How Measurement of Inequalities in Wealth by Race/Ethnicity Impacts Narrative and Policy: Investigating the Full Distribution

Abstract

In recent decades, analysts and researchers have expanded understanding of economic security by adding wealth to traditional income measures of economic security, documenting substantial and growing inequalities in wealth in the USA that exceed notable income inequalities. Racial disparities in wealth have been well-documented and represent a major barrier to economic equality for communities of color. However, while the racial wealth gap is typically measured at the median due to the substantial skew of the wealth distribution, much remains unknown about racial disparities across the wealth distribution. This study aims to advance analytic discussions about measurement of racial wealth disparities examining recent trends in wealth by race/ethnicity using a more complete view of the wealth distribution. Using the Survey of Consumer Finances (SCF) from 2001 to 2013, results reveal that racial wealth disparities across the distribution are even more widespread than an examination of central tendencies alone can observe. Also, while all households experienced notable wealth declines in recent years during the Great Recession, African American and Latino households across the distribution of wealth were particularly affected. From 2007 to 2013, the 75th percentile of wealth for African Americans and Latinos fell by approximately 50%, while losses for whites at the third quartile were just 15%. Similar differences in impacts of the economic downturn are seen across the distribution. Examination of net worth trends over the period reveals that losses were disproportionally experienced by households of color across the wealth distribution.

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Notes

  1. 1.

    Net worth and wealth are used interchangeably in this paper.

  2. 2.

    While efforts to improve data collection for population subgroups are growing particularly at local levels, national surveys often have limited or no wealth data for Asian-American and Native American households. The National Asset Scorecard for Communities of Color (NASCC) has recently been used to understand the wealth of many subpopulations in the U.S. at local level to expand our knowledge about wealth holdings of diverse communities in the country; however, national data with the detail available in the NASCC are not currently available.

  3. 3.

    All quartiles are selected for analysis in the study to provide a holistic perspective on the full wealth distribution by highlighting key quantiles evenly spaced across the distribution. Top and bottom deciles are included to provide perspective on low-wealth and higher wealth individuals. Given the highly skewed nature of the wealth distribution, further studies of the top percentile or even more focused analyses of the wealthiest households beyond the top percent is useful, as in Wolff et al.(2011). However, since this analysis aims to provide a broad understanding of the distribution, rather than focus on outliers, top and bottom deciles were selected to capture higher and lower wealth households.

  4. 4.

    See also proposals by the Annie E. Casey Foundation at: http://www.aecf.org/m/resourcedoc/aecf-investingintomorrow-2016.pdf.

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Correspondence to Laura Sullivan.

Appendix

Appendix

See Table 2.

Table 2 Net worth percentiles by race/ethnicity, 2001–2013 from survey of consumer finances

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Sullivan, L., Meschede, T. How Measurement of Inequalities in Wealth by Race/Ethnicity Impacts Narrative and Policy: Investigating the Full Distribution. Race Soc Probl 10, 19–29 (2018). https://doi.org/10.1007/s12552-017-9217-x

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Keywords

  • Racial disparities
  • Wealth
  • Inequality
  • Economic security