Demographics and geography still determine destiny in the United States

By J. Simpson

Editor’s note: The opinions expressed here are those of the authors. View more opinion on ScoonTV.

In the United States, the line between the haves and the have-nots has become a gaping chasm. Race is one of the biggest indicators of wealth inequality, as white Americans still possess a disproportionate amount of the nation’s wealth. White people own 86% of the nation’s wealth despite only making up 60% of the population.

According to the most recent statistics from the United States Census Bureau, the median household wealth of Non-Hispanic White Americans is $187,300. Black American households only have a median household wealth of $14,100, in contrast, while Hispanic households’ median household wealth is $31,700.

There are numerous factors driving this inequality, from disparities in higher education and home ownership to job opportunities and real estate trends. Wealth and income inequality will only continue to worsen if these issues are left unaddressed.

With that in mind, financial analysts WalletHub dug into recent economic data to rank each state for financial inequality by race, looking at 21 key metrics. 

Key Findings of WalletHub’s Racial Wealth Gap Survey

WalletHub’s racial wealth gap survey examines each state by income gap, poverty rate gap, homeownership rates, and educational attainment. These are then factored together to give each state an overall score. The states and districts are then ranked from worst to best in terms of the racial wealth gap, with the District of Columbia being the worst and West Virginia being the best. 

The 10 States With the Widest Racial Wealth Gap 

Delving into the data adds further insights and nuance into the racial wealth gap. The District of Columbia’s poverty rate is 303.33%, meaning there are three times as many Black people living in poverty as white, despite the fact that the District of Columbia has the highest percentage of the Black population in the entire country, at 45.39%.

Explanations for the racial wealth gap are not straightforward. 60% of the states with the lowest racial wealth gap are “red states,” for instance, defying the idea that the racial wealth gap is solely political. These states are also overwhelmingly white, with a percentage of the white population high above the national average. West Virginia, the state with the lowest racial wealth gap, has a 92.52% white population. Maine is even higher at 93.68% of its population. This raises additional questions – is the racial wealth gap smaller simply because there are fewer Black people within these states or is wealth more evenly distributed here?

The racial wealth gap divide isn’t solely determined by geographic region, either. Some parts of the Deep South, an area with a long reputation of racial discrimination, fare fairly well in terms of the racial wealth gap. For instance, Georgia is ranked #37, with a racial wealth gap score of 38.37%. Georgia has a fairly large Black population as well, though, comprising 32.47% of the state’s population. 

South Carolina’s Black population makes up an even larger percentage of the state’s residents at 42.87%. Judging by the numbers, the number of Black residents seems to be a better indicator of wealth parity than politics or geography.

That doesn’t mean there isn’t wisdom to be derived from looking at other trends, though. The West Coast is above-average in terms of racial wealth, with California coming in at #26, Oregon ranked at #33, and Washington at #34. Likewise, midwestern states make up a worrisome five of the top ten states with the widest racial income gaps. Many of these states have a relatively small Black population, like Minnesota’s 6.34%. It’s hard to say if the racial wealth gap is causing the disparity in population or if the small population causes the racial wealth gap. Either way, policymakers would do well to investigate what’s going on in Minnesota, Wisconsin, Nebraska, Iowa, and Illinois and find out what’s going on.

Homeownership rates are especially important to consider, as they’re one of the largest sources of equity and intergenerational wealth. It’s as Dr. Darrell Hudson, Associate Professor at the Brown School at Washington University in St. Louis, observes “It should be deeply alarming that the zip code that a person is born into determines so much of a person’s life chances, including their life expectancy. Public policy solutions should be place-based solutions that focus on equity would find ways to improve schools and de-concentrate poverty.”

This discrepancy in homeownership creates a downward spiral, further broadening the racial wealth gap. Schools predominated by Black, Asian, and Latinx students receive $23 billion less in funding than their white counterparts, as noted by the Brookings Institute, as schools are usually funded by property taxes.

The homeownership gap discourages Black business ownership, as well, as many business owners use their home equity as collateral to start a business. In light of this fact, policymakers might consider looking into homeownership programs for marginalized communities to help increase opportunities and reduce inequality for future generations.

Causes of the Racial Wealth Gap and Possible Solutions

WalletHub.com concluded their study and analysis by consulting with a number of economic specialists about some potential reasons for the racial wealth gap as well as some potential solutions. They asked six professors, ranging from business to history to law, about why the income gap has increased so dramatically in the last ten years.

They also asked about what kind of policies would best address the widening inequality and whether efforts would better be spent on equality of income or opportunity. Finally, they asked their opinion about the possible effects of inflation, which has been raging in the wake of COVID-19.

Why Has Racial Income Inequality Increased So Dramatically in the Last 10 Years? 

WalletHub.com started off by asking a handful of experts why they thought income equality has spiked over the last decade. They received a number of thoughtful answers. 

Dr. Gwendolyn Purifoye, Assistant Professor of Racial Justice and Conflict Transformation, Keough School of Global Affairs at the University of Notre Dame offered some sociological explanations for racial income inequality. She cites the inability to move in search of greater opportunity and job and housing discrimination as possible sources for the widening gap.

She then goes on to examine some of the potential implications of this lack of opportunity. Housing discrimination can result in unequal access to quality education, for instance, as higher-income neighborhoods tend to have better schools. This, in turn, perpetuates systemic inequality and widens the wealth and opportunity gap for future generations.

Dr. Julie J. Park, Associate Professor at the College of Education of the University of Maryland at College Park, cites skyrocketing student debt, which disproportionately affects Black students, and the rise of for-profit education as possible causes for the divide.

Possible Solutions for the Racial Wealth Gap

WalletHub.com also asked experts about some potential solutions for the racial wealth gap. They were quick to dispel any easy answers while providing some much-needed nuance to the problem.

When asked about the effectiveness of encouraging entrepreneurship programs for marginalized communities, financial analyst Phillip B. Levine advises caution, saying “On the one hand, it has the potential to generate considerable wealth for those who succeed. But many will fail and for them, it could destroy what limited wealth they may have started with.”

He goes on to advise that we need to focus on both the present and the future to address the racial wealth gap. Transfer programs will help to support marginalized communities who are currently struggling while improving K-12 education and access to higher education will help future generations get ahead even further, lessening the gap.

Hudson is similarly wary of entrepreneurship programs, calling them individualized solutions for systemic issues. Instead, he advises focusing on policies to increase equity for marginalized communities, thus lessening the wealth gap, and programs to increase opportunity in all areas, so as not to deprive different regions and neighborhoods of their talent.

He also advises focusing on programs and policies to help ensure future generations of Black and Hispanic Americans have as many opportunities as possible, to help combat the effects of cultural biases and ongoing discrimination. He cautions that Affirmative Action policies are under attack in the judicial branch. The racial wealth gap is only going to continue to widen and deepen if these trends are left unaddressed and unchecked.

Jonathan Feingold, Associate Professor of Law at the Boston University School of Law, similarly recommends focusing on systemic solutions to help counteract ingrained biases, especially since the wealth gap was created by systemic policies in the first place. He cites the racial discrimination against Black farmers in the 20th Century as an example, who lost 90% of their land due to violence, intimidation, and discrimination, often by banks and the U. S. Department of Agriculture. That land would be worth more than $326 billion in 2023.

Feingold goes on to recommend states and local municipalities forming their own commissions, like California’s Reparations Task Force. They may not be enough, on their own, to stem the tide, but they can help to identify and prove ongoing problems plaguing their communities.

The racial wealth gap is bad for everybody. Countries with high rates of income inequality suffer from lower long-term GDP growth rates, higher crime rates, poorer public health, increased political inequality, and lower average education rates. Addressing the racial wealth gap will help lessen the widening chasm in the United States between the Haves and the Have-Nots and create a healthier, more productive society for us all.Subscribe to get early access to podcasts, events, and more!