Policy Research

Wealth Inequality in Black and White: Cultural and Structural Sources of the Racial Wealth Gap

Cedric Herring, Loren Henderson

Summary

In terms of wealth, whites have far more favorable characteristics in every area (stock ownership, bankruptcies, educational attainment, etc.) than African-Americans do. The racial wealth gap is not due to cultural factors, but rather differences in income, stock ownership, and business ownership. Some previous explanations have previously centered on cultural norms such as single parent households and poor spending practices as an explanation; these explanations alone do not hold up to scrutiny in the face of structural explanations. Other previous explanations have focused on practices such as redlining (denial of access based on certain characteristics like race) and other discriminatory practices in the housing and business market. Age plays a large role in these explanations, as discriminatory practices affect the amount of wealth available to be transferred from old to young African Americans; these practices do not affect white Americans to the same degree. These findings are backed up by a study that used random sampling and controls for wealth disparities between African Americans and Whites, as well as wealth within races. Regardless of similar variables, African Americans still suffer from a large wealth gap compared to white Americans, especially in higher income brackets.

Read Now

Policy Implications

Possible action may be taken to correct for inequality in the system, not limited to but including fixes to the housing market/home ownership by African Americans, end of workplace discrimination, etc. Institutional racism can be possibly addressed by policies in the future.