highest shares in New Mexico (47.7%), Texas (39.3%), and California (39.4%). AAPI residents, including Native Hawaiians, predictably account for nearly half (46.8%) of the population of Hawaii but are also a significant share of the population in California (15.5%) as well as New Jersey and Washington state (10.2% each). Also, as the group’s name would indicate, American Indian and Alaska Native residents account for the highest share of the population in Alaska (14.8%), followed by New Mexico (8.9%), South Dakota (8.4%), and Oklahoma (7.9%). White Americans account for the largest majority of the population in several Northeastern states (90.2% in Maine, 89.1% in Vermont, and 87.2% in New Hampshire) and West Virginia (89.1%).

The patterns illustrated in the map trace each group’s unique history of settlement, immigration, and migration in this country. But they also help to make a point about the important role that state and local policies play in either improving or worsening racial disparities in the United States. As just one example, EPI research shows that Southern states, which have a high density of Black residents, are more likely than states in other regions to use preemption laws to stop local governments from setting strong labor standards, such as raising the minimum wage and guaranteeing paid sick leave.

For more on preemption laws in the South, see Hunter Blair et al., Preempting Progress: State Interference in Local Policymaking Prevents People of Color, Women, and Low-Income Workers from Making Ends Meet in the South , Economic Policy Institute, September 2020.

Current population demographics by race/ethnicity and age support projections that people of color will become the collective majority by 2045 : Share of U.S. population within given age ranges, by race and ethnicity, 2019

Source:  Economic Policy Institute analysis of U.S. Census Bureau's 2019 Population Estimates by Age, Sex, Race and Hispanic Origin, Table NC-EST2019-ASR6H. 

Source:  Economic Policy Institute analysis of U.S. Census Bureau, “Annual Estimates of the Resident Population by Sex, Age, Race, and Hispanic Origin for the United States: April 1, 2010 to July 1, 2019” (Excel table NC-EST2019-ASR6H) from 2019 Population Estimates by Age, Sex, Race and Hispanic Origin , June 25, 2020.

The changing racial and ethnic makeup of the U.S. population is foretold in the age distribution of different racial and ethnic groups. In 2019, almost a third (31.3%) of people who identified as Hispanic were under the age of 18, as were about a quarter of those who identified as Black (26.5%), AIAN (26.4%) and AAPI (23.0%). A smaller share of the white population (19.5%) belonged to this younger age cohort while over a third of white residents were near or at retirement age (age 55 or older)—a much larger share than for other racial and ethnic groups. As the current population ages, the older population will remain predominantly non-Hispanic white while Black, Hispanic, AAPI, and AIAN persons will be a growing share of the younger population. This racial and ethnic generation gap will require balancing the interests of a younger, less wealthy, more racially and ethnically diverse population with those of an older, wealthier, predominantly white population. However, these generations are linked in important ways. Older workers and retirees have a stake in worker, economic, and racial justice for those younger workers who in the years ahead will be a growing share of workers driving the national economy and providing many of the services the aging population relies on. Census population projections from 2018 (the latest available) indicate that in 2045, non-Hispanic white persons will account for less than half (49.7%) of the U.S. population (see U.S. Census Bureau, 2017 National Population Projections Tables , Table 4).

Men’s educational attainment is highly stratified by race and ethnicity, with American Indian and Alaska Native, Hispanic, and Black men most likely to be “working class” : Share of men age 25 and older with given level of educational attainment, by race and ethnicity, 2019

Sources: Economic Policy Institute analysis of U.S. Census Bureau 2019 American Community Survey 1-Year Estimates Detailed Tables B15002H, B15002B, B15002I, B15002D, B15002E, and B15002C.  

Sources: Economic Policy Institute analysis of U.S. Census Bureau. 2022. 2019 American Community Survey 1-Year Estimates Detailed Tables B15002H Sex by Educational Attainment for the Population 25 Years and Over (White Alone, Not Hispanic or Latino) ; B15002B Sex by Educational Attainment for the Population 25 Years and Over (Black of African American Alone) ; B15002I Sex by Educational Attainment for the Population 25 Years and Over (Hispanic or Latino) ; B15002D Sex by Educational Attainment for the Population 25 Years and Over (Asian Alone) ; B15002E Sex by Educational Attainment for the Population 25 Years and Over (Native Hawaiian and Other Pacific Islander Alone) ; B15002C Sex by Educational Attainment for the Population 25 Years and Over (American Indian and Alaska Native Alone) . Note that Asian and Native Hawaiian/Pacific Islander data were combined to furnish data for the AAPI category. Accessed February 2022.

The term working class has been used to describe working-age adults who have less than a bachelor’s degree. Based on their high shares without a bachelor’s degree or more education, American Indian and Alaskan Native (AIAN) (85.5%), Hispanic (84.0%), and Black (80.3%) men are more likely to be considered working class (under this definition) than are white (63.5%) or AAPI (43.6%) men. Even among the groups of men most likely to be considered working class, there is still a wide range of educational attainment that includes everything from less than a high school diploma to some college. The some college category includes attendance at a four-year or two-year institution, but no degree;  it also includes completion of a two-year associate or technical degree. The groups with the highest shares of people with less than a high school education are Hispanic men (30.6%) and AIAN men (19.6%) and 60.5% of Hispanic men and over half of AIAN men (53.8%) have no education beyond high school. While about half (49.7%) of Black men also have no education beyond high school, Black men are more likely than either Hispanic or AIAN men to have a bachelor’s or advanced degree, but still much less likely to have that level of education than either white or AAPI men. AAPI men lead all other racial groups in the share (56.4%) who have a bachelor’s or advanced degree. These patterns of educational attainment are shaped by multiple factors, including differences in immigration policies applied to Asian versus Latin American countries, as well as the legacy of racial discrimination and oppression that severely limited educational opportunities for generations of Black and Native Americans.

Most women have more than a high school education, but Latinas and AIAN women lag behind other groups in attaining higher education : Share of women age 25 and older with given level of educational attainment, by race and ethnicity, 2019

Notes: AAPI refers to Asian American and Pacific Islander, AIAN refers to American Indian and Alaskan Native. All race categories are single race and do not distinguish Hispanic ethnicity from non-Hispanic ethnicity, except for white, which is exclusive of Hispanic ethnicity (i.e., non-Hispanic white alone, Black alone, AAPI alone, and AIAN alone). Hispanic can be of any race.  Shares may not add up to 100 due to rounding.  

In 2019, across most racial and ethnic groups, at least half of women age 25 or older had some education beyond a high school diploma. Latinas were the exception—only 45.0% had some level of education beyond high school and 28.5% had less than a high school education, a much higher percentage than any other group of women (1.6 to nearly 5 times as much). Those women least likely to have a bachelor’s or advanced degree were American Indian and Alaskan Native (AIAN) women (17.6%) and Latinas (19.2%).  Asian American and Pacific Islander (AAPI) and white women had the highest levels of educational attainment with 52.9% of AAPI women and 37.3% of white women having at least a bachelor’s degree, followed by 25.0% of Black women. As with men, these patterns of educational attainment are shaped by multiple factors, including differences in immigration policies applied to Asian versus Latin American countries, as well as the legacy of racial discrimination and oppression that severely limited educational opportunities for generations of Black and Native Americans. But compared with male educational attainment by race and ethnicity women tend to have higher levels of educational attainment than their male counterparts (see Chart 5 ).

While the Black imprisonment rate has decreased, Black people are still five times as likely as white people to be imprisoned : Imprisonment rates per 100,000 U.S. residents by race and ethnicity, 2009–2019

Notes: Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, and Hispanic any race).

Source: Economic Policy Institute analysis of Bureau of Justice Statistics Federal Justice Statistics, 2019, Table 6. 

Source: Economic Policy Institute analysis of U.S Department of Justice, Bureau of Justice Statistics, “Table 6. Imprisonment Rates of U.S. Adults, Based on Sentenced Prisoners under the Jurisdiction of State or Federal Correctional Authorities, By Jurisdiction, Sex, Race or Ethnicity, 2009–2019” (downloadable data table) from Federal Justice Statistics, 2019 , October 2021. Accessed January 28, 2022.

In response to the demand for criminal justice reform and a shift away from the “tough on crime” politics of the 1980s and 1990s, imprisonment rates for Black and Hispanic people have fallen over the last decade. But Black and Hispanic people are still much more likely to be incarcerated than white people, whose imprisonment rate has stagnated over the past decade. Over 1,000 out of every 100,000 U.S. residents who are Black were imprisoned in 2019, followed by 525 out of 100,000 Latino U.S. residents and 214 out of 100,000 white U.S. residents. Thus, the approximately 2.1 million people being held in U.S. prisons and jails at the end of 2019—an often-forgotten segment of the U.S. population—are disproportionately Black, Hispanic, and other people of color.

Data on the size of the overall incarcerated population come from the “ Correctional Populations in the United States, 2019—Statistical Tables ” published by the U.S. Department of Justice in July 2021.

Black men have an exceptionally high imprisonment rate : Imprisonment rates per 100,000 U.S residents, by race/ethnicity and gender, 2019

Notes:  Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, and Hispanic any race). Other includes Asian Americans, Pacific Islanders, Native Hawaiians and American Indians, and Alaskan Natives .  

Source: Economic Policy Institute analysis of U.S Department of Justice, Bureau of Justice Statistics, “Table 6. Imprisonment Rates of U.S. Adults, Based on Sentenced Prisoners Under the Jurisdiction of State or Federal Correctional Authorities, By Jurisdiction, Sex, Race or Ethnicity, 2009–2019” (downloadable data table) from Federal Justice Statistics, 2019 , October 2021. Accessed January 28, 2022.

This chart makes two facts very clear: That imprisonment in the United States is not only a gendered issue—with men being much more likely to be imprisoned—but also an issue of racialized gender, with Black men being far and away the most highly imprisoned group. Among women, Black residents had an imprisonment rate (83 per 100,000) second only to residents who identified as some race other than Black or white (Hispanic is an ethnicity) in 2019 (109 per 100,000). The “other” category includes Asian Americans, Pacific Islanders, Native Hawaiians, American Indians, and Alaskan Natives. Among men, Black residents had the highest imprisonment rate (2,203 per 100,000), followed by other men (1,176 per 100,000).  Black men were more than twice as likely to be imprisoned as Hispanic men and nearly six times as likely to be imprisoned as white men.

Civic engagement

Consistently higher turnout among white voters was challenged by historic black voter turnout in 2012 and, to a lesser extent by historic hispanic and asian voter turnout in 2020 : voter turnout in presidential election years by race and ethnicity, select years 1992 to 2020.

Notes: Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, Asian non-Hispanic, and Hispanic any race).

Source:  Economic Policy Institute analysis of U.S. Census Bureau Historical Reported Voting Rates data, Table A-1. 

Source: Economic Policy Institute analysis of U.S. Census Bureau Current Population Survey data, “Table A-1. Reported Voting and Registration by Race, Hispanic Origin, Sex and Age Groups: November 1964 to 2020” [downloadable Excel file] from Historical Reported Voting Rates . Last revised October 26, 2021.

The right to vote is the most powerful right of U.S. citizenship—and widespread voter participation is essential to a functional democracy. Yet many U.S. citizens ages 18 and older do not vote. Data on voter participation during presidential election years since 1992 reveal that turnout varies significantly by race and ethnicity and changes over time. Since 1992, voter turnout has typically been highest among white voters—ranging from 60.7% to 70.9%—although Black voter turnout saw a huge increase in 2008 and 2012 during the election and reelection of the nation’s first Black president, Barack Obama. In fact, 2012 was the only election in which Black voter turnout (66.2%) exceeded white voter turnout (64.1%). Hispanic and Asian voter turnout was less than 50% in all presidential election years between 1996 and 2016, until both groups had the largest turnout in decades in 2020 (53.7% and 59.7% respectively). While one’s personal decision to participate in an election can be influenced by any number of factors—including enthusiasm about a particular candidate or confidence in the democratic process—rampant forms of voter suppression in some states undoubtedly contribute to these disparities as well.

For more on the impact of state laws that limit access to voter registration, revoke the right to vote for returning (formerly incarcerated) citizens, or otherwise make it more difficult for certain populations to cast a ballot, see “ State Voting Laws ,” Brennan Center for Justice, accessed May 5, 2022;  “ State Voting Rights Tracker ,” Voting Rights Lab, accessed May 5, 2022.

Amid dramatic decline in union membership since the 1970s, Black workers have held onto the highest rate of union membership for decades : Union membership rates, by race and ethnicity, 1973–2021

Notes: AAPI refers to Asian American and Pacific Islander. Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, AAPI non-Hispanic, and Hispanic any race). 1982 data on union membership is the average of 1981 and 1983, as there were no union status questions in the 1982 CPS.

Source: Economic Policy Institute analysis of Current Population Survey data from EPI Microdata Extracts, Version 1.0.29 (2022); https://microdata.epi.org . 

Source: Economic Policy Institute analysis of Current Population Survey May, 1973–1981, and Current Population Survey Outgoing Rotation Group, 1983–2021, public data series from EPI Microdata Extracts, Version 1.0.29 (2022); https://microdata.epi.org .

Like the constitutional right to vote in civil society , union membership gives workers a voice —in this case, a voice at work . But as the chart shows, s ince 1973, union membership has declined for all racial and ethnic groups. Union membership is an important metric of the state of the American worker given the role that l abor un ions play in giving workers a stronger, collective voice to advocate for higher pay, better benefits, and training and promotional opportunities, as well as protections against discrimination and harassment. In a unionized workforce, for example, collective bargaining results in labor contracts that help to create greater transparency through clearly defined policies and pay structures. These contracts help reduc e the potential for pay discrimination by limiting an employer’s discretion in paying different wages to comparably qualified individuals doing the same job and by providing workers with critical protections and direct recourse against other forms of exploitation or mistreatment. T he benefits of union membership are a likely contributor to the higher union membership rate of B lack workers, given their long history of unequal treatment relative to other groups of workers . Between 1973 and 1980, Hispanic workers also had high er rates of union membership than white workers . While the subsequent across the board decrease in union membership has brought union membership rates by race and ethnicity closer together, i n 2021, Black workers were still more likely to be union members (11.6%) compared with white workers (10.7%), Hispanic workers (9.0%), and Asian American and Pacific Islander workers (8.2%).  

Still, the labor movement, like any other U.S. institution, is not immune to racism. Unions must continue to become more diverse, inclusive, and dynamic as they serve the vital role of leveling the playing field for all workers.

For more on the benefits and protections conferred by union membership, see Celine McNicholas et al., Why Unions Are Good for Workers—Especially in a Crisis Like COVID-19 , Economic Policy Institute, August 2020 and Valerie Wilson, “ The Costs of Racial and Ethnic Labor Market Discrimination and Solutions That Can Contribute to Closing Employment and Wage Gaps ,” testimony before the U.S. House of Representatives Select Committee on Economic Disparity and Fairness in Growth, January 20, 2022.

Labor market

Black women have maintained the highest labor force participation rate amid post-1970 rise in women’s labor force participation overall : labor force participation rate for women by race and ethnicity, 1973–2021.

Notes: Race and ethnicity categories are not mutually exclusive; white, Black, and Asian data do not exclude Hispanic workers of each race. Shaded areas denote recessions. 

Notes: Race and ethnicity categories are not mutually exclusive; white, Black, and Asian data do not exclude Hispanic workers of each race. Shaded areas denote recessions. The labor force participation rate shows the number of people in the labor force—people who are employed or unemployed but looking for work—as a share of the number of civilian, noninstitutionalized people ages 16 and older.

Sources: Economic Policy Institute analysis of U.S. Bureau of Labor Statistics Current Population Survey, Labor Force Participation Rate for Women by Race and Ethnicity data series LNU01300005, LNU01300008, LNU01300011, and LNU01332342. 

Sources: Economic Policy Institute analysis of U.S. Bureau of Labor Statistics Current Population Survey (Household Survey), Labor Force Participation Rate for Women by Race and Ethnicity series LNU01300005, LNU01300008, LNU01300011, and LNU01332342. Accessible via Series Report Data Retrieval Tool and https://download.bls.gov/pub/time.series/ln/ . Accessed February 2022.

The labor force participation rate is an important indicator of economic well-being. It shows the number of people in the labor force—people who are employed or unemployed but looking for work—as a share of the number of civilian, noninstitutionalized people ages 16 and older. Across racial and ethnic groups, women’s labor force participation rose significantly from the 1970s through the 1990s. After leveling off during most of the first decade of the 2000s, labor force participation by women declined during or after the Great Recession of 2007–2009. And it declined again during the 2020 COVID-19 pandemic and recession as the burden of job losses and care responsibilities disproportionately impacted women. In 2021, Black women had the highest labor force participation rate at 58.8%, followed by Asian (56.8%), Hispanic (55.8%), and white women (55.4%). While Latinas have historically had the lowest rates of labor force participation among women, their labor force participation rate had been climbing steadily in the four years leading up to the COVID-19 pandemic. Historically, Black women have had stronger labor force attachments than other groups of women. This is part of the legacy of being forced to work as enslaved people, but the necessity of work has continued for Black women who are often co-breadwinners if not sole earners for their households.

Hispanic men have maintained the highest labor force participation rate even as labor force participation of all men has declined since the 1970s : Men’s labor force participation rate by race and ethnicity, 1973–2021

Notes: Race/ethnicity categories are not mutually exclusive; white, Black, and Asian data do not exclude Hispanic workers of each race. Shaded areas denote recessions. 

Notes: Race/ethnicity categories are not mutually exclusive; white, Black, and Asian data do not exclude Hispanic workers of each race. Shaded areas denote recessions. The labor force participation rate shows the number of people in the labor force—people who are employed or unemployed but looking for work—as a share of the number of civilian, noninstitutionalized people ages 16 and older.

Sources: Economic Policy Institute analysis of U.S. Bureau of Labor Statistics Current Population Survey, Labor Force Participation Rate for Men by Race and Ethnicity data series LNU01300004, LNU01300007, LNU01300010, and LNU01332301.

Sources: Economic Policy Institute analysis of U.S. Bureau of Labor Statistics Current Population Survey (Household Survey), Labor Force Participation for Men by Race and Ethnicity data series LNU01300004, LNU01300007, LNU01300010, and LNU01332301. Accessible via Series Report Data Retrieval Tool and https://download.bls.gov/pub/time.series/ln/ . Accessed February 2022.

Across all racial and ethnic groups, men’s labor force participation rates have declined significantly since the 1970s, with the sharpest decline occurring during and since the Great Recession of 2007–2009. While this trend in part reflects an aging population with a growing share of retirees, researchers have suggested that labor force participation has fallen among prime-age men (ages 25–54) due to a rise in serious health conditions that are a barrier to work, the emerging opioid crisis, or technological changes that encourage younger men  (under age 30) to allocate less time to work and more time to leisure activities like playing video games. Unlike with Black women, who have the highest labor force participation rate among women, Black men in 2021 had the lowest labor force participation rate among men (63.5%). And unlike with Hispanic women, who have historically had the lowest labor force participation rates among women, Hispanic men have had the highest labor force participation rate, which reached 75.4% in 2021. The ranking of men’s labor force participation rates by race and ethnicity has remained constant over the last three decades.

For more on the likely reasons for declining male labor force participation see Alan Krueger, Where Have All the Workers Gone? An Inquiry into the Decline of the U.S. Labor Force Participation Rate , Brookings Papers on Economic Activity, September 2017; and Mark Aguiar et al., “Leisure Luxuries and the Labor Supply of Young Men,” National Bureau of Economic Research Working Paper 23552, June 2017.

Black unemployment is consistently higher than unemployment of all other racial and ethnic groups : Annual unemployment rate by race and ethnicity, 1979–2021

Notes:  Shaded areas denote recession s . Race and ethnicity categories are not mutually exclusive ; white, Black and Asian data do not exclude Hispanic workers of each race.    

Sources: Economic Policy Institute analysis of U.S. Bureau of Labor Statistics Current Population Survey, Annual Unemployed Rate by Race and Ethnicity data series LNU04000003, LNU04000006, LNU04000009, and LNU04032183. 

Sources: Economic Policy Institute analysis of U.S. Bureau of Labor Statistics Current Population Survey (Household Survey), Annual Unemployed Rate by Race and Ethnicity data series LNU04000003, LNU04000006, LNU04000009, and LNU04032183. Accessible via Series Report Data Retrieval Tool and https://download.bls.gov/pub/time.series/ln/ . Accessed February 2022.

Relative rates of unemployment by race and ethnicity have been remarkably consistent over time. Typically, the annual unemployment rates of Black and Hispanic workers are significantly higher than those of white workers. The difference between Asian and white unemployment rates is smaller, and the size of the gap fluctuates, as does which group has the lower unemployment rate. In 2021, this pattern held, with an unemployment rate of 8.6% for Black workers, followed by 6.8% for Hispanic workers, 5.0% for Asian workers, and 4.7% for white workers. One of the most enduring features of the U.S. labor market is the roughly 2-to-1 ratio of the Black and white unemployment rates.  

Higher education typically lowers a worker’s chances of being unemployed but does not eliminate racial and ethnic disparities in unemployment rates : Unemployment rate by race/ethnicity and educational attainment, 2019

Notes:  AAPI refers to Asian American and Pacific Islander. Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, AAPI non-Hispanic, and Hispanic any race).

Source: Economic Policy Institute analysis of Current Population Survey basic monthly microdata from EPI Microdata Extracts, Version 1.0.24 (2021); https://microdata.epi.org .

A breakdown of unemployment rates by race, ethnicity, and education level shows the limits of educational attainment as a factor in addressing inequitable economic outcomes. As the chart shows, racial and ethnic disparities in unemployment rates exist at every level of educational attainment. And Black workers have the highest rates of unemployment among all groups. In fact, even at historically low rates of unemployment in 2019, only the most highly educated Black workers approached anything near unemployment rate parity with their counterparts. The figure also shows that while education can contribute to better outcomes—unemployment rates are lower for all groups at higher levels of education—education alone does not necessarily create equal outcomes. Reading this chart alongside Chart 13 suggests that differences in the average unemployment rates of racial and ethnic groups can only be partially explained by relative differences in education, skill, experience or local labor market conditions—discrimination remains an undeniable factor.

Black and Hispanic workers earn lower wages and have smaller gender wage disparities than their white and Asian American and Pacific Islander counterparts : Median wages by race/ethnicity and gender, 2019

Notes: AAPI refers to Asian American and Pacific Islander. Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, AAPI non-Hispanic, and Hispanic any race). Wages are in 2019 dollars.

There are sharp differences in the wages earned by typical workers of different racial groups in the United States. Asian American and Pacific Islander (AAPI) and white workers are paid the highest wages at the median, while Black and Hispanic workers are paid significantly less. The gender differences are also greater among AAPI and white workers than among Black and Hispanic workers. While AAPI and white men far out-earn AAPI and white women, Black and Hispanic men and women have much more similar median wages.

Even after controlling for education and other factors known to affect earnings, women—particularly Black and Hispanic women—are paid far less than white men : Regression-adjusted hourly wage gaps for women relative to non-Hispanic white men, by race and ethnicity, 2019

Notes: The hourly wage gap is how much less women make than comparable non-Hispanic white men with the same level of education and experience and in the same geographic location) . AAPI refers to Asian American and Pacific Islander. Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, AAPI non-Hispanic, and Hispanic any race).

Notes: The hourly wage gap is how much less women make than comparable non-Hispanic white men with the same level of education and experience and in the same geographic location). AAPI refers to Asian American and Pacific Islander. Race/ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, AAPI non-Hispanic, and Hispanic any race). The regression-based gap is based on average wages and controls for gender, race and ethnicity, education, age, and geographic division. The log of the hourly wage is the dependent variable.

Source:  Economic Policy Institute analysis of Current Population Survey basic monthly microdata from EPI Microdata Extracts, Version 1.0.24 (2021), https://microdata.epi.org .

Women of all racial and ethnic groups in the U.S. have a significant pay penalty by virtue of their gender, even when we account for several factors that could reasonably influence a worker’s productivity or wage rate, including education, age (a measure of potential experience) and geographic area (a measure of local labor market conditions). Black, Hispanic and AAPI women face an additional pay penalty by virtue of their race or ethnicity. The chart depicts these wage gaps, presented as how much less women make than non-Hispanic white men. The fact that Black and Hispanic women earn about one-third less than white men on average when calculating regression-adjusted wage gaps mean, then, that the pay penalty is not a result of differences in formal education between those groups of women and white men. One partial explanation for these wage disparities is occupational segregation, by which women of color are more highly concentrated in occupations with low pay, even relative to their education level. However, women of all races and ethnicities also often earn less than men in the same occupation (not shown in the chart), an indication of potential pay discrimination.

For more on occupational segregation and on gender pay gaps by occupation, see Jessica Schieder and Elise Gould, Women’s Work” and the Gender Pay Gap: How Discrimination, Societal Norms, and Other Forces Affect Women’s Occupational Choices —and Their Pay , Economic Policy Institute, July 2016; Emily Carew and Valerie Wilson, “Latina Equal Pay Day: Latina Workers Remain Greatly Underpaid, Including in Front-Line Occupations ,” Working Economics Blog , Economic Policy Institute, October 20, 2021; Valerie Wilson, “Black Women Face a Persistent Pay Gap, Including in Essential Occupations During the Pandemic ,” Working Economics Blog , Economic Policy Institute, August 2, 2021.

Income, poverty, and wealth

Racial and ethnic disparities in median household income have been largely persistent across time : inflation-adjusted median household income (2020 dollars), by race and ethnicity, 1967–2020.

Note: A ll race categories are single race and do not distinguish Hispanic ethnicity from non-Hispanic ethnicity, except for white, which is exclusive of Hispanic ethnicity (i.e., non-Hispanic white alone, Black alone, and Asian alone). Hispanic can be of any race.  

Notes: All race categories are single race and do not distinguish Hispanic ethnicity from non-Hispanic ethnicity, except for white, which is exclusive of Hispanic ethnicity (i.e., non-Hispanic white alone, Black alone, and Asian alone). Hispanic can be of any race. Due to a redesign of the income questions in the Current Population Survey— Annual Social and Economic Supplement (CPS ASEC) in 2013 and an update to the CPS ASEC processing system in 2017, the U.S. Census Bureau reported two estimates of income in each of those years. The 2013 and 2017 income values in this graph are an average of the two estimates reported in each year.

Source: Economic Policy Institute analysis of U.S. Census Bureau Current Population Survey, Income and Poverty in the United States 2020 data, Table A-2.

Source: Economic Policy Institute analysis of U.S. Census Bureau, Current Population Survey–Annual Social and Economic Supplements 1968 to 2021. “Table A-2. Households by Total Money Income, Race, and Hispanic Origin of Householder: 1967 to 2020” (Excel table) from Income and Poverty in the United States: 2020 , September 2021. 

In the United States, households of different racial and ethnic backgrounds bring in significantly different amounts of income and have done so for decades. At the median, Black and Hispanic households earn the least on an annual basis, while Asian and white households earn the most. Significant gaps in employment opportunities (shown in Chart 13 ) and lower wage levels (shown in Chart 15 ) translate into lower incomes among Black and Latino households. Household income is also a function of the number of earners in a household. Though not shown here, past EPI research found that in the pre-pandemic economy, about a third of Black nonelderly households (where the head of household is age 18–64) had two or more earners, compared with nearly half of white and Hispanic nonelderly households. This racial disparity in the number of household earners is not just a function of how many working-age adults live in the household, or family structure, but is another measurable consequence of the persistent 2-to-1 ratio between the Black and white unemployment rates (shown in Chart 13 ). As income inequality in the United States has increased in general over the past 50 years, disparities between the least and most well-off groups have continued to persist and, in some cases, have grown.

For more on earners per household by race, see Elise Gould and Valerie Wilson, Black Workers Face Two of the Most Lethal Preexisting Conditions for Coronavirus—Racism and Economic Inequality , Economic Policy Institute, June 2020. For more on increasing income inequality, see Elise Gould, “ Decades of Rising Economic Inequality in the U.S. ,” testimony before the House of Representatives Ways and Means Committee, Washington, D.C., March 27, 2019.

Black and Hispanic households are more likely to have the lowest annual incomes—under $25,000 per year in 2020 : Share of households within given income range by race and ethnicity, 2020

Note:  All race categories are single race and do not distinguish Hispanic ethnicity from non-Hispanic ethnicity, except for white, which is exclusive of Hispanic ethnicity (i.e., non-Hispanic white alone, Black alone, and Asian alone). Hispanic can be of any race. 

Source:   Economic Policy Institute analysis of U.S. Census Bureau Current Population Survey, Income and Poverty in the United States 2020 data, Table A-2.

This chart extends beyond the data on median or midpoint of household income shown in Chart 17 to provide a more detailed look at where different groups fall across the entire household income distribution. In 2020, 29.7% of Black households and 20.4% of Hispanic households had annual incomes under $25,000, compared with just 15.6% of white households and 13.7% of Asian households. This $25,000 figure is well below the 2020 official poverty threshold for a family of two adults and two children ($26,246). In fact, the largest share of Black households were in this lowest income bracket, while other groups were more concentrated within the $50,000–$99,000 annual income bracket. Conversely, 19.9% of Asian households and 11.7% of white households had annual incomes at or above $200,000—the highest income category—compared with only about 5% of Black and Hispanic households.

Poverty threshold data can be found in the U.S. Census Bureau’s Poverty Thresholds: 2020 data tables, last revised October 8, 2021.

Persistently elevated Black and Hispanic child poverty rates have thwarted progress reducing overall child poverty in the U.S. : Child poverty rates, by race and ethnicity, 1974–2020

Notes:  All race categories are single race and do not distinguish Hispanic ethnicity from non-Hispanic ethnicity, except for white, which is exclusive of Hispanic ethnicity (i.e., non-Hispanic white alone, Black alone, and Asian alone). Hispanic can be of any race. 

Source: Economic Policy Institute analysis of U.S. Census Bureau Current Population Survey Historical Poverty Tables, Table 3.

Source: Economic Policy Institute analysis of U.S. Census Bureau Current Population Survey–Annual Social and Economic Supplements 1960 to 2021. “Table 3. Poverty Status of People, by Age, Race, and Hispanic Origin” (Excel table) from Historical Poverty Tables: People and Families–1959 to 2020 , last revised October 8, 2021.

A cruel and unfortunate reality of structural racism in the U.S. economy is that even in the “best” of economic times, Black and Hispanic children experience much higher rates of poverty than white children. In 2019—a year characterized by record low unemployment and the highest (inflation-adjusted) median household incomes in 20 years—26.4% of Black children and 20.9% of Hispanic children lived below the official poverty threshold, compared with just 8.3% of non-Hispanic white children and 7.3% of Asian children. While child poverty has fallen significantly for Black, Hispanic, and Asian American children over the past 40 years, Black and Hispanic child poverty rates remained over 20% in 2020. This large and persistent disparity in child poverty combined with the fact that Black and Hispanic children have become an increasing share of the under age 18 population over time (see Chart 1 and Chart 4 ) has resulted in very little change in the overall child poverty rate since 1974. Given the long-term effects of exposure to poverty in childhood, addressing these persistent disparities must play a role in our approach toward building equity and moving the needle on child poverty.

For more on the long-term effects of exposure to poverty in childhood, see Kerris Cooper and Kitty Stewart, “ Does Money Affect Children’s Outcomes? An Update ,” CASEpapers (203) , The London School of Economics and Political Science, July 2017; Randall Akee et al., “ Parents’ Incomes and Children’s Outcomes: A Quasi-Experiment ,” American Economic Journal: Applied Economics , January 2010.

Poverty rates are higher among Black and Hispanic working-age adults : Poverty rates for age 18–64, by race and ethnicity, 1974–2020

While poverty across the working-age population (ages 18 to 64) is lower than that for children (see Chart 19 ), disparities by race and ethnicity follow a similar trend, with Black and Hispanic Americans more likely to be impoverished than white and Asian Americans. Poverty is a measure of economic deprivation, and among working-age adults in particular, reflects disparities in unemployment, wages, and income. Life circumstances, such as severe disability and major illness—which can also limit earned income or quickly deplete any available savings—also contribute to poverty for this age group. The racially coded misrepresentation of poverty as some kind of moral or cultural pathology has hindered the political will needed to sustain and strengthen vital income supports that have proven effective in fighting poverty. 

For more on the misrepresentation of poverty as a cultural pathology see William “Sandy” Darity Jr., “Revisiting the Debate on Race and Culture: The New (Incorrect) Harvard/Washington Consensus .” Du Bois Review: Social Science Research on Race 8 , no. 2, 467–476. For more on the vital income supports that would lessen poverty see Asha Banerjee and Ben Zipperer, “ Social Insurance Programs Cushioned the Blow of the COVID-19 Pandemic in 2020 ,” Working Economics Blog , Economic Policy Institute, September 14, 2021.

There are large racial disparities in poverty at older ages (65 and older)—likely reflecting differences in retirement preparedness and/or lifetime income disparities : Poverty rates for people ages 65 and older, by race and ethnicity, 1974–2020

The poverty seen among older Americans in the chart is most likely the result of a lifetime of low earnings and a lack of retirement preparedness. While research shows that Social Security plays a critical role in keeping poverty rates among older Americans lower than they otherwise would have been (not depicted in the chart), older Black and Hispanic Americans still have relatively high poverty rates. Older Asian Americans are also more likely to live in poverty than older white Americans. Additionally, older Asian Americans have higher poverty rates than younger Asian Americans (see Chart 19 and Chart 20 ). This is likely due to a larger share of older Asian Americans having worked comparatively few years in the United States, or in jobs where they were unable to accumulate the necessary years for Social Security eligibility, leaving them less able to take advantage of work-based social safety net programs like Social Security.

For more on the causes of poverty among older Americans and the capacity of Social Security to lift older Americans—particularly women and people of color—out of poverty, see Kathleen Romig, Social Security Lifts More People Above the Poverty Line Than Any Other Program , Center on Budget and Policy priorities, April 2022. For more on the economic condition of the older Asian American population, see Victoria Tran, “ Asian American Seniors Are Often Left Out of the National Conversation on Poverty ,” Urban Wire (Urban Institute blog), May 31, 2017.

Racial wealth disparities are stark and persistent, reflecting a history of exploitation and exclusion : Median family net worth by race and ethnicity, selected years from 1989 to 2019

Source: Economic Policy Institute analysis of Survey of Consumer Finances data from the Federal Reserve Board.

Source: Economic Policy Institute analysis of Federal Reserve Board, “ Net Worth by Race or Ethnicity ” (online table) from the Survey of Consumer Finances, 1989–2019; Last updated November 4, 2021.

The chart shows sharp racial and ethnic disparities in net worth observed across time in the United States. Though not shown in the chart, these disparities reflect the differences in lived economic experiences between white, Black, Hispanic, and other families. Wealth can be accumulated both within and across generations, such that a high net worth can result from the benefit of prime earning years with 1) relatively few employment disruptions, 2) access to wealth-building savings and investment vehicles, 3) relatively few serious negative health shocks, and 4) well-timed wealth transfers from parents and grandparents.  The typical white household has many times the wealth of the typical Black or Hispanic household due to 1) their privileged position in the American labor market, which grants them access to more consistent and higher-quality employment opportunities, 2) their more limited exposure to the health risks brought on by poorer living conditions and discrimination, and 3) their history of access to wealth-building opportunities from which other groups have been excluded.

For more on the systemic barriers to Black wealth building see Natasha Hicks, Fenaba Addo, Anne Price, and William Darity Jr., Still Running Up the Down Escalator: How Narratives Shape Our Understanding of Racial Wealth Inequality , The Samuel Dubois Cook Center on Social Equity, 2021. For more on the barriers to Hispanic wealth building see Dedrick Asante-Muhammad, Alexandra Perez, and Jamie Buell, “ Racial Wealth Snapshot: Latino Americans .” National Community Reinvestment Coalition, September 17, 2021.

Black–white disparities in life expectancy reflect the cumulative disadvantage of living as a minority in the United States : Women’s and men’s life expectancy at birth, by race and ethnicity, 2018

Source: Economic Policy Institute analysis of data from the National Center for Health Statistics Health, United States, 2019—Data Finder, Table 004.

Source: Economic Policy Institute analysis of National Center for Health Statistics (Centers for Disease Control and Prevention), “ Table 004. Life Expectancy at Birth, at Age 65, and at Age 75, by Sex, Race, and Hispanic Origin: United States, Selected Years 1900–2018 ” from Health, United States, 2019 —Data Finder ; page last reviewed March 2, 2021.

The longer life expectancy for white Americans than Black Americans shown in the chart has been documented as far back as statistics on life expectancy have been recorded (at least 200 years) and this disparity has existed in the U.S. for generations. In 2018, white men were expected to live an average of nearly five years longer than Black men and white women were expected to outlive Black women by about three years. Hispanic Americans, as a group, have higher life expectancy rates than both Black and white Americans. In 2018, Hispanic men were expected to outlive white men by nearly three years but were expected to live an average of almost eight years longer than Black men. Hispanic women were expected to outlive their Black and white counterparts by six and three years, respectively. Women’s life expectancy rates exceed those of men both within and across the racial and ethnic groups shown in the chart.

Though not shown in the chart, throughout the first half of the 20th century life expectancy at birth for Black Americans dramatically improved as infant mortality rates fell. The latter half of the 20th century saw comparatively slower gains in life expectancy for Black Americans and a slower convergence. In recent years life expectancy gains have disproportionately gone to people in the highest income categories, who are disproportionately white (see Chart 18 ). However, the opioid crisis and its attendant “deaths of despair” measurably lowered white life expectancy rates. The life expectancy advantage of Hispanic Americans has been shown to diminish with subsequent generations of U.S.-born Latinos. This suggests that there may be something uniquely deleterious about living as a minority in the United States.

For more on gaps in life expectancy, effects of the opioid crisis, and Hispanic life expectancy see Congressional Research Service, The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age , CRS Report R44846, July 6, 2021; Helena Hansen and Julie Netherland, “ Is the Prescription Opioid Epidemic a White Problem? ” American Journal of Public Health 106 , no. 12 (December 2016), 2127–2129 (doi: 10.2105/AJPH.2016.303483); Osea Giuntella, “ The Hispanic Health Paradox: New Evidence from Longitudinal Data on Second and Third-Generation Birth Outcomes ,” SSM – Population Health , vol. 2 (December 2016), 84–89 (doi.org/10.1016/j.ssmph.2016.02.013).

The Affordable Care Act significantly reduced uninsured rates across racial and ethnic groups, but disparities remain : Uninsured rates by race and ethnicity, 2010–2019

Notes: AIAN refers to American Indian and Alaska Native. Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, Asian non-Hispanic, AIAN non-Hispanic, and Hispanic any race).

Source:  Economic Policy Institute analysis of U.S. Census Bureau American Community Survey, Health Insurance Coverage in the United States 2019 Table HIC-9_ACS.

Source:  Economic Policy Institute analysis of U.S. Census Bureau, American Community Surveys 2008 to 2019. “Table HIC-9_ACS. Population Without Health Insurance Coverage by Race and Hispanic Origin: 2008 to 2019” in Health Insurance Coverage in the United States: 2019 , September 15, 2020.

The Affordable Care Act (the ACA or “Obamacare”) expanded health insurance coverage to middle- and low-income Americans, which disproportionately benefited those groups with the least access—Hispanic Americans and American Indians and Alaska Natives (AIAN), and to a lesser extent Black Americans. Despite the marked improvement in health insurance coverage rates since the implementation of ACA, disparities between groups remain stark, with Hispanic and AIAN uninsured rates nearly double Black rates, and approaching three times as high as the uninsured rates of white and Asian Americans. Early diagnosis and treatment are essential to minimizing the severity of chronic illnesses, and regular health care is important for promoting better overall health. The lack of health insurance often results in a choice to delay receiving health care until one’s condition is critical, contributing to racial disparities in health outcomes and life expectancy.

For more on how the ACA expanded health coverage, particularly to certain groups, see Samantha Artiga, Latoya Hill, Kendal Orgera, and Anthony Damico. “ Health Coverage by Race and Ethnicity, 2010–2019 ,” Kaiser Family Foundation, July 16, 2021; Jesse Cross-Call, Medicaid Expansion Has Helped Narrow Racial Disparities in Health Coverage and Access to Care , Center on Budget and Policy Priorities, October 2020.

Black mothers are far more likely to die from pregnancy-related causes than are white and Hispanic mothers : Pregnancy-related deaths per 100,000 live births by race and ethnicity, 2019

Source: Economic Policy Institute analysis of National Center for Health Statistics  Maternal Mortality Rates, 2019 Table 1.

Source: Economic Policy Institute analysis of Donna L. Hoyert, Maternal Mortality Rates in the United States, 2019 , “Table 1. Number of Maternal Deaths and Maternal Mortality Rates, by Race and Hispanic Origin and Age: United States, 2018 and 2019,” National Center for Health Statistics (Centers for Disease Control and Prevention), March 2021. DOI: https://doi.org/10.15620/cdc:103855 .

Maternal mortality rates are a stark indicator of racial disparities in public health in the United States. Black women are over twice as likely to die from a pregnancy-related cause as white women, and three times as likely as Hispanic women. Although not shown in the chart, these racial disparities persist regardless of a woman’s social or economic status. Health status and differential access to quality prenatal care play a major role in maintaining these disparities, as does structural racism more generally. To adequately address these disparities in maternal health outcomes, we must confront racism and bias in the U.S. health care system and the implications for how health care providers and personnel communicate with and treat patients.

For more on the causes and solutions to Black maternal mortality, see “ Working Together to Reduce Black Maternal Mortality ,” Centers for Disease Control and Prevention, April 6, 2022.

Disparities in COVID-19 hospitalization rates follow familiar racial patterns : Cumulative rate of COVID-19-associated hospitalizations per 100,000, all and by race and ethnicity, March 2020–January 2022

Note: AAPI refers to Asian American and Pacific Islander. AIAN refers to American Indian and Alaskan Native. Race and ethnicity categories are mutually exclusive (i.e., white non-Hispanic, Black non-Hispanic, AAPI non-Hispanic, AIAN non-Hispanic, and Hispanic any race).

Source: Economic Policy Institute analysis of “ Rates of COVID-19-Associated Hospitalization ” data from the Center for Disease Control and Prevention COVID-NET, accessed February 2022.

While COVID-19 has affected populations across the world, in the United States the burden of the disease has not been distributed equally. When examining lab-confirmed COVID-19 hospitalization rates (per 100,000) since the start of the pandemic in March 2020, American Indians and Alaska Natives, Black Americans, and Hispanic Americans are and have been the worst off since its earliest months, while white and Asian Americans and Pacific Islanders have experienced relatively less severe outcomes. The known severity of COVID-19 hospitalization suggests that these disparities themselves will and likely are already having economic consequences, from short-term loss of the ability to work, to long-term labor market disruptions from the need to care for a close relative affected by COVID-19 or the effects of “long-COVID.”

See related work on Income and wages | Program on Race, Ethnicity and the Economy (PREE) | Health | Poverty | Wealth | Children | Unemployment | Labor force participation | Black Americans | Latinx Americans | Asian Americans | American Indians | Whites | Discrimination

Advancing anti-racist economic research and policy : Perspectives and resources on race, ethnicity, and the economy

• Guiding principles for anti-racist research, the ‘bodycam’ for racial economic injustice
• The myth of race-neutral policy
• Race and ethnicity in empirical analysis : How should we interpret the race variable?
• Stratification economics : A moral policy approach for addressing persistent group-based disparities
• Serving, organizing, and empowering communities of color : Best practices for aligning research, advocacy, and activism
• Asian Americans and the anti-racist equity agenda : Contradictions and common ground
• Multidimensional identities of the Hispanic population in the United States
• The power of self-determination in building sustainable economies in Indian Country
• Racial and ethnic disparities in the United States : An interactive chartbook

See related work on Income and wages , Program on Race, Ethnicity and the Economy (PREE) , Health , Poverty , Wealth , Children , Unemployment , Labor force participation , Black Americans , Latinx Americans , Asian Americans , American Indians , Whites , and Discrimination

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Causes and Consequences of Income Inequality – An Overview

Rising income inequality is one of the greatest challenges facing advanced economies today. Income inequality is multifaceted and is not the inevitable outcome of irresistible structural forces such as globalisation or technological development. Instead, this review shows that inequality has largely been driven by a multitude of political choices. The embrace of neoliberalism since the 1980s has provided the key catalyst for political and policy changes in the realms of union regulation, executive pay, the welfare state and tax progressivity, which have been the key drivers of inequality. These preventable causes have led to demonstrable harmful outcomes that are not explicable solely by material deprivation. This review also shows that inequality has been linked on the economic front with reduced growth, investment and innovation, and on the social front with reduced health and social mobility, and greater violent crime.

1 Introduction

Income inequality has recently come to be viewed as one of the greatest challenges facing the world today. In recent years, the topic has dominated the agenda of the World Economic Forum (WEF), where the world’s top political and business leaders attend. Their global risks report, drawn from over 700 experts in attendance, pronounced inequality to be the greatest threat to the world economy in 2017 ( Elliott 2017 ). Likewise, the past decade has seen leading global figures such as former American President Barack Obama, Pope Francis, Chinese President Xi Jinping, and the former head of the International Monetary Fund (IMF), Christine Lagarde, all undertake speeches on the gravity of income inequality and the need to address its rise. This is because, as this research note shows, income inequality engenders harmful consequences that are not explicable solely by material deprivation.

The general dynamics of income inequality include a tendency to rise slowly and fluctuate over time. For instance, Japan had one of the highest rates in the world prior to the Second World War and the United States (US) one of the lowest, which has since completely reversed for both. The United Kingdom (UK) was also the second most equitable large European country in the 1970s but is now the most inequitable ( Dorling 2018 : 27–28).

High rates of inequality are rarely sustained for long periods because they tend to lead to or become punctuated by man-made disasters that lead to a levelling out. Scheidel (2017) posits that there in fact exists a violent ‘Four Horseman of Leveling’ (mass mobilisation warfare, transformation revolutions, state collapse, and lethal pandemics) for inequality, which have at times dramatically reduced inequalities because they can lead to the alteration of existing power structures or wipe out the wealth of elites and redistribute their resources. For instance, the pronounced shocks of the two world wars led to the ‘Great Compression’ of income throughout the West in the post-war years. There is already some evidence that the current global pandemic caused by the novel Coronavirus, has led to greater aversion to income inequality ( Asaria, Costa-Font, and Cowell 2021 ; Wiwad et al. 2021 ).

Thus, greater aversion to inequality has been able to reduce inequality in the past, this is because, as this review also shows, income inequality does not result exclusively from efficient market forces but arises out of a set of rules that is shaped by those with political power. Inequality’s rise is not inevitable, nor beyond the control of governments and policymakers, as they can affect distributional outcomes and inequality through public policy.

It is the purpose of this review to outline the causes and consequences of income inequality. The paper begins with an analysis of the key structural and institutional determinants of inequality, followed by an examination into the harmful outcomes of inequality. It then concludes with a discussion of what policymakers can do to arrest the rise of inequality.

2 Causes of Income Inequality

Broadly speaking, explanations for the increase in income inequality have largely been classified as either structural or institutional. Historically, economists emphasised structural causes of increasing income inequality, with globalisation and technological change at the forefront. However, in recent years opinion has shifted to emphasise more institutional political factors to do with the adoption of neoliberal reforms such as privatisation, deregulation and tax and welfare reductions since the early 1980s. They were first embraced and most heavily championed by the UK and US, spreading globally later, and which provide the crucial catalysts of rising income inequality ( Atkinson 2015 ; Brown 2017 ; Piketty 2020 ; Stiglitz 2013 ). I discuss each of these key factors in turn.

2.1 Globalisation

One of the earliest, and most prominent explanations for the rise of income inequality emphasised the role of globalisation ( Borjas, Freeman, and Katz 1992 ; Revenga 1992 ). Globalisation has led to the offshoring of many goods and services that used to be produced or completed domestically in the West, which has created downward pressures on the wages of lower skilled workers. According to the ‘market forces hypothesis,’ increasing inequality is a response to the rising demand for skills at the top, in which the spread of globalisation and technological progress have been facilitated through reduced barriers to trade and movement.

Proponents of globalisation as the leading cause of inequality have argued that globalisation has constrained domestic state choices and left governments collectively powerless to address inequality. Detractors admit that globalisation has indeed had deep structural effects on Western economies but its impact on the degree of agency available to domestic governments has been mediated by individual policy choices ( Thomas 2016 : 346). A key problem with attributing the cause of inequality to globalisation, is that the extent of the inequality increase has varied considerably across countries, even though they have all been exposed to the same effects of globalisation. The US also has the highest inequality amongst rich countries, but it is less reliant on international trade than most other developed countries ( Brown 2017 : 56). Moreover, a recent meta-analysis by Heimberger (2020) found that globalisation has a “small-to-moderate” inequality-increasing effect, with financial globalisation displaying the largest impact.

2.2 Technology

A related explanation for inequality draws attention to the impact of technology specifically. The advent of the digital age has placed a higher premium on the skills needed for non-routine work and reduced the value placed on lower skilled routine work, as it has enabled machines to replace jobs that could be routinised. This skill-biased technological change (SBTC) has led to major changes in the organisation of work, as many full-time permanent jobs with benefits have given way to part-time flexible work without benefits, that are often centred around the completion of short ‘gigs’ such as a car journey or food delivery. For instance, the Organisation for Economic Co-operation and Development (OECD) estimated in 2015 that since the 1990s, roughly 60% of all job creation has been in the form of non-standard work due to technological changes and that those employed in such jobs are more likely to be poor ( Brown 2017 : 60).

Relatedly, a prevailing doctrine in economics is ‘marginal productivity theory,’ which holds that people with greater productivity levels will earn higher incomes. This is due to the belief that a person’s productivity is equated to their societal contribution ( Stiglitz 2013 : 37). Since technology is a leading determinant in the productivity of different skills and SBTC has led to increased productivity, it has also become a justification for inequality. However, it is very difficult to separate any one person’s contribution to society from that of others, as even the most successful businessperson owes their success to the rule of law, good infrastructure, and a state educated workforce ( Stiglitz 2013 : 97–98).

Further criticisms of the SBTC explanation, are that there was still substantial SBTC when inequality first fell dramatically and then stabilised in the period from 1930 to 1980, and it has failed to explain the perpetuation of both the gender and racial wage gap, “or the dramatic rise in education-related wage gaps for younger versus older workers” ( Brown 2017 : 67). Although it is difficult to decouple globalisation and technology, as they each have compounding tendencies, it is most likely that globalisation and technology are important explanatory factors for inequality, but predominantly facilitate and underlie the following more determinant institutional factors that happen to be already present, such as reduced tax progressivity, rising executive pay, and union decline. It is to these factors that I now turn.

2.3 Tax Policy

Taxes overwhelmingly comprise the primary source of revenue that governments can use for redistribution, which is fundamental to alleviating income inequality. Redistribution is defended on economic grounds because the marginal utility of money declines as income rises, meaning that the benefit derived from extra income is much higher for the poor than the rich. However, since the late 1970s, a major rethinking surrounding redistributive policy occurred. This precipitated ‘trickle-down economics’ theory achieving prominence amongst American and British policymakers, whereby the benefits from tax cuts on the wealthy would trickle-down to everyone. Subsequently, expert opinion has determined that tax cuts do not actually spur economic growth ( CBPP 2017 ).

Personal income tax progressivity has declined sharply in the West, as the average top income tax rate for OECD members fell from 62% in 1981 to 35% in 2015 ( IMF 2017 : 11). However, the decline has been most pronounced in the UK and the US, which had top rates of around 90% in the 1960s and 1970s. Corporate tax rates have also plummeted by roughly one half across the OECD since 1980 ( Shaxson 2015 : 4). Recent International Monetary Fund (IMF) research found that between 1985 and 1995, redistribution through the tax system had offset 60% of the increase in market inequality but has since failed to respond to the continuing increase in inequality ( IMF 2017 ). Moreover, in a sample of 18 OECD countries encompassing 50 years, Hope and Limberg (2020) found that tax reforms even significantly increased pre-tax income inequality, while having no significant effect on economic growth.

This decline in tax progressivity has been a leading cause of rising income inequality, which has been compounded by the growing problem of tax avoidance. A complex global web of shell corporations has been constructed by international brokers in offshore tax havens that is able to keep wealth hidden from tax collectors. The total hidden amount in tax havens is estimated to be $7.6 trillion US dollars and rising, or roughly 8% of total global household wealth ( Zucman 2015 : 36). Recent research has revealed that tax havens are overwhelmingly used by the immensely rich ( Alstadsæter, Johannesen, and Zucman 2019 ), thus taxing this wealth would substantially reduce income inequality and increase revenue available for redistribution. The massive reduction in income tax progressivity in the Anglo world, after it had been amongst its leaders in the post-war years, also “probably explains much of the increase in the very highest earned incomes” since 1980 ( Piketty 2014 : 495–496).

2.4 Executive Pay

The enormous rising pay of executives since the 1980s, has also fuelled income inequality and more specifically the gap between executives and their employees. For example, the gap between Chief Executive Officers (CEO) and their workers at the 500 leading US companies in 2016, was 335 times, which is nearly 10 times larger than in 1980. It is a similar story in the UK, with a pay ratio of 131 for large British firms, which has also risen markedly since 1980 ( Dorling 2017 ).

Piketty (2014 : 335) posits that the dramatic reduction in top income tax has had an amplifying effect on top executives pay since it provides them with much greater incentive to seek larger remuneration, as far less is then taken in tax. It is difficult to objectively measure an individual’s contribution to a company and with the onset of trickle-down economics and accompanying business-friendly climate since the 1980s, top executives have found it relatively easy to convince boards of their monetary worth ( Gabaix and Landier 2008 ).

The rise in executive pay in both the UK and US, is far larger than the rest of the OECD. This may partially be explained by the English-speaking ‘superstar’ theory, whereby the global market demand for top CEOs is much higher for native English speakers due to English being the prime language of the global economy ( Deaton 2013 : 210). Saez and Veall (2005) provide support for the theory in a study of the top 1% of earners from the Canadian province of Quebec, which showed that English speakers were able to increase their income share over twice as much as their French-speaking counterparts from 1980 to 2000. This upsurge of income at the top of the labour market has been accompanied by stagnation or diminishing returns for the middle and lower parts of the labour market, which has been affected by the dramatic decline of union influence throughout the West.

2.5 Union Decline

Trade unions have typically been viewed as an important force for moderating income inequality. They “contribute to wage compression by restricting wage decline among low-wage earners” and restrain wage surges among high-wage earners ( Checchi and Visser 2009 : 249). The mere presence of unions can also drive up the wages of non-union employees in similar industries, as employers tend to give in to wage demands to keep unions out. Union density has also been proven to be strongly associated with higher redistribution both directly and indirectly, through its influence on left party governments ( Haddow 2013 : 403).

There had broadly existed a ‘social contract’ between labour and business, whereby collective bargaining establishes a wage structure in many industries. However, this contract was abandoned by corporate America in the mid-1970s when large-scale corporate donations influenced policymakers to oppose pro-union reform of labour law, leading to political defeats for unions ( Hacker and Pierson 2010 : 58–59). The crackdown of strikes culminating in the momentous Air Traffic Controllers’ strike (1981) in the US and coal miner’s strike (1984–85) in the UK, caused labour to become de-politicised, which was self-reinforcing, because as their political power dispersed, policymakers had fewer incentives to protect or strengthen union regulations ( Rosenfeld and Western 2011 ). Consequently, US union density has plummeted from around a third of the workforce in 1960, down to 11.9% last decade, with the steepest decline occurring in the 1980s ( Stiglitz 2013 : 81).

Although the decline in union density is not as steep cross-nationally, the pattern is still similar. Baccaro and Howell (2011 : 529) found that on average the unionisation rate decreased by 0.39% a year since 1974 for the 15 OECD members they surveyed. Increasingly, the decline in the fortunes of labour is being linked with the increase in inequality and the sharpest increases in income inequality have occurred in the two countries with the largest falls in union density – the UK and US. Recent studies have found that the weakening of organised unions accounts for between a third and a fifth of the total rise in income inequality in the US ( Rosenfeld and Western 2011 ), and nearly one half of the increase in both the Gini rate and the top 10%’s income share amongst OECD members ( Jaumotte and Buitron 2015 ).

To illustrate the changing relationship between inequality and unionisation, Figure 1 displays a local polynomial smoother scatter plot of union density by income inequality, for 23 OECD countries, 1980–2018. They are negatively correlated, as countries with higher union density have much lower levels of income inequality. Figure 2 further plots the time trends of both. Income inequality (as measured via the Gini coefficient) has climbed over 0.02 percentage points on average in these countries since 1980, which is roughly a one-tenth rise. Whereas union density has fallen on average from 44 to 35 percentage points, which is over one-fifth.

Gini coefficient by union density, OECD 1980–2018. Data on Gini coefficients from SWIID ( Solt 2020 ); data on union density from ICTWSS Database ( Visser 2019 ).

Gini coefficient by union density, 1980–2018. Data on Gini coefficients from SWIID ( Solt 2020 ); data on union density from ICTWSS Database ( Visser 2019 ).

In sum, income inequality is multifaceted and is not the inevitable outcome of irresistible structural forces such as globalisation or technological development. Instead, it has largely been driven by a multitude of political choices. Tridico (2018) finds that the increases in inequality from 1990 to 2013 in 26 OECD countries, was largely owing to increased financialisation, deepening labour flexibility, the weakening of trade unions and welfare state retrenchment. While Huber, Huo, and Stephens (2019) recently reveals that top income shares are unrelated to economic growth and knowledge-intensive production but is closely related to political and policy changes surrounding union density, government partisanship, top income tax rates, and educational investment. Lastly, Hager’s (2020) recent meta-analysis concludes that the “empirical record consistently shows that government policy plays a pivotal role” in shaping income inequality.

These preventable causes that have given rise to inequality have created socio-economic challenges, due to the demonstrably negative outcomes that inequality engenders. What follows is a detailed analysis of the significant mechanisms that income inequality induces, which lead to harmful outcomes.

3 Consequences of Income Inequality

Escalating income inequality has been linked with numerous negative outcomes. On the economic front, negative results transpire beyond the obvious poverty and material deprivation that is often associated with low incomes. Income inequality has also been shown to reduce growth, innovation, and investment. On the social front, Wilkinson and Pickett’s ground-breaking The Spirit Level ( 2009 ), found that societies that are more unequal have worse social outcomes on average than more egalitarian societies. They summarised an extensive body of research from the previous 30 years to create an Index of Health and Social Problems, which revealed a host of different health and social problems (measuring life expectancy, infant mortality, obesity, trust, imprisonment, homicide, drug abuse, mental health, social mobility, childhood education, and teenage pregnancy) as being positively correlated with the level of income inequality across rich nations and across states within the US. Figure 3 displays the cross-national findings via a sample of 21 OECD countries.

Index of health and social problems by Gini coefficient. Data on health and social problems index from The Equality Trust (2018) ; data on Gini coefficients from OECD (2020) .

3.1 Economic

Income inequality is predominantly an economic subject. Therefore, it is understandable that it can engender pervasive economic outcomes. Foremost economically speaking, it has been linked with reduced growth, investment and innovation. Leading international organisations such as the IMF, World Bank and OECD, pushed for neoliberal reforms beginning in the 1980s, although they have recently started to substantially temper their views due to their own research into inequality. A 2016 study by IMF economists, noted that neoliberal policies have delivered benefits through the expansion of global trade and transfers of technology, but the resulting increases in inequality “itself undercut growth, the very thing that the neo-liberal agenda is intent on boosting” ( Ostry, Loungani, and Furceri 2016 : 41). Cingano’s (2014) OECD cross-national study, found that once a country’s income inequality reaches a certain level it reduces growth. The growth rate in these countries would have been one-fifth higher had income inequality not increased, while the greater equality of the other countries included in the study helped to increase their growth rates.

Consumer spending is good for economic growth but rising income inequality shifts more money to the top of the income distribution, where higher income individuals have a much smaller propensity to consume than lower-income individuals. The wealthy save roughly 15–25% of their income, whereas low income individuals spend their entire income on consumer goods and services ( Stiglitz 2013 : 106). Therefore, greater inequality reduces demand in an economy and is a major contributor to the ‘secular stagnation’ (persistent insufficient demand relative to aggregate private savings) that the largest Western economies have been experiencing since the financial crisis. Inequality also increases the level of debt, as lower-income individuals borrow more to maintain their standard of living, especially in a climate of low interest rates. Combined with deregulation, greater debt increases instability and “was a major contributor to, if not the underlying cause of, the 2008 financial crash” ( Brown 2017 : 35–36).

Another key economic effect of income inequality is that it leads to reduced welfare spending and public investment. Since a greater share of the income distribution is earned by the very wealthy, governments have less income available to fund education, public amenities, and other services that the poor rely heavily on. This creates social separation, whereby the wealthy opt out in publicly funding services because their private equivalents are of better quality. This causes a cycle of increasing income inequality that is likely to eventually lead to a situation of “private affluence and public squalor” ( Marmot 2015 : 39).

Lastly, it has been proven that economic instability is a by-product of increasing inequality, which harms innovation. Both countries and American states with the highest inequality have been found to be the least innovative in terms of the amount of Intellectual Property (IP) patents they produce ( Dorling 2018 : 129–130). Although income inequality is predominantly an economic subject, its effects are so pervasive that it has also been linked to a host of negative health and societal outcomes.

Wilkinson and Pickett found key associations between income inequality for both physical and mental health. For example, they discovered that on average the life expectancy gap is more than four years between the least and most equitable richest nations (Japan and the US). Since their revelations, overall life expectancy has been reported to be declining in the US ( Case and Deaton 2020 ). It has held or declined every year since 2014, which has led to a cumulative drop of 1.13 years ( Andrasfay and Goldman 2021 ). Marmot (2015) has provided evidence that there exists a social gradient whereby differences in affluence translate into increasing health inequalities, which can be shown even down to the neighbourhood level, as more affluent areas have higher life expectancy on average than deprived areas, and a clear gradient appears where life expectancy increases in line with affluence.

Moreover, Marmot’s famous Whitehall studies, which are large-scale longitudinal studies of Whitehall employees of UK central government, found an inverse-relationship between salary grade and ill-health, whereby low-grade workers were four times as likely as high-grade workers to suffer from ill-health ( 2015 : 11). Health steadily improves with rank and the correlation is little affected by lifestyle controls such as tobacco and alcohol usage. However, the leading factor that seems to make the most difference in ill-health is job stress and a person’s sense of control over their work, including the variety of work and the use and development of skills ( Schrecker and Bambra 2015 : 54–55).

‘Psychosocial stresses,’ like those appearing in the Whitehall studies, have been found to be more common and frequent amongst low-income individuals, beyond just the workplace ( Jensen and van Kersbergen 2017 : 24). Wilkinson and Pickett (2019) posit that greater income inequality engenders low self-esteem, chronic stress and depression, stemming from status anxiety. This occurs because more importance is placed on where people fit in a hierarchy with greater inequality. For evidence, they outline a clear relationship of a much higher percentage of the population suffering from mental illness in more unequal countries. Meticulous research has shown that huge inequalities in income result in the poor having feelings of shame across a range of environments. Furthermore, Dickerson and Kemeny’s (2004) meta-analysis of 208 studies found that stress-hormone (cortisol) levels were raised particularly “when people felt that others were making negative judgements about them” ( Rowlingson 2011 : 24).

These effects on both mental and physical health can be best illustrated via the ‘absolute income’ and ‘relative income’ hypotheses ( Daly, Boyce, and Wood 2015 ). The relative income hypothesis posits that when an individual’s income is held constant, the relative income of others can affect a person’s health depending on how they view themselves in comparison to those above them ( Wilkinson 1996 ). This pattern also holds when income inequality increases at the societal level, because if such changes lead to increases in chronic stress, it can increase ill-health nationally. Whereas the absolute income hypothesis predicts that health gains from an extra unit of income diminish as an individual’s income rises ( Kawachi, Adler, and Dow 2010 ). A mean preserving transfer from a richer to poorer individual raises the health of the poorer individual more than it lowers the health of the richer person. This occurs because there is an optimum threshold of income required to maintain good health. Thus, when holding total income constant, a more equal distribution of income should improve overall population health. This pattern also applies at the country-wide level, as the “effect of income on health appears substantial as countries move from about $15,000 to 25,000 US dollars per capita,” but appears non-existent beyond that point ( Leigh, Jencks, and Smeeding 2009 : 386–387).

Income inequality also impacts happiness and wellbeing, as the happiest nations are routinely the ones with low inequality, such as Denmark and Norway. Happiness has been proven to be affected by the law of diminishing returns in economics. It states that higher income incrementally improves happiness but only up to a certain point, as any individual income earned beyond roughly $70,000 US dollars, does not bring about greater happiness ( Deaton 2013 : 53). The negative physical and mental health outcomes that income inequality provoke, also impact key societal areas such as crime, social mobility and education.

Rates of violent crime are lower in more equal countries ( Hsieh and Pugh 1993 ; Whitworth 2012 ). This is largely because more equal countries have less poverty, which leads to less people being desperate about their situation, as lower-income individuals have been shown to commit more crime. Relatedly, according to strain theory, more unequal societies place higher social value in achieving economic success, while providing lower means to achieve it ( Merton 1938 ). This generates strain, which may lead more individuals to pursue crime as a means of attaining financial success. At the opposite end of the income spectrum, the wealthy in more equal countries are also less likely to exploit others and commit fraud or exhibit other anti-social behaviour, partly because they feel less of a need to cut corners to get ahead, or to make money ( Dorling 2017 : 152–153). Homicides also tend to rise with inequality. Daly (2016) reveals that inequality predicts homicide rates better than any other variable and accounts for around half of the variance in murder rates between countries and American states. Roughly 90% of American homicides are committed by men, and since the majority of homicides occur over status, inequality raises the stakes of disputes over status amongst men.

Studies have also shown that there is a marked negative relationship between income inequality and social mobility. Utilising Intergenerational Earnings Elasticity data from Blanden, Gregg, and Machin (2005) , Wilkinson and Pickett (2009) first outline this relationship cross-nationally for eight OECD countries. Corak (2013) famously expanded on this with his ‘Great Gatsby Curve’ for 22 countries using the same measure. I update and expand on these studies in Figure 4 to include all 36 OECD members, utilising the WEF’s inaugural 2020 Social Mobility Index. It clearly shows that social mobility is much lower on average in more unequal countries across the entire OECD.

Index of social mobility by Gini coefficient. Data on social mobility index from World Economic Forum (2020) ; data on Gini coefficients from SWIID ( Solt 2020 ).

A primary driver for the negative relationship between inequality and social mobility, derives from the availability of resources during early childhood. Life chances have been shown to be determined in early childhood to a disproportionately large extent ( Jensen and van Kersbergen 2017 : 29). Children in more equitable regions such as Scandinavia, have better access to resources, as they go to similar schools, receive similar educational opportunities, and have access to a wider range of career options. Whereas in the UK and US, a greater number of jobs at the top are closed off to those at the bottom and affluent parents are far more likely to send their children to private schools and fund other ‘child enrichment’ goods and services ( Dorling 2017 : 26). Therefore, as income inequality rises, there is a greater disparity in the resources that rich and poor parents can invest in their children’s education, which has been shown to substantially affect “cognitive development and school achievement” ( Brown 2017 : 33–34).

4 Conclusions

The causes and consequences of income inequality are multifaceted. Income inequality is not the inevitable outcome of irresistible structural forces such as globalisation or technological development. Instead, it has largely been driven by a multitude of institutional political choices. These preventable causes that have given rise to inequality have created socio-economic challenges, due to the demonstrably negative outcomes that inequality engenders.

The neoliberal political consensus poses challenges for policymakers to arrest the rise of income inequality. However, there are many proven solutions that policymakers can enact if the appropriate will can be summoned. Restoring higher levels of labour protections would aid in reversing the declining trend of labour wage share. Similarly, government promotion and support for new corporate governance models that give trade unions and workers a seat at the table in ownership decisions through board memberships, would somewhat redress the increasing power imbalance between capital and labour that is generating more inequality. Greater regulation aimed at limiting the now dominant shareholder principle of maximising value through share buy-backs and instead offering greater incentives to pursue maximisation of stakeholder value, long-term financial stability and investment, can reduce inequality. Most importantly, tax policy can be harnessed to redress income inequality. Such policies include restoring higher marginal income and corporate tax rates, setting higher corporate tax rates for firms with higher ratios of CEO-to-worker pay, and establishing luxury taxes on spiralling compensation packages. Finally, a move away from austerity, which has gripped the West since the financial crisis, and a move towards much greater government investment and welfare state spending, would also lift growth and low-wages.

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Income Inequality 101: Causes, Facts, Examples, Ways to Take Action

Billionaires are increasing their fortunes by $2.7 billion every day . Meanwhile, at least 1.7 billion workers live in areas where inflation is higher than wages. Income inequality is a global problem. It has several consequences, including financial crises, fragile economies, high inflation, poorer health outcomes, and violence. In this article, we’ll explore what causes income inequality, what it looks like, the most important facts everyone should know, and how to address it.

Income inequality is a global issue with several causes, including historical racism, unequal land distribution, high inflation, and stagnant wages. As gaps increase thanks to crises like COVID-19, the world needs to take action in education, labor market policies, tax reforms, and higher wages.

What is income inequality?

When some people in society earn significantly more than others, it creates inequality. Inequality is more than just about the paychecks we take home, however. There’s also wealth inequality, which refers to uneven distributions of wealth. This includes the value of assets and possessions like stocks, property, boats, and so on. Someone may earn a lower income than a neighbor, but because they own stocks and land, they’re wealthier.

Income inequality is measured with factors like gender, ethnicity, location, historical income, and occupation. When identifying a country’s income inequality, there are measurements like the Gini index , which is also called the Gini coefficient. A score of 0 on the index means there’s no deviation; everyone is perfectly equal. A score of 100 means total inequality; a single person has all the country’s wealth. The index isn’t perfect . As Amanda Shendruck points out, Greece, Israel, Thailand, and the UK got the same score in 2015. However, poverty in these countries looks very different. The World Inequality Database avoids the index altogether. On its own, the Gini index may not be especially useful, but it can provide a quick snapshot that encourages more investigation.

The causes of income inequality: two case studies

There are global and country-specific factors that drive income inequality. To get a clearer idea of the causes, let’s look at two countries as examples: South Africa and the United States.

South Africa: The long shadow of apartheid and land ownership

Based on the Gini index, South Africa has the world’s highest income inequality at 63.0 . Apartheid is a big reason why. For almost 50 years, this formalized racial segregation restricted the activities and movements of Black South Africans, who made up most of the population. Black Africans couldn’t marry white people, travel without passbooks, or start businesses in white areas. Society was structured to uplift white people while trampling Black South Africans. When apartheid ended in the 1990s, inequality remained baked into the country’s foundation. South Africa has struggled to make progress on ending inequality. According to a 2022 World Bank report , the top 10% of South Africa’s population holds 71% of all income. Living in or near cities increases job opportunities, but South Africa’s growth has stalled and failed to create enough jobs. High unemployment is a significant driver of inequality, especially for young people.

Gender, race, and land ownership are three other main causes. In South Africa, women earn 38% less than men even when they have similar education levels. When race gets added to inequality analyses, it contributes 41% to income inequality. The World Bank report also studied land ownership, which is vital for addressing inequality among poor people in rural areas. Because of apartheid, there’s a long history of unequal land distribution which hasn’t been remedied yet. COVID-19 made all these factors worse.

The United States: The legacy of slavery and stagnant wages

The United States isn’t among the top most unequal countries in the world, but it has a much higher Gini coefficient when compared to similar economies. According to Statista , the top 10% of earners in the United States (in the third quarter of 2022) held 68% of the country’s total wealth. The lowest 50% held just 3.3.%. Like South Africa, the United States’ history of racial segregation plays a big role. Slavery made it impossible for Black people to build wealth, but even after emancipation, Jim Crow laws severely restricted economic opportunities. The effects resonate to this day. A 2018 analysis of incomes and wealth found that over the past 70 years, there’s been no progress in reducing income and wealth inequalities between Black and white households.

Inequality is also driven by the fact that wages haven’t kept pace with inflation. In June 2022, consumer prices hit 9.1% higher than the year before. This made it the largest annual increase since 1981. Wages have been going up, but they’ve been consistently at 4.5%. The federal minimum wage hasn’t increased since 2009: it’s just $7.25. A study found that in 91% of U.S. counties, a full-time minimum wage worker doesn’t make enough to afford a one-bedroom apartment rental.

What are the five main facts everyone should know about income equality?

There’s a lot to sift through when it comes to income and wealth inequality, but here are five of the most important facts to know:

#1. Inequalities within countries are getting worse

While global inequalities between countries are lowering, the gaps within countries are increasing. According to the World Inequality Database’s 2022 report , the gap between the average incomes of the bottom 50% and the top 10% of individuals has nearly doubled in the past two decades. The World Inequality Database frames it this way: “global inequalities seem to be about as great today as they were at the peak of Western imperialism in the early 20th century.”

#2. COVID-19 is erasing progress

According to groups like the IMF , COVID-19 is worsening inequalities within countries (the poor were hit harder than the rich), but also between countries. Wealthier countries had more resources to deal with the pandemic and could recover faster. According to the World Bank , progress was set back by about a decade.

#3. Inequality hits already-disenfranchised people the hardest

Income inequality is an intersectional issue. It affects disenfranchised groups like women, young people, informal industry workers, the elderly, and disabled people the most. As income inequality worsened in the UK , the disposable income for the poorest ⅕ of the population dropped by 3.8%. The average income for retired households also went down from £26,300 to £25,900.

#4. Over the last decade, the world’s richest 1% have gotten 54% of new wealth – and they’re getting richer

According to an Oxfam report , the world’s richest 1% captured $42 trillion of the new wealth created between December 2019-December 2021. $16 trillion got distributed to the bottom 99%. While the pandemic hit the poor the hardest, the world’s richest actually gained wealth. There was a slight dip in 2022, but in 2023, their wealth is increasing yet again.

#5. Income inequality is linked to climate change

Every year, humans emit around 6.6 tonnes of carbon dioxide equivalent per capita. However, the top 10% of emitters are releasing around 50% of all emissions. The bottom 50% are producing just 12%. Why does this matter to income inequality? The world’s biggest emitters are rich. While many of the world’s poorest countries emit significantly less CO2 , they’re enduring the worst climate change effects. Even within rich countries, the poorest half of the population have already met (or are close to meeting) the 2030 climate targets set by their nations. It’s the rich who need to change.

How to take action on income inequality

Income inequality is a deeply-entrenched, global problem that will take lots of work. Here are three ways countries can take action:

#1. Pay a living wage

Many countries are raising wages, but they’re not raising them enough to close income gaps. That’s why minimum wages need to be higher. In an article on the World Economic Forum about fair wages , the global director of human rights at Unilver emphasized the need for living wages. These are calculated based on what it takes to afford a decent standard of living. Currently, minimum wages in many countries don’t reflect reality. The United States is an example as its minimum wage won’t cover rent on a one-bedroom apartment.

#2. Invest in good public education

Study after study shows the positive impact of good public education. According to a report from Oxfam , a good education can reduce poverty, increase opportunities, and encourage a more democratic society. Education also improves gender equality, which is key to closing income inequality gaps. To successfully address income inequality, education must be universal, free, and public. If it isn’t, education can make inequalities worse as it divides students by traits like race, gender, and wealth.

#3. Make tax systems more redistributive

According to the IMF , addressing inequality more redistributive tax systems. What is a redistributive tax system ? It’s a system where high-income people pay higher taxes (positive taxes) and lower-income people receive more subsidies. In places like the United States, where legislation has designed tax codes to benefit corporations and the wealthiest individuals , wider inequality has followed. The rich are also allowed to get away with more. In 2014-2016, the IRS – which is famously underfunded – didn’t pursue over 300,000 high-income individuals who failed to file tax returns. If countries want to tackle inequality, their tax systems should be designed to help rather than make things worse. That includes spending more on social sectors like education, health, and social protection.

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About the author, emmaline soken-huberty.

Emmaline Soken-Huberty is a freelance writer based in Portland, Oregon. She started to become interested in human rights while attending college, eventually getting a concentration in human rights and humanitarianism. LGBTQ+ rights, women’s rights, and climate change are of special concern to her. In her spare time, she can be found reading or enjoying Oregon’s natural beauty with her husband and dog.

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• Black Americans Have a Clear Vision for Reducing Racism but Little Hope It Will Happen

Many say key U.S. institutions should be rebuilt to ensure fair treatment

Table of contents.

• Black Americans see little improvement in their lives despite increased national attention to racial issues
• Few Black adults expect equality for Black people in the U.S.
• Black adults say racism and police brutality are extremely big problems for Black people in the U.S.
• Personal experiences with discrimination are widespread among Black Americans
• 2. Black Americans’ views on political strategies, leadership and allyship for achieving equality
• The legacy of slavery affects Black Americans today
• Most Black adults agree the descendants of enslaved people should be repaid
• The types of repayment Black adults think would be most helpful
• Responsibility for reparations and the likelihood repayment will occur
• Black adults say the criminal justice system needs to be completely rebuilt
• Black adults say political, economic and health care systems need major changes to ensure fair treatment
• Most Black adults say funding for police departments should stay the same or increase
• Acknowledgments
• Appendix: Supplemental tables
• The American Trends Panel survey methodology

Pew Research Center conducted this analysis to understand the nuances among Black people on issues of racial inequality and social change in the United States. This in-depth survey explores differences among Black Americans in their views on the social status of the Black population in the U.S.; their assessments of racial inequality; their visions for institutional and social change; and their outlook on the chances that these improvements will be made. The analysis is the latest in the Center’s series of in-depth surveys of public opinion among Black Americans (read the first, “ Faith Among Black Americans ” and “ Race Is Central to Identity for Black Americans and Affects How They Connect With Each Other ”).

The online survey of 3,912 Black U.S. adults was conducted Oct. 4-17, 2021. Black U.S. adults include those who are single-race, non-Hispanic Black Americans; multiracial non-Hispanic Black Americans; and adults who indicate they are Black and Hispanic. The survey includes 1,025 Black adults on Pew Research Center’s American Trends Panel (ATP) and 2,887 Black adults on Ipsos’ KnowledgePanel. Respondents on both panels are recruited through national, random sampling of residential addresses.

Recruiting panelists by phone or mail ensures that nearly all U.S. Black adults have a chance of selection. This gives us confidence that any sample can represent the whole population (see our Methods 101 explainer on random sampling). Here are the questions used for the survey of Black adults, along with its responses and methodology .

The terms “Black Americans,” “Black people” and “Black adults” are used interchangeably throughout this report to refer to U.S. adults who self-identify as Black, either alone or in combination with other races or Hispanic identity.

Throughout this report, “Black, non-Hispanic” respondents are those who identify as single-race Black and say they have no Hispanic background. “Black Hispanic” respondents are those who identify as Black and say they have Hispanic background. We use the terms “Black Hispanic” and “Hispanic Black” interchangeably. “Multiracial” respondents are those who indicate two or more racial backgrounds (one of which is Black) and say they are not Hispanic.

Respondents were asked a question about how important being Black was to how they think about themselves. In this report, we use the term “being Black” when referencing responses to this question.

In this report, “immigrant” refers to people who were not U.S. citizens at birth – in other words, those born outside the U.S., Puerto Rico or other U.S. territories to parents who were not U.S. citizens. We use the terms “immigrant,” “born abroad” and “foreign-born” interchangeably.

Throughout this report, “Democrats and Democratic leaners” and just “Democrats” both refer to respondents who identify politically with the Democratic Party or who are independent or some other party but lean toward the Democratic Party. “Republicans and Republican leaners” and just “Republicans” both refer to respondents who identify politically with the Republican Party or are independent or some other party but lean toward the Republican Party.

Respondents were asked a question about their voter registration status. In this report, respondents are considered registered to vote if they self-report being absolutely certain they are registered at their current address. Respondents are considered not registered to vote if they report not being registered or express uncertainty about their registration.

To create the upper-, middle- and lower-income tiers, respondents’ 2020 family incomes were adjusted for differences in purchasing power by geographic region and household size. Respondents were then placed into income tiers: “Middle income” is defined as two-thirds to double the median annual income for the entire survey sample. “Lower income” falls below that range, and “upper income” lies above it. For more information about how the income tiers were created, read the methodology .

More than a year after the murder of George Floyd and the national protests, debate and political promises that ensued, 65% of Black Americans say the increased national attention on racial inequality has not led to changes that improved their lives. 1 And 44% say equality for Black people in the United States is not likely to be achieved, according to newly released findings from an October 2021 survey of Black Americans by Pew Research Center.

This is somewhat of a reversal in views from September 2020, when half of Black adults said the increased national focus on issues of race would lead to major policy changes to address racial inequality in the country and 56% expected changes that would make their lives better.

At the same time, many Black Americans are concerned about racial discrimination and its impact. Roughly eight-in-ten say they have personally experienced discrimination because of their race or ethnicity (79%), and most also say discrimination is the main reason many Black people cannot get ahead (68%).  

Even so, Black Americans have a clear vision for how to achieve change when it comes to racial inequality. This includes support for significant reforms to or complete overhauls of several U.S. institutions to ensure fair treatment, particularly the criminal justice system; political engagement, primarily in the form of voting; support for Black businesses to advance Black communities; and reparations in the forms of educational, business and homeownership assistance. Yet alongside their assessments of inequality and ideas about progress exists pessimism about whether U.S. society and its institutions will change in ways that would reduce racism.

These findings emerge from an extensive Pew Research Center survey of 3,912 Black Americans conducted online Oct. 4-17, 2021. The survey explores how Black Americans assess their position in U.S. society and their ideas about social change. Overall, Black Americans are clear on what they think the problems are facing the country and how to remedy them. However, they are skeptical that meaningful changes will take place in their lifetime.

Black Americans see racism in our laws as a big problem and discrimination as a roadblock to progress

Black adults were asked in the survey to assess the current nature of racism in the United States and whether structural or individual sources of this racism are a bigger problem for Black people. About half of Black adults (52%) say racism in our laws is a bigger problem than racism by individual people, while four-in-ten (43%) say acts of racism committed by individual people is the bigger problem. Only 3% of Black adults say that Black people do not experience discrimination in the U.S. today.

In assessing the magnitude of problems that they face, the majority of Black Americans say racism (63%), police brutality (60%) and economic inequality (54%) are extremely or very big problems for Black people living in the U.S. Slightly smaller shares say the same about the affordability of health care (47%), limitations on voting (46%), and the quality of K-12 schools (40%).

Aside from their critiques of U.S. institutions, Black adults also feel the impact of racial inequality personally. Most Black adults say they occasionally or frequently experience unfair treatment because of their race or ethnicity (79%), and two-thirds (68%) cite racial discrimination as the main reason many Black people cannot get ahead today.

Black Americans’ views on reducing racial inequality

Black Americans are clear on the challenges they face because of racism. They are also clear on the solutions. These range from overhauls of policing practices and the criminal justice system to civic engagement and reparations to descendants of people enslaved in the United States.

Changing U.S. institutions such as policing, courts and prison systems

About nine-in-ten Black adults say multiple aspects of the criminal justice system need some kind of change (minor, major or a complete overhaul) to ensure fair treatment, with nearly all saying so about policing (95%), the courts and judicial process (95%), and the prison system (94%).

Roughly half of Black adults say policing (49%), the courts and judicial process (48%), and the prison system (54%) need to be completely rebuilt for Black people to be treated fairly. Smaller shares say the same about the political system (42%), the economic system (37%) and the health care system (34%), according to the October survey.

While Black Americans are in favor of significant changes to policing, most want spending on police departments in their communities to stay the same (39%) or increase (35%). A little more than one-in-five (23%) think spending on police departments in their area should be decreased.

Black adults who favor decreases in police spending are most likely to name medical, mental health and social services (40%) as the top priority for those reappropriated funds. Smaller shares say K-12 schools (25%), roads, water systems and other infrastructure (12%), and reducing taxes (13%) should be the top priority.

Voting and ‘buying Black’ viewed as important strategies for Black community advancement

Black Americans also have clear views on the types of political and civic engagement they believe will move Black communities forward. About six-in-ten Black adults say voting (63%) and supporting Black businesses or “buying Black” (58%) are extremely or very effective strategies for moving Black people toward equality in the U.S. Smaller though still significant shares say the same about volunteering with organizations dedicated to Black equality (48%), protesting (42%) and contacting elected officials (40%).

Black adults were also asked about the effectiveness of Black economic and political independence in moving them toward equality. About four-in-ten (39%) say Black ownership of all businesses in Black neighborhoods would be an extremely or very effective strategy for moving toward racial equality, while roughly three-in-ten (31%) say the same about establishing a national Black political party. And about a quarter of Black adults (27%) say having Black neighborhoods governed entirely by Black elected officials would be extremely or very effective in moving Black people toward equality.

Most Black Americans support repayment for slavery

Discussions about atonement for slavery predate the founding of the United States. As early as 1672 , Quaker abolitionists advocated for enslaved people to be paid for their labor once they were free. And in recent years, some U.S. cities and institutions have implemented reparations policies to do just that.

Most Black Americans say the legacy of slavery affects the position of Black people in the U.S. either a great deal (55%) or a fair amount (30%), according to the survey. And roughly three-quarters (77%) say descendants of people enslaved in the U.S. should be repaid in some way.

Black adults who say descendants of the enslaved should be repaid support doing so in different ways. About eight-in-ten say repayment in the forms of educational scholarships (80%), financial assistance for starting or improving a business (77%), and financial assistance for buying or remodeling a home (76%) would be extremely or very helpful. A slightly smaller share (69%) say cash payments would be extremely or very helpful forms of repayment for the descendants of enslaved people.

Where the responsibility for repayment lies is also clear for Black Americans. Among those who say the descendants of enslaved people should be repaid, 81% say the U.S. federal government should have all or most of the responsibility for repayment. About three-quarters (76%) say businesses and banks that profited from slavery should bear all or most of the responsibility for repayment. And roughly six-in-ten say the same about colleges and universities that benefited from slavery (63%) and descendants of families who engaged in the slave trade (60%).

Black Americans are skeptical change will happen

Even though Black Americans’ visions for social change are clear, very few expect them to be implemented. Overall, 44% of Black adults say equality for Black people in the U.S. is a little or not at all likely. A little over a third (38%) say it is somewhat likely and only 13% say it is extremely or very likely.

They also do not think specific institutions will change. Two-thirds of Black adults say changes to the prison system (67%) and the courts and judicial process (65%) that would ensure fair treatment for Black people are a little or not at all likely in their lifetime. About six-in-ten (58%) say the same about policing. Only about one-in-ten say changes to policing (13%), the courts and judicial process (12%), and the prison system (11%) are extremely or very likely.

This pessimism is not only about the criminal justice system. The majority of Black adults say the political (63%), economic (62%) and health care (51%) systems are also unlikely to change in their lifetime.

Black Americans’ vision for social change includes reparations. However, much like their pessimism about institutional change, very few think they will see reparations in their lifetime. Among Black adults who say the descendants of people enslaved in the U.S. should be repaid, 82% say reparations for slavery are unlikely to occur in their lifetime. About one-in-ten (11%) say repayment is somewhat likely, while only 7% say repayment is extremely or very likely to happen in their lifetime.

Black Democrats, Republicans differ on assessments of inequality and visions for social change

Party affiliation is one key point of difference among Black Americans in their assessments of racial inequality and their visions for social change. Black Republicans and Republican leaners are more likely than Black Democrats and Democratic leaners to focus on the acts of individuals. For example, when summarizing the nature of racism against Black people in the U.S., the majority of Black Republicans (59%) say racist acts committed by individual people is a bigger problem for Black people than racism in our laws. Black Democrats (41%) are less likely to hold this view.

Black Republicans (45%) are also more likely than Black Democrats (21%) to say that Black people who cannot get ahead in the U.S. are mostly responsible for their own condition. And while similar shares of Black Republicans (79%) and Democrats (80%) say they experience racial discrimination on a regular basis, Republicans (64%) are more likely than Democrats (36%) to say that most Black people who want to get ahead can make it if they are willing to work hard.

On the other hand, Black Democrats are more likely than Black Republicans to focus on the impact that racial inequality has on Black Americans. Seven-in-ten Black Democrats (73%) say racial discrimination is the main reason many Black people cannot get ahead in the U.S, while about four-in-ten Black Republicans (44%) say the same. And Black Democrats are more likely than Black Republicans to say racism (67% vs. 46%) and police brutality (65% vs. 44%) are extremely big problems for Black people today.

Black Democrats are also more critical of U.S. institutions than Black Republicans are. For example, Black Democrats are more likely than Black Republicans to say the prison system (57% vs. 35%), policing (52% vs. 29%) and the courts and judicial process (50% vs. 35%) should be completely rebuilt for Black people to be treated fairly.

While the share of Black Democrats who want to see large-scale changes to the criminal justice system exceeds that of Black Republicans, they share similar views on police funding. Four-in-ten each of Black Democrats and Black Republicans say funding for police departments in their communities should remain the same, while around a third of each partisan coalition (36% and 37%, respectively) says funding should increase. Only about one-in-four Black Democrats (24%) and one-in-five Black Republicans (21%) say funding for police departments in their communities should decrease.

Among the survey’s other findings:

Black adults differ by age in their views on political strategies. Black adults ages 65 and older (77%) are most likely to say voting is an extremely or very effective strategy for moving Black people toward equality. They are significantly more likely than Black adults ages 18 to 29 (48%) and 30 to 49 (60%) to say this. Black adults 65 and older (48%) are also more likely than those ages 30 to 49 (38%) and 50 to 64 (42%) to say protesting is an extremely or very effective strategy. Roughly four-in-ten Black adults ages 18 to 29 say this (44%).

Gender plays a role in how Black adults view policing. Though majorities of Black women (65%) and men (56%) say police brutality is an extremely big problem for Black people living in the U.S. today, Black women are more likely than Black men to hold this view. When it comes to criminal justice, Black women (56%) and men (51%) are about equally likely to share the view that the prison system should be completely rebuilt to ensure fair treatment of Black people. However, Black women (52%) are slightly more likely than Black men (45%) to say this about policing. On the matter of police funding, Black women (39%) are slightly more likely than Black men (31%) to say police funding in their communities should be increased. On the other hand, Black men are more likely than Black women to prefer that funding stay the same (44% vs. 36%). Smaller shares of both Black men (23%) and women (22%) would like to see police funding decreased.

Income impacts Black adults’ views on reparations. Roughly eight-in-ten Black adults with lower (78%), middle (77%) and upper incomes (79%) say the descendants of people enslaved in the U.S. should receive reparations. Among those who support reparations, Black adults with upper and middle incomes (both 84%) are more likely than those with lower incomes (75%) to say educational scholarships would be an extremely or very helpful form of repayment. However, of those who support reparations, Black adults with lower (72%) and middle incomes (68%) are more likely than those with higher incomes (57%) to say cash payments would be an extremely or very helpful form of repayment for slavery.

• Black adults in the September 2020 survey only include those who say their race is Black alone and are non-Hispanic. The same is true only for the questions of improvements to Black people’s lives and equality in the United States in the October 2021 survey. Throughout the rest of this report, Black adults include those who say their race is Black alone and non-Hispanic; those who say their race is Black and at least one other race and non-Hispanic; or Black and Hispanic, unless otherwise noted. ↩

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The 2023 Income, Poverty, and Health Insurance Reports: Strong household income gains, lower official poverty, uninsured rate near record   low

This morning the U.S. Census Bureau released its annual reports on poverty, income, and health insurance for 2023. Here are the topline findings:

• Household income grew at a rapid pace—after adjusting for inflation—across the income distribution. Growth was strongest for the lowest-income households, but also strong at the median (4.0%).
• The Official Poverty Measure (OPM) decreased by 0.4 percentage points between 2022 and 2023, falling to 11.1 percent. The Supplemental Poverty Measure (SPM), which accounts for more government benefits, taxes, and expenses than the OPM, rose from 12.4 percent in 2022 to 12.9 percent 2023.
• The share of Americans without health insurance remained low at 8.0 percent in 2023, down from 8.3 percent in 2021 and similar to 7.9 percent in 2022.

Today’s report contains a clear policy message: income, poverty, and health insurance outcomes are driven not just by market outcomes, but by policy choices as well. The Affordable Care Act (ACA), along with Biden-Harris Administration actions to expand ACA health insurance, continue to be instrumental in sustaining historic reductions in the uninsured rate. The Administration’s extensions of the Child Tax Credit, which we continue to fight to reinstate, led to equally historic reductions in child poverty before it was allowed to expire. And housing policies proposed by the administration will help increase the stock of affordable rental housing, thereby lowering both housing costs and SPM poverty.

Real household income rose across the distribution

Today’s Census Bureau report confirms a pattern seen in other labor market data through 2023: real income grew robustly as inflation eased and unemployment remained historically low. CEA has long stressed how the benefits of tight labor markets disproportionately accrue to those with lower incomes, and growth last year was especially strong at lower income levels. That said, Figure 1 shows that gains from the strong labor market were broadly delivered: inflation-adjusted gains at the 10 th , 30 th , 50 th , 70 th , and 90 th percentiles were all above 3%. The ratio of the 90 th to 10 th percentiles fell from 12.63 to 12.38, indicating relative gains for low-income households, and delivering the lowest level of income inequality since 2015. Growth at the bottom of the income distribution—6.7% for households at the 10 th percentile, after adjusting for inflation—drove the decline in the official poverty rate and helped mitigate the increase in SPM poverty. It also produced an all-time high in the 10 th percentile of household income.

These real growth rates for lower-income households are historically large but consistent with what we have tended to see in periods of tight labor markets. For 10 th percentile households, the three largest annual increases occurred in 2019, 2015, and 1968.

Reduction in income inequality was also evident across the educational distribution. Median income rose 4.3% when the householder has only a high school degree, versus 3.1% for those with a four-year degree or more. 1 And rural households did better (7.5%) than their counterparts within metropolitan areas (3.7%).

Median incomes rose in each region of the country and for every racial/ethnic group measured by the Census, with the exception of Asian households. Black, Hispanic, and White non-Hispanic households experienced real income increases of 2.8%, 0.4%, and 5.7%, respectively (Asian households’ incomes declined only slightly). For the median Black household, inflation-adjusted income is now at an all-time high.

Table 1 below shows income changes for each of these racial/ethnic groups since 2020. Relative to that year, median incomes rose in real terms for Asian, Black, Hispanic, and White non-Hispanic households. Increases ranged from $700 for Hispanic households (1.1%) to $2,650 for Black households (4.9%).

The official poverty rate fell, but the supplemental poverty rate rose

The official poverty rate, which reflects only the inflation-adjusted changes in income described above, fell from 11.5% in 2022 to 11.1% in 2023. However, the rate of poverty in the supplemental measure rose from 12.4% to 12.9%. Figure 2 shows these trends.

Why did the SPM rise while the OPM fell? One answer is that the inflation index used for the SPM puts substantially more weight on housing than does the more commonly used CPI-U. SPM poverty thresholds were therefore driven higher by housing inflation in 2023. In addition, some of the increase in SPM thresholds were caused by shifting pandemic-era consumption patterns . Researchers have tried to disentangle these by using a so-called anchored measure of SPM that only takes account of inflation. These anchored measures show flat or falling SPM poverty rates, depending on the choice of inflation index.

Pandemic-era benefit expiration elevates child poverty

While the SPM poverty rate increased by 0.5 percentage points, the child SPM poverty rate increased by more than double the overall SPM rate. In 2023, SPM child poverty reached 13.7 percent, up 1.3 percentage points from 12.4 percent in 2022 and up 8.5 percentage points from 5.2 percent in 2021 . However, as CEA noted last year , the increase in child poverty since 2021 is a predictable consequence of failing to extend the enhanced Child Tax Credit (CTC), a policy the Biden/Harris administration continues to fight for. In 2021, the enhanced CTC lifted almost 3 million children out of SPM poverty (compared to about 1.4 million children in 2023) and cut the child SPM poverty rate by more than 40 percent . In 2021, the enhanced CTC lifted almost 3 million children out of SPM poverty (compared to about 1.4 million children in 2023) and cut the child SPM poverty rate by more than 40 percent .

The Biden-Harris Administration has consistently advocated for a permanent enhanced CTC to help reduce child poverty. If the enhanced CTC had been available in 2023 and had the same effect on SPM child poverty as in 2021, reducing the SPM child poverty rate by 40 percent, the SPM child poverty rate would have been 9.4 percent, about 4.3 percentage points lower than what Census reported. Continued opposition to the expansion of the enhanced CTC unnecessarily keeps millions of children in poverty, generating substantial, well-documented negative consequences. A review by the National Academies of Sciences finds that there is “overwhelming evidence” that children who grow up in poverty have worse outcomes along a variety of dimensions of success.

In an effort to offset part of the loss of the enhanced CTC, the Biden-Harris Administration led an effort that resulted in the creation of Summer Electronic Benefits Transfer (EBT), referred to as SUN Bucks . Beginning in 2024, SUN Bucks, which will be a continuation of the Pandemic Electronic Benefits Transfer (P-EBT) , provides $120 per eligible child during the summer to help families afford groceries, and is aimed at the millions of children that receive free or subsidized school meals. Summer food assistance has been shown to reduce food insecurity , and food assistance, more generally, has been shown to have positive effects on economic outcomes.

Rising housing costs contributed to higher SPM thresholds

Poverty rates are determined not just by changing income and policies, but also by shifts in the income thresholds that determine who is poor. Rising costs have increased the number of people with incomes below the SPM thresholds, particularly among those who rent their homes. SPM thresholds are calculated separately for renters, owners with a mortgage, and owners without a mortgage (more detail is available in the appendix). While all the thresholds increased by more than usual between 2022 and 2023, renters experienced the largest increase.

Reducing the cost of housing is therefore crucial to reducing SPM poverty. The Biden-Harris Administration has advocated for various policies to help reduce the increase in rents and increase the supply of affordable housing, many of which require Congressional support. For example, we have launched an all-of-government Housing Supply Action Plan to increase the stock of affordable housing by millions of units. This far-reaching plan includes $185 million in grants for communities to reduce barriers to housing construction , improvements to the Low Income Housing Tax Credit (a credit supporting affordable multifamily housing, a key source of pressure of the SPM threshold), updating HUD rules so that more types of housing can be built efficiently under HUD code, and a Legacy Challenge to encourage communities to use Community Development Block Grants for transformative housing investments, and more.

Health insurance coverage remained high in 2023

The uninsured rate (share of people without health insurance for the entire year) continued to remain low in 2023 at 8.0 percent, statistically indistinguishable from 2022’s 7.9 percent rate. Although Census has made changes over time in how health insurance coverage is measured, the uninsured rate in 2023 is among the lowest achieved under the newer measurement system (see Figure 3)dating back to 2017. This gain in insurance coverage builds on the earlier success of the ACA, with a fall in the uninsured rate from 13.3 percent in 2013 (before the ACA insurance expansions) to 8.8 percent in 2016 (after the ACA insurance expansions).

Uninsured rates differ by demographic characteristics, including race and ethnicity. In 2023, uninsured rates reached the lowest rates on record for Black and Asian people at 8.1 percent and 5.5 percent, respectively. The uninsured rate for white, non-Hispanic people increased by 0.1 percentage point to 5.0 percent, while the uninsured rate for Hispanic people increased 0.3 percentage point to 17.5 percent in 2023.

Census also provides information on the uninsured rate by age group. Children under age 19 experienced a 0.5 percentage point increase in their uninsured rate at 5.8 percent in 2023. 2 Additional information provided by Census on the source of insurance coverage indicates that this change was accompanied by a decline in the share of children with employer-based health insurance for some or all of the year from 55.0 percent in 2022 to 54.0 percent in 2023.

The record highs for insurance coverage in recent years reflect the focus of the Biden-Harris Administration on increasing the availability and affordability of health insurance coverage. Effective in 2023, administrative action removed the “family glitch” to expand financial assistance for the purchase of Affordable Care Act (ACA) health insurance coverage to many families who were previously ineligible. 3 This follows other changes to increase the generosity of financial assistance for ACA coverage, facilitate state Medicaid expansions, and invest in enrollment outreach in recent years.

Gains in insurance coverage also reflect continuous Medicaid enrollment under a pandemic-related provision that ended in March 2023. The uninsured rate in 2023 does not yet tell us the results of the “unwinding” of this provision, since affected individuals had coverage at the beginning of the year. However, proactive steps have been taken by the Biden-Harris Administration to aid the eligibility redetermination process for states and help transitions to other sources of coverage for people no longer eligible for Medicaid.

New Biden-Harris administration policies also aim to further expand and protect coverage for children. A new change that started on January 1, 2024 requires that all states provide 12 months of continuous eligibility for children enrolled in Medicaid and the Children’s Health Insurance Program (CHIP). Continuous eligibility policies are associated with higher rates of insurance coverage, reduced gaps in coverage, and better health among children. In addition, a final rule issued in March 2024 took additional steps to make it easier for Americans, including children, to apply for and renew health insurance coverage under Medicaid and CHIP.

Each year, the Bureau of Labor Statistics (BLS) calculates the SPM thresholds using the Consumer Expenditure Survey data on out-of-pocket spending by consumer units in the middle of the out-of-pocket spending distribution, between the 47th and the 53rd percentiles, from the previous five years. Because the data used to calculate the SPM thresholds are based on a specific basket of goods and services, BLS uses an inflation index for food, clothing, shelter, and utilities (FCSUti) rather than the more-familiar CPI-U. 4 In 2023, the FCSUti remained elevated in comparison to the CPI-U and prior increases (see Figure 4). A 2023 study by the Bureau of Labor Statistics showed that the inflation adjustment was the primary driver of the increase in the SPM thresholds from 2021 to 2022. While the increase in the 2023 SPM thresholds (6.8 percent for homeowners without a mortgage, 7.8 percent for homeowners with a mortgage, and 8.6 percent for renters) was smaller than the 2022 change from 2021, the increase still outpaced the two to four percent increase of 2016 to 2021. Given that the FCSUti index remained elevated again in 2023, inflation is likely to be a large contributor to the increase.

• The Census Bureau defines a “householder” as “the person (or one of the people) in whose name the home is owned or rented and the person to whom the relationship of other household members is recorded.” ↩︎
• Working age adults saw no significant change and adults age 65 and older saw a decrease of 0.2 percentage points to 0.9 percent in 2023. ↩︎
• Previously, if an employee was offered affordable employee-level coverage but not affordable family-level coverage from their employer, their family members were ineligible for financial assistance for ACA health insurance coverage. ↩︎
• Prior to 2020, the index used to adjust the thresholds included telephone services and excluded internet and in-kind transfers.  ↩︎

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