Simulating How Progressive Proposals Affect the Racial Wealth Gap

Center for American Progress logoThis issue brief and accompanying interactive are part of a series on structural racism in the United States.

Authors’ note: CAP uses “Black” and “African American” interchangeably throughout many of our products. We chose to capitalize “Black” in order to reflect that we are discussing a group of people and to be consistent with the capitalization of “African American.”

Wealth—a household’s assets minus its debts—is a key measure of financial well-being. Unfortunately, the United States is home to stark and persistent racial disparities in household wealth. While various proposals exist with the aim of shrinking the racial wealth gap, estimates of their long-term effects are limited. A new simulation developed by the Center for American Progress (see below) demonstrates how separate proposals implemented today, in combination or in isolation, would reduce racial disparities in average wealth—total wealth divided by the number of households in the United States—by 2060. The simulation specifically tracks white and Black couples who are currently beginning their careers and starting to accumulate wealth and compares their total projected household wealth as they near retirement.

The racial wealth gap

Wealth eases the transition between jobs and neighborhoods and provides a cushion in response to emergencies and during retirement. Wealth is also transferrable and allows households to finance their descendants’ futures by helping cover the costs of education, a health emergency, or even a down payment on a home. However, in 2016, the median white household held $171,000 in wealth—almost 10 times more than the median Black household’s wealth of $17,600.1 The median racial wealth gap of more than $150,000 may understate the extent of the disparity between Black and white households. The average net worth of a white household was $919,000 in 2016.2 In contrast, the average net worth of a Black household was just $139,000, showing a much larger difference of $780,000.3 Regardless of the method of measuring wealth, the evidence is clear: A considerable wealth disparity exists between white and Black households.

View the complete August 7 article by Christian E. Weller, Connor Maxwell and Danyelle Solomon on the Center for American Progress website here.