wealth distribution essay

What Wealth Inequality in America Looks Like: Key Facts & Figures

For an updated analysis of wealth inequality in the U.S., see U.S. Wealth Inequality: Gaps Remain Despite Widespread Wealth Gains , which was published Feb. 7, 2024.

The following charts help to illustrate the state of wealth inequality in America.

The St. Louis Fed’s Center for Household Financial Stability looks at the relationship between wealth and different demographic characteristics: race or ethnicity, education, and age or birth year. We believe this demographic lens is more informative than looking at wealth by income bands, because while income can (and frequently does) change from year to year, demographics are more stable.

We find that families who are thriving tend to be white, college-educated and/or older. We find that families who are struggling tend to have one or more of these characteristics: black or Hispanic; no four-year college degree; and/or younger.

We also find that many families across the board are striving for more economic security.

Using data from the Federal Reserve Board’s Survey of Consumer Finances, we discuss trends in a series of charts and discuss pathways toward building that security. Dollar values in all figures and text are adjusted with the Consumer Price Index for All Urban Consumers (CPI-U) to 2016 dollars (i.e., inflation-adjusted to represent comparable values or “real terms”).

1) Income inequality has grown.

Income is a fairly common indicator of financial well-being. Let’s examine how income inequality has changed from 1989 to 2016, the earliest and latest years for which Survey of Consumer Finances data are available.

U.S. Household Income Distribution, Top 10% vs. Bottom 50% (pie charts).

Notes: Totals may not equal 100% due to rounding.

Sources: Federal Reserve Board’s Survey of Consumer Finances and authors’ calculations.

Description: This figure includes two pie charts. The chart on the left shows the 1989 share of total pre-tax income for the bottom 50% of income earners, the middle 50% to 90%, and the top 10% of income earners. The values are 15% share, 42% share and 42% share, respectively. The right pie chart shows the 2016 shares of those same groups: a 13% share for the bottom 50% of income earners; a 37% share for the middle group; and a 50% share for the top 10% of income earners.

The charts above show different groups of U.S. income earners:

The bottom 50% — In 2016, households in the 0-50 th percentiles had incomes of $0 to $53,000.
The middle 50%-90% — These households had incomes between $53,000 and $176,000.
The top 10% — Households in the 90 th percentile had incomes of $176,000 or above.

Consider that the U.S. has a total “income pie.” Think of it as all of the pre-tax household income combined—including wages, interest, capital gains, food stamps, Social Security and all other sources of income.

That pie was worth $7.12 trillion in 1989 and grew to be worth $12.88 trillion in 2016.

How has each group’s share of the pie changed over the past three decades? The bottom 50% and middle 50%-90% of income earners have slightly smaller shares of the pie, while the share of the top 10% has grown to half the pie.

2) Wealth inequality is starker.

Income allows a family to get by; wealth allows a family to get ahead.

A family’s net worth, or wealth, is its assets—things like savings, 401(k)s and real estate—minus its debts—things like mortgages, credit card debt and student loans.

In 1989, the total household wealth in the U.S. was $32.87 trillion (2016 adjusted dollars).
In 2016, total U.S. household wealth amounted to $86.87 trillion.

Just like income, we can look at the changing distribution of wealth in the U.S.

Infographic: U.S. Wealth Distribution - Who Owns the Most? (Details in article).

Notes: Dollar values are CPI-U adjusted to 2016 dollars and rounded to the nearest $10 billion.

Description: This figure shows the distribution of total U.S. wealth in 1989 and 2016, with the shares of the top 10%, middle 50%-90% and bottom 50% of families ordered by household wealth. In 1989, these shares were 67%, 30% and 3%, respectively. In 2016, the shares were 77%, 22% and 1%, respectively. A callout indicates that roughly 1 in 10 families in 2016 had negative net worth; that’s up from about 7% of families in 1989. The 1989 population was approximately 93 million families, while the 2016 population was approximately 126 million families.

Wealth inequality in America has grown tremendously from 1989 to 2016, to the point where the top 10% of families ranked by household wealth (with at least $1.2 million in net worth) own 77% of the wealth “pie.” The bottom half of families ranked by household wealth (with $97,000 or less in net worth) own only 1% of the pie.

You read that correctly. If we rank everyone according to their family net worth and add up the wealth of the bottom 50%, which includes roughly 63 million families, that sum is only 1% of the total household wealth of the United States.

Moreover, we can compare how average wealth within each group has changed. These are not the same families being compared over time. Each survey year of the Fed’s Survey of Consumer Finances samples new families, and estimates are weighted to be representative of the entire U.S. population.

In 2016, the average wealth of families in the top 10% was larger than that of families in the same group in 1989.
The same goes for the average wealth of families in the middle 50 th to 90 th percentiles.
The average wealth of the bottom 50% however, decreased from about $21,000 to $16,000.

So, even though the total wealth pie grew, this rising economic tide did not lift all boats. On average, the bottom half of Americans are getting left behind.

An additional sign of economic insecurity? In 2016, more than 10% of families had negative net worth, up from about 7% of families in 1989.

3) The racial wealth gap is largely unchanged.

Aggregate trends can mask financial weakness revealed when splitting groups demographically: for example, the racial and ethnic wealth gaps.

Despite some fluctuation, the large racial and ethnic wealth gaps remain essentially unchanged when looking at white/black and white/Hispanic families. (Note that families are grouped by the survey respondent’s primary racial/ethnic choice.)

In 2016, the typical white family had about 10 times the wealth of the typical black family and about 7.5 times the wealth of the typical Hispanic family.

Black/White Wealth Gap Chart: Median wealth of U.S. families. (Details in article)

Notes: Dollar values are CPI-U adjusted to 2016 dollars and rounded to the nearest $1,000.

Description: This line chart displays the white/black racial wealth gap from 1989 to 2016. The top horizontal line shows the median (50 th percentile) wealth of white families, which was $134,000 in 1989 and $163,000 in 2016. The bottom horizontal line shows the median (50 th percentile) wealth of black families, which was $8,000 in 1989 and $16,000 in 2016. The tops of the dotted vertical lines indicate the 75 th wealth percentile for black families; notably, these never reach the 50 th wealth percentile of white families.

White/Hispanic Wealth Gap Chart: Median wealth of U.S. families. (Details in article)

Notes: Dollar values are CPI-U adjusted to 2016 dollars and rounded to the nearest $1,000. Comparative figures result from using unrounded numbers.

Description: This line chart displays the white/Hispanic ethnicity wealth gap from 1989 to 2016. The top horizontal line shows the median (50 th percentile) wealth of white families, which was $134,000 in 1989 and $163,000 in 2016. The bottom horizontal line shows the median wealth of Hispanic families, which was $10,000 in 1989 and $22,000 in 2016. The tops of the dotted vertical lines indicate the 75 th wealth percentile for Hispanic families; these never reach the 50 th wealth percentile of white families.

By “typical,” we mean a family at the middle or median; in other words, the 50 th percentile of the wealth distribution for that race or ethnicity. This middle wealth value is a useful approximation of the “typical” family’s experience because it is more resistant to extremely high- or low-wealth families than the average.

The figures above show that over a nearly three-decade period, the U.S. has seen very little progress in narrowing racial and ethnic wealth gaps.

In terms of the total wealth pie that we examined earlier—$86.87 trillion in 2016—white families in 2016 owned 89% of it, while black and Hispanic families owned a 3% sliver each.

This is especially troubling given the changing racial makeup of the population. More than 1 in 4 families are headed by a black or Hispanic person, up from 1 in 5 in 1989. Yet their slivers of the economic pie have barely budged, according to our research.

What might be particularly indicative of the magnitude of the racial wealth gap? In no survey year of the Fed’s Survey of Consumer Finances, 1989 to 2016, did the wealth of black or Hispanic families in the 75 th percentile reach the wealth level of white families at the 50 th percentile.

4) The educational wealth gap has grown.

Thirty-four percent of families were headed by someone with at least a four-year college degree in 2016, up from 23% in 1989. This may reflect a growing belief that college helps people get ahead financially.

Indeed, looking at the whole, we find that families with a four-year degree or higher are doing quite well; they had roughly three-quarters of the wealth pie in 2016, up from half in 1989. Four-year college graduates and postgraduates have also seen their median wealth grow in real terms (i.e., after adjusting for inflation).

Educational Wealth Gap Has Grown: Chart shows median household wealth by educational attainment (Details in article).

Description: This line chart displays the educational wealth gap, 1989 to 2016. From top to bottom, the median household wealth values of five educational groups are shown: families headed by someone with a postgraduate degree; a bachelor’s degree; an associate’s degree or certificate; a high school degree or some college (but no degree); and a GED or a high school dropout. In 1989, the median wealth of each group of families was $367,000, $176,000, $94,000, $76,000 and $45,000, respectively. In 2016, the median wealth values were $443,000, $229,000, $93,000, $64,000 and $24,000, respectively. Dollar values are CPI-U adjusted to 2016 dollars and rounded to the nearest $1,000.

On the other end of the spectrum, families with less than a high school degree or at most a GED have about half as much wealth at the median than families with the same education level did in 1989.

The group of families with at most an on-time high school degree (including families with some college experience, but no degree) has also experienced wealth losses at the middle, relative to similar families in earlier survey years.

Meanwhile, the median wealth of families with at most a two-year college degree or certificate has fluctuated, but in 2016 it was very similar to the median wealth of 1989 families headed by someone who’d attained the same level of education.

Taken together, the wealth gap has grown between families who are headed by someone with a four-year degree and families who are not.

5) The generational wealth gap also has widened.

The generational wealth gap has grown, too.

For example, let’s compare a group of younger families headed by 25- to 35-year olds to a group of older families headed by 65- to 75-year olds.

Taking the median, or middle, wealth value of each of those age groups, we see that older families had more than seven times the wealth of younger families in 1989. By 2016, this generational wealth gap had grown: older families had more than 12 times the wealth of younger families.

Older Families Have 12 Times the Wealth of Younger Families - Generational Wealth Gap Chart (Details in article)

Notes: Dollar values are CPI-U adjusted to 2016 dollars and are rounded to the nearest $1,000.

Description: This line chart displays the generational wealth gap from 1989 to 2016. The top line shows the median (50 th percentile) household wealth of families headed by 65- to 75-year olds, and the bottom line shows the median household wealth of families headed by 25- to 35-year olds. In 1989, these values were $155,000 and $20,000, respectively. In 2016, these values were $228,000 and $18,000, respectively.

Older families have more wealth than same-aged families did in years past, while younger families have less wealth. We find that age 60 is a demarcation point. Families headed by someone age 60 or older in 2016 had more wealth than similarly aged families in 1989. Meanwhile, families headed by someone younger than 60 had less wealth than similarly aged families.

My colleagues and I examine this in depth in our recent Demographics of Wealth series .

6) The racial wealth gap is large for college graduates and nongrads.

While college is touted as the great equalizer, the data show that large racial and ethnic wealth gaps remain.

To examine gaps, let’s look at the median wealth of white, black and Hispanic families with four-year college degrees. We’ll also look at the median wealth of white, black and Hispanic families without four-year degrees—from here on out, called “nongrads.” Taking this approach helps us to control for education. Because the sample size of black and Hispanic college graduates is very small in some survey waves, we grouped survey years into an earlier period (1989, 1992, 1995 and 1998) and a later period (2010, 2013 and 2016). This makes long-term trends easier to see. Each family’s wealth was standardized for each survey year and medians were calculated on these standardized wealth values for each period. See the Appendix in the third Demographics of Wealth essay for more detail.

“Nongrads” includes families with at most a two-year college degree, as their wealth outcomes more closely mirror the wealth of families with at most an on-time high school degree than the wealth of four-year college graduate families.

Racial Wealth Gap Large for Non-College Graduates: Infographic Shows Black, Hispanic & White Families (Details in article)

Notes: Dollar values are CPI-U adjusted to 2016 dollars.

Description: This figure shows the comparative median wealth of families headed by someone who has not attained a four-year degree. The left stack of pennies shows that for every dollar of white nongrad median wealth in the earlier period (1989-1998), black nongrad families owned 11 cents and Hispanic nongrad families owned 12 cents. The right stack of coins shows these values in the later period (2010-2016), standing at 12 cents for black families and 17 cents for Hispanic families.

Among nongrads, the white/black and white/Hispanic wealth gaps narrowed slightly between the earlier (1989-1998) and later (2010-2016) periods. This trend is largely due to the decline among white nongrads , whose median wealth shrank from $101,000 in the earlier period to $88,000 in the later period.

At the median, black nongrad families had 11 cents per dollar of white nongrad wealth in the earlier period. By the later period, their wealth had grown to 12 cents per dollar of white wealth.
For Hispanic nongrad families, their median wealth grew from 12 cents to 17 cents per dollar of white nongrad wealth between the earlier and later periods.

Among black and Hispanic families headed by someone with a four-year college degree, the racial wealth gaps were historically narrower than among nongrads.

However, the Great Recession hit them very hard , and in recent years the college boost has been depleted to the point where there is little difference in the racial and ethnic wealth gap among grads versus nongrads.

Racial Wealth Gap Is Large for College Graduates: Infographic of Black, Hispanic & White Families (Details in article)

Description: This figure shows the comparative median wealth of families headed by someone who has attained at least a four-year degree. The left stack of pennies shows that for every dollar of white college grad median wealth in the earlier period (1989-1998), black grad families owned 31 cents and Hispanic grad families owned 34 cents. The right stack of coins shows these values in the later period (2010-2016), standing at 17 cents for black families and 19 cents for Hispanic families.

This is due in large part to the gains of white college graduates. In the later period, black grads had 17 cents per dollar of white grad median wealth, down from 31 cents in the earlier period. Hispanic graduates’ median wealth went from 34 cents to 19 cents per dollar of white wealth between these time periods.

Conclusions

This series of charts illustrates the wide range in wealth outcomes within the United States. Demographic cuts illuminate vast differences otherwise obscured by aggregate statistics.

Demography may not be economic destiny, but it is strongly related to financial outcomes. Ongoing structural and systemic barriers may make it difficult to narrow gaps for some racial and ethnic groups.

Based on past research, here are four recommendations that could help families build wealth.

Help families build a rainy-day fund.

Having cash on hand contributes to financial stability and greatly reduces risk of hardship . These funds can be built through employers, at tax time, through mobile apps, and through innovations such as “prize-linked savings.”

Promote early-in-life investments.

In particular, efforts can be made to expand early education and early savings, such as child savings accounts, which have positive financial and social outcomes . These early investments are likely to have the largest effect on longer-term outcomes, and investing early in children can pay for itself over time.

Examine college costs.

Address the rising cost of college and reduce the need for students to finance post-secondary education with loans. While not for everyone, innovations such as Income Share Agreements , income-driven repayments and College Savings Accounts should be considered.

Support all forms of housing.

Increase the supply of affordable rental housing while promoting paths to sustainable homeownership. Homeownership should be treated as a “capstone” financial event, not a first step; building a diversified balance sheet—with low levels of consumer debts and high levels of liquid savings—should precede and help sustain homeownership.

Covers of the St. Louis Fed's Demographics of Wealth essay series

For an in-depth discussion and additional resources, see the Demographics of Wealth series . Dig deeper into structural and systemic barriers to wealth accumulation here (PDF).

Notes and References

Dollar values in all figures and text are adjusted with the Consumer Price Index for All Urban Consumers (CPI-U) to 2016 dollars (i.e., inflation-adjusted to represent comparable values or “real terms”).
These are not the same families being compared over time. Each survey year of the Fed’s Survey of Consumer Finances samples new families, and estimates are weighted to be representative of the entire U.S. population.
Because the sample size of black and Hispanic college graduates is very small in some survey waves, we grouped survey years into an earlier period (1989, 1992, 1995 and 1998) and a later period (2010, 2013 and 2016). This makes long-term trends easier to see. Each family’s wealth was standardized for each survey year and medians were calculated on these standardized wealth values for each period. See the Appendix in the third Demographics of Wealth essay for more detail.

This blog post was updated Dec. 5, 2019, with additional authorship attribution.

Ana Hernández Kent is a senior researcher with the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. Her research interests include economic disparities and the role of systemic biases and historical factors in wealth outcomes. Read more about Ana’s research .

Lowell R. Ricketts is a data scientist for the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. His research has covered topics including the racial wealth divide, growth in consumer debt, and the uneven financial returns on college educations. Read more about Lowell's research .

Ray Boshara is a former senior advisor and assistant vice president of the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. He is also a senior fellow in the Financial Security Program at the Aspen Institute.

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How the racial wealth gap has evolved—and why it persists.

October 3, 2022

Article Highlights

New dataset tracks evolution of racial wealth gap from 1860 to 2020
Racial wealth gap today is legacy of vastly unequal wealth for Black and White Americans following Civil War
Racial wealth gap has been stagnant for last 40 years due to differences in Black and White households’ wealth portfolios

— W. E. B. Du Bois , The Souls of Black Folk

The dawn of emancipation in the United States saw 4 million former slaves, 90 percent of the Black American population, gain their freedom. But they did so in poverty, as Du Bois describes: A few years prior, they had been counted as wealth, earning and owning nothing in their own name.

After emancipation, proposals to provide former slaves with land so they could survive economically were largely defeated . Thus in 1870, the wealth gap between Black and White Americans was a staggering 23 to 1 . That's equivalent to just $4 of wealth for Black Americans for every $100 for White Americans.

The mission of the Opportunity & Inclusive Growth Institute is to conduct and promote research that will increase economic opportunity and inclusive growth for all Americans and help the Federal Reserve achieve its maximum employment mandate. Connect with us to receive emails with Institute news, insights, and events.

Fast forward 150 years and that gap has narrowed to about 6 to 1—and yet, a significant gap remains: average per capita wealth of White Americans was $338,093 in 2019 but only $60,126 for Black Americans.

In the new Institute working paper “ Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860–2020 ,” former Institute visiting scholar Ellora Derenoncourt and colleagues Chi Hyun Kim, Moritz Kuhn, and Moritz Schularick study the evolution of the Black-White racial wealth gap to understand how it has changed and what forces drove those changes.

“We wanted to see if there was something to be learned for policy: Do we see that certain periods were particularly good, particularly bad in terms of convergence? What conclusions can we draw from that?” Kuhn said about one motivation the author team had for undertaking the research.

Drawing on numerous historical resources, the economists construct a new dataset that fills in around 100 years of missing wealth data, from the 1880s to the 1980s, when modern surveys of wealth began. They then use a model of wealth accumulation to investigate the sources of the wealth gap.

So where does wealth come from? Yesterday’s wealth, mostly. Unlike income, which can change quickly—lose a job, take a new job—wealth builds slowly from interest on previous wealth and new savings from income. For that reason, “it takes a lot of time to build wealth and to close an existing wealth gap, especially if the world around you is not stopping to accumulate wealth,” Kuhn said.

The economists’ analysis suggests that, more than 150 years after the end of slavery, today’s racial wealth gap is the legacy of very different wealth conditions after emancipation. While the White-Black income gap has narrowed over time, differences in Black and White Americans’ capital gains rates and savings rates throughout history have slowed the convergence (closing the gap) between Black and White wealth.

The result: An enduring wealth gap that shows no sign of resolving. “It was interesting for us to see how extremely persistent the racial wealth gap is. We saw a lot of things changing in the U.S. economy in the last 70 years, but the racial wealth gap seems to be pretty ignorant of all that,” Kuhn observed.

Evolution of the racial wealth gap

Tracing 150 years of the racial wealth gap 1 reveals rapid early progress followed by frustrating stagnation (Figure 1).

Dawn of emancipation: 1870 to 1900

The thirty years following emancipation saw rapid narrowing of the racial wealth gap, falling from a ratio of 56 to 1 in 1860 on the eve of the Civil War to 23 to 1 in 1870 following emancipation and 11 to 1 in 1900. (In 2019 dollars, that comes to average wealth of $34,000 for a White American and $3,100 for a Black American.) White slaveholders’ loss of slaves as “wealth” explains about a quarter of this convergence. The rest was due to a higher wealth accumulation rate for Black Americans than White Americans.

This convergence, however, is more a matter of statistics than reflection of meaningful economic or political change. Because Black Americans’ wealth was so low in 1870, even small gains translated to big percent increases in wealth and thus large reductions in the wealth gap, even though the difference in the amount of average wealth held by Black Americans and White Americans remained large.

Unfortunately, this period of rapid convergence was relatively short-lived. Proposals to redistribute property to former slaves, such as General William Sherman’s field order allowing freed slaves to establish 40-acre farms on federal land, ultimately failed to garner sufficient political support, and early enforcement of Black Americans’ rights were similarly reversed. By 1900, a racist economic and social order was largely restored.

Racist resurgence: 1900 to 1930

Between 1900 and 1930, the racial wealth gap narrowed tepidly, at a rate around 0.3 percent a year. During this period, Black Americans’ share of national wealth stayed fairly constant, at 1 percent (Figure 2).

“Barriers to Black economic progress were pervasive in the post-Reconstruction era,” the economists observe. For instance, Black Americans had limited access to financial institutions or credit ; they had little opportunity to purchase land; they experienced the violent destruction of their property; they faced widespread discrimination in education and the labor market. In the South, the vast majority of Black farmers were renters or sharecroppers in an economic system that hindered Black workers’ economic progress because White landlords were able to capture their tenants’ improvements to the land simply by not renewing the lease.

Global upheaval: 1930 to 1960

Wealth convergence picked back up modestly during this period, and by 1960 the gap was 8 to 1. (In 2019 dollars, that translates to average wealth of $76,000 for White Americans and $9,000 for Black Americans.) A closer look at the timing reveals this does not appear to be the result of New Deal economic relief or new social insurance policies, which tended to exclude sectors with large representations of Black workers. Rather, labor market dynamics around the time of World War II led to Black workers moving into higher-paying occupations, notably related to war production and defense, which reduced the racial income gap and led to greater gains in Black Americans’ wealth. This movement was facilitated by President Franklin D. Roosevelt’s Executive Order 8802 , which banned “discrimination in the employment of workers in defense industries or government because of race, creed, color, or national origin.”

Civil rights: 1960 to 1980

The civil rights movement was responsible for the fastest period of racial wealth convergence since 1900. Tireless efforts by Black activists to demand equal rights and protections led to the passage of numerous laws that reduced social, political, and economic discrimination, including the Civil Rights Act of 1964, the Voting Rights Act of 1965, the Fair Housing Act of 1968, and expansions to the Fair Labor Standards Act, which sets federal minimum wage policies.

These legislations helped narrow the racial income gap, which in turn narrowed the wealth gap; it fell from 8 to 1 in 1960 to 5 to 1 in 1980. Figure 2 shows that Black Americans’ share of national wealth started increasing more rapidly in 1960 even as the total U.S. population of Black Americans was also increasing.

Stagnation: 1980 to 2020

And then—convergence stopped. In the 40 years between 1980 and 2020, the racial wealth gap actually increased by the equivalent of 0.1 percent a year. The reasons for this stagnation are discussed in the section “A widening gap: The role of capital gains” below.

Unequal initial wealth, unequal wealth accumulation

The next step in the economists' research is to analyze the causes of the racial wealth gap. To do this, they engage in a thought experiment: What if Black and White Americans started with the radically different levels of wealth in 1870 that they did in real life, but their wealth accumulation rates were identical after that? The resulting wealth gap in 2020 would be about 3 to 1 ($100 dollars of White wealth for every $33 dollars of Black wealth). That’s about half of what the actual wealth gap is today, suggesting that unequal levels of wealth in 1870 are a major source of today’s racial wealth gap.

The fact that today’s racial wealth gap is larger than it would be under this optimistic scenario is due to unequal wealth accumulation rates, which of course haven’t been identical for White and Black Americans, as the brief history above of political and economic exclusion makes plain.

Wealth accumulation can be described as a fairly straightforward equation. It starts with yesterday’s wealth and the interest earned on that wealth (capital gains rate). Add to that new savings from income, which is the product of yesterday’s income level, how much income has changed (income growth rate), and how much of that income is saved (savings rate).

While historical data on these rates is difficult to come by, since at least 1950, White Americans have enjoyed a higher average savings rate and capital gains rate than Black Americans (see Table 1).

What drove wealth convergence, then? The income growth rate. The economists estimate that the average annual income growth rate for Black Americans was larger than that of White Americans from 1870 to about 1980. At that point, income convergence stalled; over the last 40 years, the annual income growth rates for Black and White Americans have been essentially the same.

A widening gap: The role of capital gains

Now that income convergence has stalled, the difference in the capital gains rate experienced by Black and White households is the main factor pushing their wealth apart.

The role of capital gains is particularly important here. The high rate of return to capital holdings over the last 40 years—economic parlance for “stocks have really gone up a lot”—is a leading cause of the wealth dispersion in the United States today. According to analysis by economist Emmanuel Saez and others, wealth has become significantly more concentrated during this period: In 1980, the richest 0.1 percent of Americans—about 160,000 households—owned 7.7 percent of national wealth. In 2020, they owned 18.5 percent.

“Given that there are so few Black households at the top of the wealth distribution,” Derenoncourt and co-authors write, “faster growth in wealth at the top will lead to further increases in racial wealth inequality.”

And that’s what’s happening now. On average between 1950 and 2010, Black households held about 7 percent of their wealth in stock equity; among White households, it was 18 percent (Table 2). The portfolios of White households are also more diversified than Black households, which are concentrated in housing wealth. Housing has appreciated since the 1950s, but stock equity has appreciated five times as much.

“At a more general level,” Kuhn stated, “this research emphasizes how important portfolio choice and investment behavior is. It’s not only about putting money aside, but where you put it.”

Why wealth matters

The distribution of wealth in the United States comes under frequent scrutiny because of how skewed it is—and because wealth is a determinant of social and economic outcomes far beyond what someone can buy.

“Wealthier families are far better positioned to finance elite independent school and college education, access capital to start a business, finance expensive medical procedures, reside in higher amenity neighborhoods, lower health hazards, etc.; exert political influence through campaign financing; purchase better counsel if confronted with the legal system, leave a bequest, and/or withstand financial hardship resulting from any number of emergencies,” Institute advisor William Darity Jr. and Darrick Hamilton wrote in a 2010 article analyzing policies to address the wealth gap.

It matters a great deal, then, that White Americans hold 84 percent of total U.S. wealth but make up only 60 percent of the population—while Black Americans hold 4 percent of the wealth and make up 13 percent of the population. Put another way: The wealth of the richest 400 Americans is approximately equal to that of 43 million Black Americans.

The historical analysis and counterfactual simulations by Derenoncourt, Kim, Kuhn, and Schularick provide useful context for thinking about policies to address the racial wealth gap. Without redistribution, the wealth gap will likely persist for centuries. But redistribution alone, without attending to disparities in wealth accumulation, will see the gap reemerge. These approaches, the economists argue, are complimentary.

They are also necessary if the wealth gap is to meaningfully narrow before another 150 years slip by.

Suggested citation: Lisa Camner McKay, “How the Racial Wealth Gap Has Evolved—And Why It Persists,” Federal Reserve Bank of Minneapolis, October 3, 2022, https://www.minneapolisfed.org/article/2022/how-the-racial-wealth-gap-has-evolved-and-why-it-persists .

1 The economists actually compare Black wealth to non-Black wealth—that is, the average wealth among all groups except Black Americans—because the data does not allow them to separate out the wealth of other racial/ethnic groups. As a check, they compare their estimate of non-Black wealth to an estimate of White wealth in the periods 1860–1880 and 1960–2020; the estimates are very similar. Racial/ethnic groups other than White and Black were quite small in the United States prior to 1950. And because White Americans are the wealthiest racial/ethnic group in the United States, using “non-Black wealth” likely underestimates White wealth and therefore underestimates the Black-White wealth gap.

Lisa Camner McKay is a senior writer with the Opportunity & Inclusive Growth Institute at the Minneapolis Fed. In this role, she creates content for diverse audiences in support of the Institute’s policy and research work.

Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020

Yet another source of inequality: Property taxes

The wealth gap and the race between stocks and homes

The Reporter

Wealth Inequality in the United States

Much attention has focused in the last few years on the issue of inequality. With recent proposals for a direct wealth tax, particular attention has been given to wealth inequality. My work also focuses on this issue. Here, I summarize studies of four different aspects.

First, what are the general trends in wealth and wealth inequality over the last 60 years or so in the United States? I pay particular attention to the role of leverage and asset price movements in explaining these trends. Second, how has the racial wealth gap evolved over time, and what are the factors that account for its movement? Third, how does one account for the fact that certain assets like 401(k)s are tax-deferred? How does this affect the valuation of these assets and how does this impact measured inequality and wealth movements over time? Fourth, how might a direct tax on household wealth impact wealth inequality?

The Role of Leverage

In the first study, I examine wealth trends from 1962 to 2019. 1 My empirical work in this and the next three papers is based mainly on data from the Federal Reserve Board’s Survey of Consumer Finances. In terms of median wealth, the year 2007 stands out as a true high-water mark. Median net worth in constant dollars showed robust growth over 1962–2001, gaining 1.55 percent per year, and rose even faster over 2001–07, at 2.90 percent per year. Then the Great Recession hit like a tsunami and wiped out 40 years of gains. Over 2007–10, house prices fell 24.5 percent in real terms, stock prices declined 26.6 percent, and median wealth was reduced by a staggering 43.9 percent. By 2010, median wealth was at about the same level as in 1969.

However, between 2010 and 2019 asset prices recovered, and median wealth advanced by a robust 41.9 percent. Still, it was 20.4 percent below its 2007 peak. Mean wealth more than fully recovered by 2016 and by 2019 it was up 9.2 percent from its 2007 level.

Wealth grew more vigorously at the top of the wealth distribution than in the middle. Indeed, according to the Gini coefficient and top wealth shares, wealth inequality rose sharply from 1983 to 1989 (the Gini coefficient was up 0.029), remained relatively stable from 1989 to 2007, then showed a steep increase over 2007–10 (the Gini was up 0.032), and a more modest rise from 2010 to 2016. By 2016, the Gini coefficient and the share of the top percentile were at their highest levels of the 57 years of the study period, at 0.877 and 39.6 percent, respectively. However, from 2016 to 2019 there was actually a small decline in inequality, with the top percentile share down by 1.4 percentage points, the Gini coefficient down by 0.008, and the mean wealth of the top 1 percent down by 1.9 percent.

Another notable trend is the sharp increase in relative debt after 1983, with the debt-income and the debt-net worth ratios peaking in 2010 and then receding. The overall homeownership rate rose from 63.4 percent in 1983 to a peak of 69.1 percent in 2004, then fell off to 64.9 percent in 2019. The overall stock ownership rate — either directly or indirectly through mutual funds, trust funds, or pension plans — after rising briskly from 31.7 percent to a peak of 51.9 percent over 1989–2001, fell off to 46.1 percent in 2013. It rebounded to 49.6 percent in 2019, though it was still down from its peak.

The key to understanding the plight of middle-class Americans in the years following the Great Recession is their high degree of leverage, the high concentration of assets in their homes, and the precipitous fall in home prices. This translated into a very high negative rate of return on their wealth (−10.4 percent per year), which largely explains the steep decline in median wealth over 2007–10. High leverage, moreover, helps explain why median wealth fell more than house prices over these years. The high negative rate of return accounted for 61 percent of the collapse in median net worth, with the other 39 percent due to dissaving.

What about the recovery in median wealth after 2010? In 2010–16, the rate of return should have led to a $42,600 increase in median wealth, while the actual increase was $12,200. Dissaving reduced the gain by $30,400. For 2016–19, both the rate of return and saving made positive contributions, explaining 85.6 and 14.4 percent of the gain, respectively.

The large spread in returns between the middle three wealth quintiles and the top percentile — over 4 percentage points — also helps explain why wealth inequality climbed steeply from 2007 to 2010. It is first of note that, as shown in Figure 1, the return on net worth for the middle group exceeded that for the top percentile over the whole 1983–2019 period and for all subperiods except 1983–89 and 2007–10. A lot of theoretical work on wealth inequality assumes just the opposite relationship. In a decomposition analysis of the change in the ratio of the wealth of the top percentile to median wealth, the differential in returns between the two groups accounted for 28.7 percent of the increase in the inequality ratio over the Great Recession, with differences in saving accounting for the rest. The middle class took a bigger relative hit to its wealth from the home price plunge than the top 1 percent did from the stock market decline. There was a modest rise in the inequality ratio from 2010 to 2016. The same decomposition shows that the differential in returns between the two groups — now in favor of the middle group — should have led to a decline in the inequality ratio, while there actually was an increase. The inequality ratio fell a bit from 2016 to 2019. In this case, the rate of return difference — again in favor of the middle group — accounted for 18.2 percent of the decline and the residual accounted for 81.8 percent.

The Decline in Black and Hispanic Wealth

The year 2007 was also a watershed year for both the racial and ethnic wealth gaps. 2 The ratios of mean net worth between Blacks and Whites and between Hispanics and non-Hispanic Whites reached their maximum values, 0.19 and 0.26, respectively. The Great Recession hit Black households much harder than White because Blacks were more highly leveraged and had a greater share of their assets in their homes; the racial ratio plunged to 0.14 in 2010, reflecting a 33 percent decline of Black wealth in real terms. The wealth gap remained unchanged from 2010 to 2019.

Hispanic households made sizable gains on White households from 1983 to 2007, with the mean net worth ratio growing from 0.16 to 0.26. However, like Blacks, Hispanics got hammered by the Great Recession, with their mean net worth plunging in half over 2007–10 and the wealth ratio falling from 0.26 to 0.15. The relative and absolute losses suffered by Hispanic households over these three years were also mainly due to their much higher leverage and greater concentration of assets in homes. Over 2010–16, the mean wealth ratio rebounded to 0.19, where it remained in 2019.

Differential leverage and resulting differences in rates of return on net worth play critical roles in accounting for movements in the wealth of minorities relative to Whites. Blacks and Hispanics had much higher indebtedness and a higher concentration of housing wealth than Whites. In 2007, the debt-net worth ratio among Black households was an astounding 0.553 and that for Hispanics was 0.511, compared to 0.154 among Whites. Housing as a share of gross assets was 54 percent for Blacks and 52.5 percent for Hispanics, compared to 30.8 percent for Whites. The rate of return on net worth for the Black and Hispanic middle groups surpassed that for Whites for the whole period 1983–2019 and for all subperiods except 1983–89 and 2007–10, as shown in Figure 2.

Using a decomposition analysis, I find that capital revaluation explains about three-quarters of the advance of mean wealth among Black households over 2001–07 and 78 percent of the ensuing collapse over 2007–10. Among Hispanics, the corresponding figures are 59 and 57 percent. Differentials in returns account for 43 percent of the gain in the Black-White wealth ratio over 2001–07 and 39 percent of the decline over 2007–10. Over 2010–19, the higher rate of return for Black households should have helped close the racial wealth gap, but this was offset by greater dissaving.

Likewise, disparities in returns account for 33 percent of the gain in the Hispanic-White wealth ratio in 2001–07 and 28 percent of the ensuing drop over 2007–10. Over 2010–16, the higher returns for Hispanic households explain 41.4 percent of their relative gains, but over 2016–19 this effect is neutralized by greater dissaving.

The racial gap in augmented wealth, defined as the sum of net worth, defined-benefit pension wealth, and Social Security wealth, is considerably smaller than that in net worth. The former is defined as the present value of expected future pension benefits and the latter as the present value of expected Social Security benefits. In 2016, while the Black-White ratio in mean net worth was 0.14 and that in median net worth a mere 0.02, the ratio in mean augmented wealth was 0.27 and that in median augmented wealth also 0.27. The ratios in mean defined-benefit pension and Social Security wealth were notably higher, at 0.50 and 0.60, respectively. Whereas the racial gap in net worth widened from 1983 to 2016, the gap in augmented wealth remained largely unchanged.

Taxes and the Revaluation of Household Wealth

The face value of 401(k)s, IRAs, and other tax-deferred assets cannot be directly valued with other components of wealth like houses, stocks, and securities because tax-deferred assets carry a substantial tax liability on withdrawal. 3 For example, an IRA valued at $1,000 can yield considerably less than $1,000 when the asset is “cashed out.” Whether the net rate of return is higher with tax-deferred assets or directly investing in stocks depends on the income level of the investor, the time horizon, and the tax treatment of dividends.

I compare trends in wealth levels and wealth inequality with and without netting out this implicit tax liability. 4 I also consider how netting out income taxes due on accrued capital gains impacts wealth trends for both conventional net worth and augmented wealth over the period 1983–2016.

Netting out implicit taxes on tax-deferred assets and accrued capital gains reduces the growth in net worth and augmented wealth by between 17 and 20 percent [see Figure 3] but has little impact on their inequality. However, it does lower pension wealth and Social Security wealth inequality. The implication is that the use of pre-tax values has led to a considerable overstatement of household wealth growth.

The impact of implicit taxes varies by demographic group. Netting out taxes is generally an equalizing factor with regard to intergroup differences in pension and Social Security wealth, though less so for net worth or augmented wealth. It has a minimal effect on the Black-White ratio in net worth or augmented wealth.

Distributional Effects of Wealth Taxation

I also analyze the fiscal effects of a Swiss-type direct tax on household wealth, with a $120,000 exemption and marginal tax rates running from 0.05 to 0.3 percent on $2,400,000 or more of wealth. 5 I also analyze the wealth tax proposed by Senator Elizabeth Warren with a $50 million exemption, a 2 percent tax on wealth above that, and a 1 percent surcharge on wealth above $1 billion. Based on the 2016 Survey of Consumer Finances augmented with wealth data from the Forbes 400, the Swiss tax would yield $189.3 billion and the Warren tax $303.4 billion per year by my estimates. Only 0.07 percent of households would pay the Warren tax, compared to 44.3 percent for the Swiss tax. However, the effect on wealth inequality of implementing either the Swiss tax or the Warren tax is small. If the policies were in place for a single year, they would reduce the Gini coefficient by at most 0.0005. The effect of both policies on wealth inequality would grow if they remained in place for a long period of time.

The incidence of the Swiss tax differs by demographic group, falling proportionately more on older than younger families, more on married couples than on singles, and more on Whites than on others.

A potential problem stemming from a wealth tax is capital flight. However, by my estimates, the Swiss tax would reduce the average yield on household assets by only 6.2 percent. It would reduce the yield in the top bracket by 9.7 percent. These figures suggest that disincentive effects on personal savings would be very modest. In contrast, the Warren wealth tax could reduce the after-tax rate of return on investments for the top group by almost 100 percent.

Researchers

The Economics of Income and Wealth Distribution

Over the past 20 years, the evolution of income and wealth inequality has taken center stage in both news coverage and academic debates. This virtual issue compiles 11 contributions, published in The Economic Journal , which exemplify how our discipline has addressed questions related to the measurement and modelling of inequality. The issue is organized around three themes. The first theme pertains to the measurement of wealth and income inequality. The second delves into the theoretical exploration of the origins and implications of inequality. The third theme focuses on a specific source of wealth inequality that has garnered attention in theoretical literature: heterogeneity of beliefs in financial markets.

The first set of papers contributes to the measurement of inequality. Milanovic (2002) constructs a novel measure of the world income distribution for individuals in 1988 and 1993, based entirely on household surveys from 91 countries. Over this five-year period he finds a slight increase in inequality in the world. Hammar and Waldenström (2020) estimate trends in labor earnings dispersion across occupational groups between 1970 and 2018, constructing a new database that covers 68 developed and developing countries. Their main finding is that global earnings inequality has fallen over the past 50 years, primarily during the 2000s and 2010s, and that the earnings share of the world's poorest-half doubled. Shifting the perspective to a long-term view, Blanco, Bauluz and Martínez-Toledano (2021) reconstruct Spain’s national wealth from 1900 to 2017. Their study revealed that the housing boom of the early 2000s caused an unprecedented increase in the wealth-to-income ratio, pushing it from historical values of 400-600% to nearly 800% in 2007. Madsen, Minniti and Venturini (2021) also adopt a long-term perspective and measure the wealth–income ratio within a Schumpeterian framework. Analyzing historical data from 21 OECD countries spanning 1860 to 2015, their research uncovered a negative relationship between the wealth-income ratio and wealth inequality with the rate of economic growth, along with positive associations with investment rates in intangible and tangible assets, consistent with Schumpeterian theory predictions.

The second set of papers inspects theoretical explanations and consequences of various dimensions of inequality. Lansing and Markiewicz (2018) use a quantitative growth model to assess the welfare consequences of rising US income inequality, by introducing permanently shifting income shares into a growth model with workers and capital owners. The baseline simulation delivers large welfare gains for capital owners and significant welfare losses for workers. Benhabib, Bisin, and Fernholz (2022) begin with the observed positive correlation between grandparent-child wealth rank, which persists even when controlling for parent-child wealth rank. They show that permanent disparities in returns on wealth account for this phenomenon. This perspective can be viewed as a formalization of a latent factor representation of enduring cultural and institutional factors, as suggested in the political economy and sociology literature. Challe and Ragot (2016) consider the short run implications of inequality in wealth and income. Borrowing constraints, aggregate shocks and uninsurable idiosyncratic unemployment risk imply time-varying precautionary savings and therefore Keynesian type multiplier effects. The novelty of their approach is to propose a class of heterogeneous-agent models with incomplete markets, borrowing constraints and both aggregate and idiosyncratic labor income shocks that can be solved under exact aggregation and rational expectations. Saint Paul (2006) considers the long run personal distribution of income in a world with saturation of needs and shows that technical change can raise earnings inequality and possibly lower absolute wages at the bottom.

The final set of papers focuses on one long-studied force that can create wealth inequality: the heterogeneity in beliefs and how financial market structure affects the dynamics of the wealth distribution. Friedman's (1953) market selection hypothesis suggests that with complete financial markets, agents with incorrect beliefs will see their financial wealth trends towards zero in the long run. Cogley, Sargent and Tsyrennikov (2014) and Cao (2018) revisit this view. Cogley, Sargent and Tsyrennikov (2014) consider an economy where a rational expectations agent and a learning one coexist. They show that when the only traded asset is a risk-free bond, the learning agent accumulates wealth, both agents survive, and the more knowledgeable agent is driven to his debt limit. Cao (2018) shows that when markets are incomplete Friedman’s market selection hypothesis fails, and that the long-run wealth distribution depends on the precise structure of market incompleteness. Finally, Guzman and Stiglitz (2021) study the consequences of heterogenous expectations on macroeconomic stability, as individuals end up basing their consumption on a pseudo-wealth that is divorced from society’s real assets.

Francesco Lippi, Editor-in-Chief, The Economic Journal Franck Portier, Joint Managing Editor, The Economic Journal

All articles in this virtual issue will be Free-to View for a limited time only, until May 2024.

The Measure of Inequality

True world income distribution, 1988 and 1993: first calculation based on household surveys alone, global earnings inequality, 1970-2018, wealth in spain 1900-2017 a country of two lands, wealth inequality in the long run: a schumpeterian growth perspective, causes and implications of wealth and income inequality, top incomes, rising inequality and welfare, heterogeneous dynasties and long-run mobility*, precautionary saving over the business cycle, distribution and growth in an economy with limited needs: variable markups and 'the end of work', focus: the consequences of heterogenous beliefs on wealth inequality, speculation and financial wealth distribution under belief heterogeneity, wealth dynamics in a bond economy with heterogeneous beliefs, pseudo-wealth and consumption fluctuations.

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Wealth Surged in the Pandemic, but Debt Endures for Poorer Black and Hispanic Families

3. How wealth and wealth gaps vary by income

Table of contents.

The range of wealth within racial and ethnic groups
The share of racial or ethnic groups’ wealth held by richer households, not counting the top 1%
Households with no wealth or in debt
How wealth varies by race and ethnicity
The wealth of White households relative to the wealth of other households
Households in the lower, middle or upper tiers of wealth
The wealth of U.S. households by income tier
Racial and ethnic wealth gaps by income tier
Types of assets owned by U.S. households
The value of assets owned by households
The importance of home equity
The debt level of households
How high is household debt?
Acknowledgments
Data source
Race and ethnicity
Household head
Adjusting for inflation
Defining income tiers
Statistical testing

Household wealth or net worth is the value of assets owned by every member of the household minus their debt. The terms are used interchangeably in this report. Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more. Debt refers to home mortgage loans, education loans, credit card balances, and any other loan or credit extended to the household. Net worth is negative when debt levels are greater than asset values. ( Refer to the methodology for more details.)

“Poorer,” “more solvent,” “wealthier” and “richer” refer to a household’s wealth status relative to other households of the same race and ethnicity . Poorer households rank in the bottom 25% when compared with other households of the same race and ethnicity; more solvent households place from the 25th up to and including the 50th percentile; wealthier households from the 50th up to and including the 75th percentile; and the richer are in the top 25%. The bottom 1% and the top 1% are excluded prior to the ranking so extreme values do not affect estimates for poorer and richer households.

Lower, middle and upper wealth tiers refer to a household’s wealth status relative to all other households in the U.S. The middle wealth tier consists of households whose wealth lies between one-quarter to four times as much as the median wealth of U.S. households – between $41,700 and $667,500 in 2021. Households in the lower wealth tier had wealth less than $41,700, and households in the upper wealth tier had wealth more than $667,500. The wealth tier boundaries vary across years. (Dollar amounts are expressed in December 2021 prices.)

Middle-income households are those with an income that is two-thirds to double that of the U.S. median household income, after incomes have been adjusted for household size and difference in the cost of living across areas. This was about $4,800 to $14,300 monthly in December 2021, for a household of three. Lower-income households had incomes less than $4,800, and upper-income households had incomes greater than $14,300. The income tier boundaries vary across years. (Dollar amounts are expressed in December 2021 prices.)

Households are grouped by the race and ethnicity of the survey reference person, or the household head. White, Black and Asian include those who report being only one race and are not Hispanic. Multiracial includes non-Hispanics of two or more races. Hispanics are of any race. American Indian or Pacific Islander households are not covered in our analysis because of small sample sizes.

The wealth of a household depends in part on its income. Here, we look at the wealth of lower-, middle- and upper-income households in the United States and examine whether wealth gaps across racial and ethnic groups are different within each income tier. We find that:

Overall, lower- and middle-income households experienced faster growth in their wealth than upper-income households during the pandemic.
Wealth gaps between White households and Black and Hispanic households are greater among lower-income households.

A dot plot showing the median wealth of lower-, middle- and upper-income U.S. households. In 2021, lower-income households had a median wealth of $24,500, middle-income households had $204,100 and upper-income households had $803,400.

There is a wide gulf between the wealth of lower- and upper-income U.S. households. In 2021, the typical upper-income household had a median net worth of $803,400. This was 33 times as much as the wealth of the typical lower-income household ($24,500). The wealth of middle-income households stood at $204,100, only about one-fourth the wealth of upper-income households.

The separation between upper- and lower-income households was even greater in 2019, when upper-income households had 58 times as much wealth. But the wealth of lower-income households increased at a faster rate during the pandemic – 101% vs. 15% for upper-income households. Middle-income households saw their net worth increase by 29% from 2019 to 2021.

In our analysis, “middle-income” households are those with an income that was two-thirds to double the national median income. This was about $4,800 to $14,300 monthly in December 2021 for a household of three. “Lower-income” households had incomes less than $4,800, and “upper-income” households had incomes greater than $14,300. The income it takes to be middle income varies by household size , with smaller households requiring less to support the same lifestyle as larger households. (Dollar amounts are expressed in December 2021 prices.)

Lower-income households

A dot plot showing the median wealth of middle-income White, Black, Hispanic and Asian U.S. households in 2019 and 2021. Middle-income Asian households saw their net worth increase from $172,400 in 2019 to $309,000 in 2021. Gains for other middle-income households were much smaller.

The median wealth of each income tier conceals considerable variation across racial and ethnic groups within each tier .

In 2021, the typical lower-income White household had a net worth of $55,400, while the typical lower-income Asian household had $40,800. The net worth of lower-income Black and Hispanic households was much less. Black households – with a median net worth of $2,700 – were barely above water financially, and lower-income Hispanic households held only $12,100 in net worth.

Lower-income White households saw their net worth increase by $24,100 during the pandemic, a sizable step up from $31,300 in 2019. But lower-income Black, Hispanic and Asian households did not experience significant changes in wealth from 2019 to 2021.

Middle-income households

A dot plot showing the median wealth of upper-income White, Black, Hispanic and Asian U.S. households in 2019 and 2021. Upper-income Asian and White households had a median net worth of about one million each in 2021. Upper-income Black and Hispanic households had much less wealth.

In 2021, the median net worth of middle-income Asian ($309,000) and White ($255,100) households exceeded the net worth of Black ($74,400) and Hispanic ($100,800) households by large margins.

Middle-income Asian households’ net worth increased by $136,600 from 2019 to 2021. Meanwhile, the net worth of White and Hispanic households in this income tier increased by $47,100 and $37,400, respectively.

The wealth of middle-income households is considerably greater than the wealth of lower-income households. Middle-income Black households had 28 times as much wealth as lower-income households in 2021, although this is more a consequence of the very low level of wealth among lower-income Black households. Middle-income Hispanic and Asian households had about eight times as much wealth as their lower-income counterparts in 2021, and middle-income White households had about five times as much.

Upper-income households

A dot plot showing the median wealth of lower-income White, Black, Hispanic and Asian U.S. households in 2019 and 2021. Lower-income White households saw their net worth increase from $31,300 in 2019 to $55,400 in 2021. But lower-income Black and Asian households did not experience significant changes in wealth from 2019 to 2021.

The wealth of upper-income Asian and White households hovered around the million-dollar mark in 2021 – Asian households had $1.1 million and White households had $923,300 at the median. These two groups were also about as wealthy as each other in 2019.

The net worth of upper-income Hispanic households was close to $350,000 in both 2019 and 2021. Upper-income Black households had a net worth of about $285,000 in both years.

The rise in median household wealth from the middle to the upper income tier is remarkably similar across racial and ethnic groups. Upper-income White, Black, Hispanic and Asian households all had between three to four times as much wealth as their middle-income counterparts in 2021. The balance was similar in 2019, when upper-income households had anywhere from four to six times as much wealth as middle-income households, depending on race and ethnicity.

Differences in wealth between White households and Black and Hispanic households do not go away even among those with similar levels of income. And these gaps can still be large.

Most notably, the median wealth of lower-income White households was about 21 times the median wealth of lower-income Black households in 2021. This was not much different than in 2019, when White households had about 22 times as much. In the lower income tier, White households also had about five times as much wealth as Hispanic households in 2021.

A bar chart showing the ratio of the median wealth of White households to the median wealth of other U.S. households by income tiers in 2019 and 2021. Lower-income White households had about 21 times the median wealth of lower-income Black households in 2021.

Sizable racial and ethnic gaps in wealth persist among middle- and upper-income households. In these two tiers, White households had about three times as much wealth as Black households and double to triple the wealth of Hispanic households in 2021. These ratios were no different than in 2019.

There were no significant differences in wealth between White and Asian households in any income tier in either 2019 or 2021.

Overall, the persistence of wealth gaps across White households and Black and Hispanic households within the same income tiers underlines the role of other factors in creating these gaps. As noted, this list includes, but is likely not limited to, the role of slavery and post-slavery practices , differences in age across groups , immigration status , and differences in inheritance patterns .

The gaps in wealth within income tiers are compounded by the fact that Black and Hispanic households are much more likely than White and Asian households to be in the lower income tier and much less likely to be in the upper income tier. For example, a related study by the Center estimates that 41% of Black adults and 40% of Hispanic adults lived in lower-income households in 2021 , compared with 24% of White adults and 22% of Asian adults. Thus, low levels of wealth are much more prevalent among Black and Hispanic households than among White and Asian households.

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How is wealth distributed around the world?

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This pyramid shows that as of 2015, 3.4 billion people (71% of the world’s adults) are in possession of less than $10,000. Another billion people (21% of the world’s adults) have financial assets of between $10,000 and $100,000. At the very top of the pyramid, 34 million people have a fortune of $1 million of higher, and they collectively control a whopping $113 trillion. By contrast, the 3.4 billion people at the base of the pyramid control just $7.4 trillion, according to the Global Wealth Report from Credit Suisse .

151102-global wealth statista pyramid distribution

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Author: Niall McCarthy is a Media Relations Manager at Statista .

Image: Residents are seen in the Villa 31 slum, which censuses show has grown 50 percent in the past four years to currently house some 40,000 people, near the 100-year-old railway station Retiro in the heart of Buenos Aires, February 9, 2014. REUTERS/Enrique Marcarian.

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Unequal Distribution of Wealth Essay

3 Works Cited

The way money is distributed within the United States is unbalanced, with the majority of the wealthy owning the bulk of the country’s wealth. Wealth can be defined as a person’s assets and monetary gains. This unequal distribution has caused numerous economic and geographical problems, such as how resources are divided among countries, how developed or industrialized a country is in relation to wealth distribution and the wide spread of disease and lack of medical attention due to an absence of money. In this paper I will address the negative and positive aspects associated with wealth distribution. I will explain how resource distribution contributes to an area’s economic growth. I will also discuss varying ways to measure wealth …show more content…

This is due in part because of the unequal wealth distribution. The top one percent of the richest people own forty six percent of the global wealth. This wealth being held by the rich would not be a problem if they were not so selfish with their earnings. The distribution of wealth leads to the subsequent unequal distribution of resources. Some issues this raises are human settlement and population distribution, economic activities, trade and quality of life. Certain indicators can be expended in order to measure a nation’s wealth and they include: Gross Domestic Product (GDP), Gross National Income (GNI) and Human Development Index (HDI). The Gross Domestic Product is the total value of all goods and services. This is a good indicator of what the country is like in relation to their products being sold. The GNI is the GDP plus the income from foreign investors minus the money paid out to foreign investors. The GNI and GDP are not always equal between or within countries. The HDI captures the health, education and income of any given area. It is often a more accurate depiction of what the people are like. The HDI determines what the people are like but in order for citizens to obtain health care, education and jobs, there has to be some sort of equal distribution to ensure that everyone has an equal opportunity to health care an education and a job. America is not exempt from these findings.

Essay about income inequality

33928 Words

Murray, Harry. "Deniable Degradation: The Finger-Imaging Of Welfare Recipients." Sociological Forum 15.1 (2000): 39. Academic Search Premier. Web. 28 May 2013.

Economic Inequality Essay

Each year income increases in the United States. Economic inequality and political inequality may have a connection where our democracy could be affected but americans have the ability to solve this problem. Economic inequality refers to wealth or income between different groups or a society as a whole. There have been past social movements that have tried to improve this problem such as women's suffrage and more. We are still trying to resolve this issue of economic inequality.

Income Inequality in the U.S.a Essay

Income Inequality in America is a problem that’s been going on for decades, and many feel that it hardly exists, the many people that feel that way are highly uneducated, and seem to not really care about this tremendous problem that in one’s eyes really has no end in the near future, in fact it has been gradually rising and one feels that it’s just not fair. Unfortunately, there’s not much that can be done, only of course if the poor class of people decide to actually educate themselves and get a higher education. One says poor class, simply because that’s how they’re classified. There are five types of levels that Americans are classified as, and they are: 1. Upper Class, 2. Upper Middle Class, 3. Middle Class, 4. Working Class, 5. Poor.

potential links between social inequalities and the health of the population

Income and wealth distribution: comparing the differences in levels of income and wealth between different social groups help measure inequalities in society. The income is a regular flow of money earned by someone working or from someone’s benefits, pension or their savings. Wealth is defined on property, shares or other belongings that could be sold to make an income. This is very hard to measure accurately and to

Essay on wealth inequality in america

In today’s capitalist economy, where economic transactions and business in general is centered on self-interest, there is a natural tendency for some people to make more than others. That is the basis for the “American Dream,” where people, if they worked hard, could make money proportional to their effort. However, what happens when this natural occurrence grows disproportional in its allocation of wealth within a society? The resulting issue becomes income inequality. Where a small portion of the population, own the majority of the wealth and the majority of the population own only a fraction of what the rich own. This prominent issue has always been the subject of social tension

Wealth Inequality in the US with Sociological Viewpoints Essay

8 Works Cited

What is wealth inequality? “It is the difference between individuals or populations in the distribution of assets, wealth or income.” [1] In sociology, the term is social stratification and refers to “a system of structured social inequality” [2] where the inequality might be in power, resources, social standing/class or perceived worth. In the US, where a class system exist, (as opposed to caste or estate system) your place in the class system can be determined by your personal achievements. However, the economic and social class that an individual is born into is a big indicator of the class they will end up in as an adult. [3] What are the effects of this wealth inequality in the US and what causes it as well as some possible solutions

Essay On Income Inequality For All

Income Inequality in the United States has been a problem for decades. Since the year 1913 the gap in income inequality between the rich and poor in the U.S. has widened and has been a hot topic for debate. The rich keep getting richer and the poor are getting poorer. Thomas Pogge a German philosopher and a professor at Yale University argue that we live in a world where income and wealth are very unevenly distributed throughout society, thus leading to widespread poverty. Amartya Sen an Indian economist and philosopher of Bengali ethnicity argues that really freedoms should be both the ends and means of human development. Robert Reich a professor at Berkeley University and former secretary of labor under Bill Clinton, makes an fluent and impassioned

Income Inequality in the United States Essay

5 Works Cited

The highest earning fifth of U.S. families earned 59.1% of all income, while the richest earned 88.9% of all wealth. A big gap between the rich and poor is often associated with low social mobility, which contradicts the American ideal of equal opportunity. Levels of income inequality are higher than they have been in almost a century, the top one percent has a share of the national income of over 20 percent (Wilhelm). There are a variety of factors that influence income inequality, a few of which will be discussed in this paper. Rising income inequality is caused by differences in life expectancy, rapidly increases in the incomes of the top 5 percent, social trends, and shifts in the global economy.

The Inequality Of Income Inequality Essay

One of the social issues concerning power, status, and class in American society today is income inequality. The income gap between the social classes has increased drastically throughout the last few decades, creating a significant gap between the wealthy and the poor. This gap has become so large that the middle class has nearly diminished, creating a social class comprised of the rich and the poor. The significant gap between the two social classes is unhealthy for the economy because it provides too much power in the hands of those with high social status.

Income Inequality Essay

Income inequality has affected American citizens ever since the American Dream came to existence. The American Dream is centered around the concept of working hard and earning enough money to support a family, own a home, send children to college, and invest for retirement. Economic gains in income are one of the only possible ways to achieve enough wealth to fulfill the dream. Unfortunately, many people cannot achieve this dream due to low income. Income inequality refers to the uneven distribution of income and wealth between the social classes of American citizens. The United States has often experienced a rise in inequality as the rich become richer and the poor become poorer, increasing the unstable gap between the two classes. The

Currently there are many problems and flaws with the way the Canadian government’s policies deal with healthcare, income inequality and poverty. Time to time changes in policies have been made, perhaps to improve these issues, however, the gap between rich and poor keeps increasing and there is very little improvement in healthcare and the economy. In fact, healthcare keeps on becoming costly. Major issues like income inequality and poverty are not being taken care of by the government. According to Dr. Raphael (2002) poverty is caused by several reasons such as inequality in people’s income, weak social services and lack of other social supports (p.VI). He states, “Poverty directly harms the health of those with low incomes while income

Essay Inequality of Wealth and Income Distribution in America

2 Works Cited

Every American dreams of finding a job that pays well enough so that they may comfortably take care of their loved ones and themselves for years to come. Most Americans hope to find some way to make a living that they enjoy, something that they view as productive. Unfortunately, many do not have this luxury. In our society, a good portion of the population is forced to hold the base of our country in place while hardly being redeemed for their time and effort, and thus the problem of income inequality. Numbers of these people live from paycheck to paycheck, barely getting by, not because they manage their money poorly, but because the value of their time at work is negligible.

Socioeconomic Inequality Essay

Universal basic income, (UBI), has become one our leading topics for a solution towards socioeconomic inequality. Billionaires such as Elon Musk and Mark Zuckerberg, have advanced the idea of going through with UBI (Kaza, 2018). UBI tackles many diversity challenges our society seriously needs solutions too. However, due to the enormity of UBI, it’s important to evaluate our decision to go forward; not only finically but ethically. For governments to implement a UBI, it would take a major overhaul of their welfare and tax systems. For example, the United States would need to spend over 3 trillion dollars a year just to provide a yearly distribution of $12,000 for each person over 18. This does not include illegal immigrants or the cost of running the program. I will evaluate the potential effects and ethics of UBI on minority groups in three areas: gender inequality, social conflict and the effects of automation on the work force.

Income inequality is a phenomenon that is undeniably real in our current world, and more specifically, the present United States. Canon describes how the gap between the elite and the poor has been consistently growing for many years and continues to widen (189). Whether the differences between the top and the bottom are a threat to current society is another story. Does income inequality undermine a democracy? Ray Williams argues that societies are strongest when they have a higher rate of equality while George Will challenges that inequality is the very basis of what make democratic processes. A. Barton Hinkle takes a Libertarian approach to the idea that inequality is threatening to democracy and how it can be fixed. Some threats that each article addressed were economic impacts, civility, and fairness. Overall, there is a definite need to evaluate whether the United States democracy is being threatened due to the continuous rise of the elites and the fall of the working class.

Distribution of Wealth

Wealth has affected american society and evermore has affect the fabric of families. Has the distribution of wealth gotten so out of control that the effect will reverberate for generations to come and as a society can we do something about it.

Wealth Distribution In America Essay

Changes in Wealth Distribution in America – 1950 to Present All of us know and have used to the idea that it’s obvious some people are rich while others are poor because it has been so for many centuries even when people didn’t have any knowledge on economy or finance. It’s impossible not feeling sorry for and wanting to help those who benefited less and poor (bottom 99%) or not feeling envy when talking about those who are wealthy (top 1%). It is the result of unequal wealth distribution among population, it is often called wealth gap. This essay will analyze the rate of changes of wealth distribution in the US since 1950s, try to explain its reasons and give recommendations on fixing the raising wealth gap between the poor and the rich. Nowadays the middle class is disappearing as people becoming too poor while some are getting too rich. Distribution of wealth is the amount of wealth that various groups or …show more content…

1992-2010 data from Wolff (2012). Table 3 represents the share of wealth held by the bottom 99% and top 1% in the United States from 1949 to 2010. Change of wealth distribution is not favorable for the bottom 99% as this class obtaining less and less wealth while the top 1%’s wealth is expanding. The gap between the rich and the poor is increasing. This factor has not only economic drawbacks but social problems are increasing at the same time (Kennickel, 2003). It leads to crimes and unsafety. Wealth inequality in America is increasing specially after the Great Recession of 2008 (Kenworthy & Smeeding, 2013; Allegretto, 2011). “The wealthiest 1% of U.S. households had net worth that was 225 times greater than the median or typical household’s net worth in 2009” (Allegretto, 2011). John Slater (2015) suggests that top 1% will gain more wealth than bottom 99% in 2016 if the government doesn’t take any measures to prevent it.

Income Inequality In America Essay

Based on freedom and equality, America is today the country the most unequal amongst developed countries. Today there is a very big difference between the ideal, what Americans think and the reality of the income distribution. There is only a very small share in the middle class. This is a major crisis in the United States indeed, 1 per cent of the rich have 40 per cent of the country’s wealth.

New Deal DBQ Essay

In the 1920s the American wealth exploded. It brought forward an increase of millionaires by 400% but this in turn buried the already poor Americans into a deeper hole of poverty. The difference in income between the wealthy class, the middle class and the poor class was absolutely massive. In total 60% of all Americans lived at or below the poverty line of $2,000.

1967-1970 Income Inequality

The level of wealth inequality from the years 1967-1970 was higher than the level of income inequality from that same time. It would seem that a higher level of wealth inequality is a standard of the American economy since it was higher than the level of income inequality in all three eras. As for the specific amount of the yearly average wealth controlled by each fractile, using the information from Fig 6, we can see that the top one-hundredth percent fractile was in possession of 72.37% of the yearly average wealth from the years 1967-1970. The next nine-hundredth percent fractile controlled 16.06% of the yearly average wealth from the years 1967-1970. The four-tenth percent fractile after them had 5.95% of the yearly average wealth from

Wealth Inequality In America

It hinders the ability of americans to take risks and investments that could be very beneficial to them in the future, while also limiting the success of the less fortunate by supplying them with limited resources . Wealth inequality inevitably has a major role in america's current poverty level, which in turn could possibly lead to crime. One major benefit of wealth equality would be a significant drop in the current crime rate. Many crimes are committed in low income neighborhoods.

Wealth Gap Analysis

As outlined in chapter 10 of the course text, inequality in housing and wealth is a major problem. The United States is described to be the most unequal countries in the western hemisphere. But with the inequalities when it comes to wealth, the United States is one of the richest countries in the world. Wealth is the sum total of a person’s assets. These assets include, cash in the bank and value of all properties, not only land but houses, cars, stocks, and bonds, and retirements savings.

Racial Wealth Inequality

The graph notes that in 2011 the median white household held an average of $111,146 in accumulated wealth holdings, compared to the median black household that only accumulated an average of $7,113 wealth holdings (Traub and Ruetschlin). Thus, highlighting the obvious disparity of wealth in the United States between the two which reveals an unmistakable social inequality. As from the statistics noted on the graph, black households are shown to only hold six percent of the wealth owned by the white households leaving them at a great disadvantage as the wealth gap between the black household and the white household on average had a wealth disparity of $104,033 (Traub and Ruetschlin). Hence, in 2011 for every $15.63 a typical white family owned as an accumulation of wealth in the U.S., a typical black family only owned $1 (Traub and Ruetschlin). Consequently, demonstrating the uneven distribution of wealth within the United States.

Essay On New Money In The Great Gatsby

Economic crisis and the growing gap between the wealthy and the remaining “99%” is a massive controversial topic in today’s world. The divide between the wealthy and the poor only continues to grow. Instead of being redistributed, money is passed along families, staying for generations. This leads to divide even within the wealthy, between the new and old money. Though both have wealth, old money is often seen as more respectable and comes from inheritance, while new money is often earned or stolen.

The Problem Of Wealth Inequality In America

Wealth inequality in America is nothing new. It has been growing more and more over the decades. The rich are becoming richer and the poor are becoming poorer. Imagine, people are having to get up at six o’clock every morning and drive back and forth across town to work at three jobs they hate. People have to work multiple jobs because most places only hire part time and pay minimum wage.

Effects Of Income Inequality In The United States

The United States exhibits a wide difference of wealth distribution between rich and poor people, which is larger than any other major developed country.

Essay On Inequality In America

Wealth and Inequality in America Inequality The inequality in America has increased over time; the gap between the rich and the poor has become a problem that many Americans don’t see. Inequality is the extent of income which is distributed unequally among the citizenry. The inequality of the United has a large gap between the poor and the rich making it unfair to the population, the rich are becoming wealthier and the poor remain poor. The article “Of the 1%, By the 1%, For the 1%”, authored by Joseph E. Stiglitz describes that there is a 1 percent amount of American’s who are consuming about a quarter of the United States income in a year.

Wealth Inequality In America Essay

The solution to this problem is to slightly raise the minimum wage so the lower class will be able to gain wealth. In America the difference of wealth between the top tenth of the one-percent and the other 99% is astounding. People in the lower classes can work for wealth their entire life and barely make a

Imperialism Research Paper

In the US, the control of the wealth by the top 1 percent of the population had remained genuinely stable throughout the twentieth century, however in the 1970s it plunged quickly as asset values collapsed. After the implementation of neoliberal policies in the late 1970s, the share of national income of the top 1 percent of income earners in the US soared and reach 15 percent by the end of the century. The top 1 percent of income earners in Britain have doubled their share of the national income from 6.5 percent to 13 percent since 1982. Extraordinary surges in income inequalities and wealth have taken place in China as it has embraced free-market-oriented practices. The influx of privatization in Mexico after 1992 catapulted a few individuals almost overnight into Fortune’s list of the world’s wealthiest people.

Economic Inequality In America Essay

The problem with the widened wealth gap is that the inequality may harm the quality. Meaning that those in the higher classes see it as you can use the money with no restrictions. However, economist believe that the “relationship between inequality and economic freedom, with the possibility that policies that are meant to reduce inequality will reduce economic freedom, which will then only make inequality worse.”

Space Exploration Argumentative Essay

The distribution of wealth is so off in this country

Essay On Wealth Inequality

Introduction All over the world, there is an obvious contrast between the living standards and lifestyle of the rich and the poor. Moreover, there is a large gap between the populations of poor and wealthy. This is known as the Wealth Gap, and it is caused by Wealth Inequality. Wealth Income/Inequality is defined as “The unequal distribution of assets within a population.” Wealth is defined as more than just the amount of income a person has, but instead the value of a person’s assets.

More about Wealth Distribution In America Essay

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Reinstating the SATs Will Only Make Rich Kids Richer

Dartmouth College Brings Back Standardized Test Requirements For Applicants

A t America’s wealthiest colleges, the SAT is back with a vengeance, and it’s easy enough to see who will suffer: socioeconomically disadvantaged students of color.

Over the past few weeks, Dartmouth , Yale , Brown , and Harvard have all announced that they will require standardized test scores from all applicants next fall after suspending their use during the pandemic.

Between the spring of 2020 and the winter of 2021, the number of four-year universities and colleges with test-optional policies doubled from 713 to 1,350 including, notably, all eight Ivy League schools. Colleges touted the shift as progressive. “Students have never been treated as numbers,” Colorado College posted on its website. “Our test-optional policy allows our team to identify the most qualified candidates for admission while also increasing access for first-generation, low-income, and traditionally underserved students.” Even Harvard was on board. “People somehow think that if you don’t have test scores it’s very hard to evaluate an application, but you have teacher reports, you have grades,” Harvard’s admissions dean Bill Fitzsimmons said in 2022. “There’s an enormous amount of academic information.”

In the wake of the Supreme Court’s decision in SFFA v. Harvard , which effectively ended race-based affirmative action, it was possible to envision career-defining standardized testing heading for the scrap bin of history, too. After all, the SAT and ACT have long been known to correlate closely with wealth. One recent study found that students from families in the top 1% of the income distribution are 13 times more likely than students from the bottom 20 percent to score 1300 or higher on the SAT. Just 2.5% of students from the lowest income quintile manage to reach 1300.

If colleges wanted to preserve diversity—and could no longer consider an applicant’s race—surely they could no longer place great weight on a metric that functions principally as a marker of the applicant’s wealth.

Not so fast.

Elite colleges are whistling quite a different tune than they were just two years ago. The reimplementation of standardized testing has coincided with a spate of personal anecdotes , research , and articles extolling their putative benefits. Christina Paxson, the president of Brown University, recently touted the SAT and ACT for revealing “useful information about whether students will, on average, be academically successful at Brown.”

Read More: I Took the SAT Again in My 50s. Turns Out I Had Learned Nothing

One could understand the need for standardized testing at public colleges, where more than a third of entering students fail to graduate within six years. But it’s a curious argument to be advanced by Brown, where the six-year graduation rate is 96% and for Pell Grant recipients is 93%.

Another line of defense is that the SAT is the best friend of the downtrodden. Harvard economist David Deming said , “My worry is that if we get rid of the SAT, you’re getting rid of the only way that a low-income student who’s academically talented has to distinguish themselves.” It’s again a curious argument to be made, especially by schools like Brown and Harvard, each of which counts itself among the 38 American colleges where more students come from families in the top 1% of the income distribution than the bottom 60%. This is true even though Brown has an endowment of $6.6 billion and Harvard the nation’s largest— $50.9 billion .

It's even more curious, still, given that in the same letter in which Paxson announced the return to standardized testing, she reaffirmed Brown’s commitment to early decision—which has long been known to hurt poorer students who can’t afford to commit to a college without comparing financial aid packages—and to the preference it affords to the children, of alumni, donors, faculty, staff, and athletic recruits—pathways that overwhelmingly benefit rich, white applicants, otherwise known as “ALDC” applicants. At Harvard, for example, 43% of white students are “ALDC.” Research shows that about three quarters of these students would have been rejected without their ALDC status.

Read More: The Case Against Private College Admissions Counselors

So what’s really going on?

To understand, one need only take a closer look at the most widely cited study by Deming and his colleagues Raj Chetty and John Friedman. Standardized test scores, the story goes, are a much better predictor of college success than high school GPA. What are their principal markers of “college success?” Attending an “elite graduate school” and “working at a prestigious firm.” The outcome they’re looking at is the accumulation of wealth not knowledge. Is it any surprise that rich kids both outperform lower-SES kids on the SAT and at getting investment banking jobs at Goldman Sachs and consulting jobs at McKinsey?

What if these researchers and college administrators instead adopted this definition of success: the student maintained a college GPA of over 3.0, learned and grew as a person, and got a significant benefit in terms of economic mobility? By this standard, virtually every socioeconomically disadvantaged kid admitted to one of these prestigious, highly endowed colleges is a success.

But this interpretation of the data and definition of the object of college would be decidedly inconvenient and mask the true object of elite colleges: to make rich kids richer.

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Wealth Distribution Essays

Profit and privatization: examining the canadian world view through the lens of government and taxes, economic inequality in the united states, addressing income inequality through progressive tax reform, popular essay topics.

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The Relationship Between Wealth Distribution and Crime Rates Proposal

Human society is built on the tenets of cooperation to achieve mutual benefits and positive developments. However, individuals tend to exploit one another due to inequality, resulting in unjust distribution of resources. Violent crimes describe incidents where people take advantage of others using force, threats, or physical harm. Compared to other forms of crime, violent criminal offenses are highly prevalent in economically marginalized areas than in wealthy societies (De Courson et al. 2). Hence, this essay explains how unequal wealth distribution is associated with desperation, and in turn, high crime and violence rates. In addition, it will propose some solutions to counter adverse developments. Unequal wealth distribution and economic inequality is one of the most complex phenomena in society as institutional standards advocate for integrity and giving back to the community. High crime rates and violence in society are some of the disparities fuelled by these inequalities.

Unequal Wealth Distribution and its Relation to High Crime and Violence Rates

Income inequality is a social disparity that has garnered increased interest over the years because of the ever-increasing gap between the rich and the poor. Saez et al. suggest that only 1% of Americans hold a majority of the total income share while the number of people living under the poverty line continues to increase (13). Consequently, the unequal distribution of wealth contributes to the plight of these individuals as it limits them from accessing basic needs like adequate and nutritious food, favorable living conditions, healthcare, and economic benefits. Individuals living under such conditions are exposed to factors that interfere with their comfort as they create social tension, feelings of unfairness, and desperation (De Courson et al. 8). In turn, these individuals may lash out against others who they perceive are having an easier time, resulting in high crime and violence. Thus, the increasing gap in wealth distribution is a social problem that requires fast and practical solutions to prevent a potential crisis.

Supporting Arguments

There are two widely adopted theories as to why income inequality and unequal wealth distribution affect societal outcomes like trust between individuals and crime. The first theory points out to the composition of individuals in the community (Anser et al. 10). In unequal societies, individuals in poor communities live under severely detrimental conditions than in areas where wealth is averagely distributed because the dispersion from the mean average on either side is great (Anser et al. 17). In the US, the relationship between unequal wealth distribution and crime rates is mediated by poverty levels within a given area. As a result, areas that are less socio-economically developed register higher levels of crime because of the poor conditions that people are forced to survive under. De Courson et al. suggest that changes in crime rates in these regions over time are correlated to changes in socio-economic prospects (9). Thus, these researchers support that unequal wealth distribution is correlated to crime and violence due to poor socio-economic developments and low living standards.

In addition, psychosocial influences interfere with individuals’ judgment and predispose them to differences that alter their state of mind. In other words, individuals exposed to disparities as a result of unequal wealth distribution and poverty are exposed to diminished living standards and forced to deal with stressful issues, putting them at risk of mental disease (Anser et al. 12). Consequently, these conditions can increase their competitiveness, self-serving attitudes, and anxiety, encouraging them to engage in crime or violent acts to alleviate their stress and financial problems. Moreover, individuals living under stressful conditions are at higher risk of abusing narcotics and other drugs that alter their mental functions, which is one of the leading facilitators of violent crimes (Papachristos et al. 1062). Hence, the more severe these issues, the more individuals are inclined to engage in violent habits and crime.

Scholars also adopt a risk-reward approach to explain why crime rates are higher in regions with economic disparities. According to Anser et al., the levels of crime and violence in the community depend on the difference between the risks or costs and potential gains (12). Thus, the penalties associated with apprehension by law enforcement influence the occurrence of crime in some areas as strict regulations and a robust police force hinder potential criminals from carrying out their acts (Coccia 12). Nevertheless, unequal wealth distribution facilitates higher crime rates in that they interfere with the difference between the risks of crime and potential rewards (Anser et al. 13). In other words, police officers may play a critical role in limiting crime in society by apprehending criminals. However, a notable gap between the rich and the poor increases the rewards of violent crimes and erodes their risks, thus encouraging perpetrators to engage in crimes and associated atrocities. As a consequence, unequal wealth distribution can lead to higher crime regardless of law enforcement efforts to limit criminal activities.

Counterarguments

Some individuals hold that unequal wealth distribution does not increase crime rates. Instead, several factors come into play, thus encouraging individuals to engage in violent crimes. According to Imran et al., a wealth of literature points to income inequality as the main facilitator of violent crime. Nevertheless, researchers fail to acknowledge the impact of income levels, and poverty rather than income inequality (54). The researchers argue that cross-national studies investigating crimes like homicide fail to control variables like poverty, which is one of the most notable predictors of crime in the US. Although there is evidence to support a relationship between crime rates and income inequality, critical studies using similar data sets proclaim that income inequality is insignificant when poverty is aggregated in the regression model (Imran et al. 69). Thus, these studies purport that poverty levels should be used to explain violent crime rates and not income inequality.

Similarly, scholars suggest that criminals in society are less intelligent than others who choose to stay away from crime, which translates to their IQ and education levels. According to Odabaşi, low intelligence and poor performance in school are indicators of future criminal behavior since they predispose individuals to factors like stress, depression, drug abuse, and high-pressure environments (1224). People’s educational achievement is related to their intelligence quotient (IQ) as individuals with low IQ are unlikely to comprehend the consequences of their actions. Similarly, the US Department of Justice reports that a typical criminal in the US, from data collected in prison facilities, is unemployed, under-educated, and lives in poverty (Odabaşi 1242). Hence, researchers attribute high crime rates to low IQ, associated with poor educational performance.

Although poverty and low IQ are reasonable arguments to support that unequal wealth distribution is not correlated to violent crimes, it is critical to alter the perspective and acknowledge the main cause of these disparities. Unequal wealth distribution results in economic inequalities that disadvantage individuals receiving minimum wages and the unemployed. To put it in another way, individuals controlling vast amounts of wealth have access to additional resources and high-quality services due to their high living standards. On the other hand, populations that have access to minimum resources struggle to make ends meet and only prioritize critical issues in their societies (Coccia 16). As a result, they lose out on quality educational opportunities, resulting in high levels of unemployment and substandard living. Subsequently, these factors facilitate their negative and impulsive behaviors towards others.

Recommendations

Reducing violent crime rates in marginalized communities is a challenging task for law enforcement personnel. Judging by the number of individuals incarcerated for violent crimes like robbery, assault, and murder, the situation is getting worse as prisons are overwhelmed. Although instilling fear in would-be criminals by implementing stern regulations and reparations against violent crimes can help deter its prevalence, these solutions are short-term as they do not provide people in the community with the motivation to change their ways (Hazra et al. 32). Therefore, the most practical solution is to empower individuals in these communities by providing them with the resources they need to develop. Inequality and marginalization are vices deeply rooted in human society. Thus, it is essential to address these issues and establish solutions to lend a hand to the disabled, marginalized communities, and individuals living under the poverty line.

Focusing on remuneration policies can also help the government to channel more money into marginalized areas. Most CEOs and top officials in the US receive abnormally high salaries, coupled with absurd organizational benefits (Saez et al 14). On the other hand, individuals who engage with vital organizational processes, low-level employees, and subordinate staff walk home with insufficient pay (Hazra et al. 48). Unequal wealth distribution alleviates individuals’ levels of poverty as the employed people, responsible for the region’s economic stability and continuous advancement, do not have sufficient access to finances and resources (Anser et al. 11). Therefore, revisiting remuneration policies to provide all workers with reasonable pay according to their employment structures, incentives, and benefits like additional healthcare coverage can help alleviate their issues and allow them to support economic development in their areas.

Economic inequality is characterized by complex facets as it goes against human and organizational standards advocating for integrity and community development. High crime rates and violence are fuelled by these inequalities, resulting in higher number of cases in marginalized areas. These inequalities are propelled by factors like discrimination, racism, a wide income gap, the lack of education opportunities, unemployment, and the negligence of leaders and the government. In turn, some people struggle to make ends meet while others have excess money to spend. Unequal wealth distribution has social and psychological implications as it contributes to feelings of unfairness, encouraging suffering people to retaliate. Moreover, it exposes individuals to poor living conditions and detrimental factors that interfere with their judgment. As a result, these individuals occasionally engage in violent crimes, thus driving up crime rates in these areas. Nevertheless, empowering these individuals to access better educational and personal development opportunities can facilitate improvement and diminish crime. Similarly, revising remuneration policies to provide middle-class individuals and employed workers financing opportunities will allow them to spend more on development. Nevertheless, addressing social issues like racism, discrimination, and marginalization is the first step toward achieving equality.

Works Cited

Anser, Muhammad Khalid, et al., “Dynamic linkages between poverty, inequality, crime, and social expenditures in a panel of 16 countries: two-step GMM estimates.” Journal of Economic Structures, vol. 9, no. 1, 2020, pp. 1-25. Web.

Coccia, Mario. “Economic inequality can generate unhappiness that leads to violent crime in society.” International Journal of Happiness and Development, vol. 4, no. 1, 2018, pp. 1-24. Web.

De Courson, Benoît, and Daniel Nettle. “Why do inequality and deprivation produce high crime and low trust?” Scientific Reports, vol. 11, no. 1, 2021, pp. 1-11. Web.

Hazra, Devika, and Jose Aranzazu. “Crime, correction, education, and welfare in the US–What role does the government play?” Journal of Policy Modeling , vol. 44, no. 2 2022, pp. 474-491. Web.

Imran, Mohammed, et al. “Does poverty lead to crime? Evidence from the United States of America.” International Journal of Social Economics , vol. 45, no. 10, 2018, pp. 1424-1438. Web.

Odabaşi, Suzan. “Mental wellbeing and economics of crime: A county-level analysis in the US.” Yaşar Üniversitesi E-Dergisi, vol. 16, no. 63, 2021, pp. 1218-1236. Web.

Papachristos, Andrew V. et al. “Understanding the crime gap: Violence and inequality in an American city.” City & Community , vol. 17, no. 4, 2018, pp. 1051-1074. Web.

Saez, Emmanuel, and Gabriel Zucman. “The rise of income and wealth inequality in America: evidence from distributional macroeconomic accounts.” Journal of Economic Perspectives, vol. 34, no. 4, 2020, pp. 3-26. Web.

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