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.
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.
According to Survey of Consumer Finances data, the median Black family has $24,100 in wealth. 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 shows 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 income threshold for entry into the top 10 percent is another indicator of racial disparities at the top of the U.S. earnings scale. According to the Pew Research Center, for white families to make it into this tier of earners in their racial group, they need to have annual income of at least $117,986 — nearly twice as much as the threshold for Black families.
Racial discrimination in many forms, including in education, hiring, and pay practices, contributes to persistent earnings gaps. As of the third quarter of 2022, the median white worker made 25 percent more than the typical Black worker and around 28 percent more than the median Latino worker, according to BLS data.
The Covid-19 pandemic drastically raised unemployment in America, but that impact has not been felt evenly across all racial groups, according to BLS data. In December 2020, as the recovery of the summer months started to fade, the unemployment rate was 9.9 percent for Black people and 9.3 percent for Latinos, compared to 6.0 percent for whites and 5.9 percent for Asians. These rates only count those who are actively seeking work, leaving out those who have given up finding a job.
Within racial groups, Bureau of Labor Statistics data shows 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. Women comprise 56 percent of college students, but hold nearly two-thirds of outstanding student loan debt. According to the American Association of University Women, Black women graduate with the most debt — $37,558, on average — compared to $31,346 for white women and $29,862 for 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 returned to pre-pandemic levels, racial disparities remain. As of September 2022, the unemployment rate for Black workers was 5.8 percent, compared to just 3.5 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.