American Wealth Increased The Last Four Years ... But, Black Wealth Is Still At The Bottom
Recent Federal Reserve data reveals a substantial increase in American wealth over four years. However, White households still possess more than six times more wealth than Black households.
Asiamah | a Black Wealth Data Center & Prosperity Now feature
Recent Federal Reserve data reveals a substantial increase in American wealth over four years, with median Black household net worth rising by 57.85 percent and median White household net worth by 29.68 percent. However, despite this surge, the wealth divide persists, as White households still possess more than six times more wealth than Black households. Government interventions during the pandemic, like the CARES Act and American Rescue Plan, contributed to this wealth increase, but many of these programs have ended, impacting families' financial stability amid rising inflation and housing costs, especially affecting Black households' ability to benefit from homeownership. Understanding these factors is crucial for meaningful, sustainable progress without demoralizing future efforts.
Largest Jump in Wealth … For Who?
The recent Federal Reserve data release that speaks to the state of wealth in the United States has inspired a number of articles and think pieces about how Americans saw the largest jump in wealth over the past 3 years. The data in question, stemming from the Survey of Consumer Finances (SCF), is a survey of American families that happens every three years. It gathers data on families' finances, including their assets, retirement savings, earnings, and basic demographic information. These data available on the Black Wealth Data Center’s ‘Explore Data’ page on Assets and Debt, offer additional insights. The data points speak to a 58 percent increase in median Black household net worth (from $27,937 to $44,100) and a 30 percent increase in median White Household net worth (from $219,206 to $284,310).
We are inclined to ask what factors could be contributing to this change and what additional context we must consider to gain a more comprehensive understanding. Independent of these questions, the reality is that White households still possess little more than 6 times the wealth of Black households.
Governmental Support Measures During the Pandemic
Throughout the Coronavirus Pandemic, critical measures were put in place to support individuals and families impacted by the crises. The following legislative acts played a pivotal role …
The CARES Act and Subsequent Extensions. The Coronavirus Aid, Relief, and Economic Security (CARES) Act introduced direct payments to individuals, substantial rebates for families with children, and extended unemployment benefits for those facing layoffs. Additionally, the Consolidated Appropriations Act of 2021 extended many of the benefits under the CARES Act and included refundable tax credits of $600 per family member. Moreover, the American Rescue Plan (ARPA), another extension of the CARES Act, provided further rebates to taxpayers, benefits for the unemployed, and parents.
Financial Assistance and Economic Impact. Some 3.6 million borrowers benefited from the Saving on a Valuable Education (SAVE) plan. For Black borrowers who typically carry higher education debt than other groups, this had the effect of improving economic stability and the ability to accumulate wealth.
Societal and Economic Implications
Changing Investment Trends. Notably, about 30 percent of Black investors under 40 got into the stock market for the first time in 2020 as many got pulled into the spirit of YOLOing discretionary and nondiscretionary funds on a meme stock or two because they “[liked] the stock.” Despite this, the wealthiest 10 percent of U.S. households own nearly 93 percent of the stock market.
Wealth Inequality and Historical Patterns. It is evidenced throughout history that events such as warfare and catastrophic occurrences, including pandemics, have often led to notable reductions in wealth inequality. This has been observed through various means, such as the nationalization of assets, the destruction of capital goods, and the implementation of progressive tax systems. The rise of labor unions and the implementation of minimum wage laws and reforms to regulate financial markets and the establishment of social safety nets (e.g. social security) prompted by the Great Depression are other examples to consider. Progress seldom occurs without significant post-crisis reforms. Much of what we see as progress is due to the interventions carried out by the Federal Government to keep people safe and relatively secure during the pandemic. As of this writing, many of the aforementioned programs have effectively ended.
Economic Trends and Challenges
Wage Growth vs. Inflation. While we observed wage growth over the period spanning 2019 - 2022, potentially boosting the net worth of low income families, this positive trend was countered by substantial inflation over that same period, rising from 1.8 percent (2019) to 8 percent (2022). This increase significantly reduced the purchasing power of families.
Housing Market Dynamics. Although the housing boom likely played a role in increasing the net worth of homeowners, our data show that Black households were less likely to reap the benefits of homeownership while the difference in Black-White homeownership increased as rising prices kept many from accessing homeownership.
Conclusion
Data plays a crucial role in driving meaningful and lasting change, context ensures that the forthcoming data release three years from now does not have a demoralizing effect on those striving to ensure their work is not only tangible and measurable, but sustainable. Simultaneously, data-driven solutions must consider context to thoroughly assess how policies affect underserved Black communities.
DAVID ASIAMAH, PH.D. is Research and Content Development Manager for The Black Wealth Data Center.