What Matthew Yglesias Got Wrong About the Black-White Wealth Gap
By: Stacy Becker
Tags: Racism, Inequality, Politics, Economics, Bias

The line-up shows clearly that the wealthiest people are mostly white. This distorts the Black-white wealth gap because of a few super-wealthy white people at the top. So Carney wondered: if I remove the wealthiest 25% of white people, then what does the gap look like? In the graphic, this means he removed from the data set all the blue families to the right of the red line. The yellow (Black) families remain.

But why would one look at wealth that way? Wealth inequality is wealth inequality regardless of race. Just as a minority of (very wealthy) white families exaggerates the overall financial well-being of all white families, doesn’t a minority of Black wealthy families also exaggerate wealth for Black families? Yes, the top 10% of wealth has a far greater impact on average white wealth. The top ten percent pull up the average wealth of white families by nearly $800,000 compared to only $115,000 for Black families. But it pulls it up for Black families nonetheless.

If you compare all families in the bottom 90% of wealth distribution — removing both Black and white families in the top 10% — there remains a sizable gap between Black and white wealth: $340,000 compared to $187,000.* Black wealth is only 55% of white wealth. If you adjust for household size, because Black household size is somewhat larger than white, the gap grows: the per capita difference (used by Carney) places Black wealth at only 48% of white wealth.

Why does the wealth gap persist?

Ygelsias goes on in his blog to offer policy prescriptions to reduce the wealth gap, based on class, not race. This is why it is so important to be on high alert for bias — intended or not — that creeps into the data and analyses we use.

The solutions we offer depend on the problem we see.

Ygelsias describes Carney’s paper as “a detailed evolution of the black/white wealth gap.” The so-called “evolution” took place in a period from 1989–2013. And “the details” are the standard controls for variables like income. Sorry Black folks, you’re not wealthy because you don’t make enough money.

Carney used par-for-the-course economic methods. This way of looking at the world is being challenged by a new subgenre of economics called “stratification economics,” which holds that “racial disparities in income and employment persist over time and across the educational distribution because there is an economic benefit to employers and white workers.”

In “The Economics of Race” Kyle Moore writes that “The primary flaws of neoclassical (economic) explanations for racial income disparities are that they are both ahistorical and apolitical; that is, such explanations do not deal with the empirical, historical circumstances which brought about these disparities, and they do not account for the role of direct political decisions (or the lack thereof) in perpetuating said disparities.”

Using historical and political lenses, the founder of stratification economics, William Darity of Duke University offers a strikingly different take on the Black-white wealth gap:

Until emancipation, 90 percent of African Americans were enslaved; therefore, they were a source of wealth for others but generally deprived of the capacity to acquire wealth themselves. Emancipation brought the promise of the allocation of 45 million acres of land to the ex-slaves…But that promise went unfulfilled as President Andrew Johnson and his allies abrogated the policy of a radical racial land redistribution. Subsequently, African Americans — by dint of extraordinary effort and perseverance — did manage to acquire 15 million acres of land, primarily in the U.S. South, by the start of the 20th century. However, from 1920 on there has been a progressive decumulation of black-owned land due to outright seizure by white terrorists, fraud, theft, and the manipulative use of partition sales tactics by whites seeking to appropriate the property. Thus, the foundation of wealth in the black community literally was destroyed over the course of the 20th century.

Ygelsias, a self-described leftist, makes clear that he is not denying that racism exists. Yet I wonder what kind of conversation he would have with Darity, who concludes: “discriminatory practices to preserve privilege are likely to persist rather than fade out, even in market-based economies, in the absence of conscious policy intervention to address them.”

Solving problems in a complex world obliges us to inquire beyond the horizon point of our immediate knowledge, to unearth our assumptions, to see with clear eyes our biases. If we don’t, it’s all too easy to reach spurious generalizations like “the racial wealth gap is a class gap.”