Policies like forgiving debt for all student loans and giving baby bonds to the whole population won’t be nearly enough to achieve racial wealth parity, an economist says.
Elimination of the wealth gap between Black and white Americans is a stated goal of President Biden and the Democratic Party. The gulf is enormous any way you look at it. But depending on the measure you use, the chasm ranges from $54,700 a person to $280,300 a person. I believe the higher figure is the most appropriate one. That amounts to a total of $11.2 trillion — a figure that implies that incremental measures will not be sufficient to address the enormous racial wealth disparity. Those numbers are derived from data compiled in the Federal Reserve’s 2019 Survey of Consumer Finances. The survey shows that the gap in wealth between Black and white Americans at the median — the middle household in each community — was $164,100. The median Black household was worth only $24,100; the median white household, $188,200. But if we compare Black and white wealth at the mean — for the average household in each community — the difference was $840,000, a far larger sum. The average figure for Black households was $142,500; for white households, $983,400, close to $1 million. An approach that I have proposed to close the wealth gap is a program of reparations for Black Americans whose ancestors were enslaved in the United States. Policymakers, conventionally, have focused on the median gap in wealth, viewing the experiences of households at the middle of each group’s distribution as more representative of the group as a whole. Wealth held by households that are exceptions or outliers do not affect the median value of net worth. In the context of racial differences in wealth, however, I believe it is more appropriate to select the mean, or average, gap as the policy target. The reason is wealth is so densely concentrated in the United States that 97 percent of white Americans’ total wealth is held by households with a net worth above the white median.
