By William Emmons, Lead Economist, Center for Household Financial Stability
We previously reported encouraging news about racial and ethnic wealth (or net worth) gaps of non-white families compared to white families. The Federal Reserve’s 2016 Survey of Consumer Finances (SCF) shows that racial and ethnic wealth gaps generally decreased between 2013 and 2016.1 However, the survey also showed that overall wealth inequality among U.S. families continued to increase during this period.
A simple way to illustrate wealth inequality is to compare mean (or average) wealth to median (or typical) wealth. A ratio far above one indicates that wealth is skewed toward (or concentrated in) wealthier families. An increase in the ratio indicates that wealth inequality is increasing.
For the entire population, the mean-to-median wealth ratio increased from 6.6 to 7.1 between 2013 and 2016. These ratios are significantly higher than the 1989 ratio, which was 4.0.
The figure below shows the evolution of this ratio since 1989 across races and ethnicities, in addition to all families.
Note first that mean-to-median wealth ratios generally have increased over time among all groups. Thus, increasing wealth inequality is a widespread feature of U.S. family finances.
It’s also clear that wealth inequality within non-white groups is even greater than among whites:
Thus, the 2016 SCF data confirm that the distribution of wealth in the U.S. is rapidly becoming more unequal. Less well-known is the fact that wealth inequality is even higher within non-white groups than among whites.
1See “Survey of Consumer Finances,” Federal Reserve Board, Sept. 27, 2017.