Ethnic disparities in wealth in the United States: evidence from the Survey Of Consumer Finances

Disparities in wealth between Whites and ethnic minorities in the United States are evident and persistent. This work uses data from 1989 to 2019 from the Survey of Consumer Finances - a nationally representative survey - to document differences between the Whites and the two most frequently interviewed ethnic minorities, namely Blacks/African-Americans and Hispanics/Latinos. The absolute and relative gaps in the amount of gross and net wealth are staggering: the two minority groups own cents on the dollars of the Whites. The structure of the families’ balance sheets highlight that the ethnic gap is not just a question of the amount of wealth: the typical portfolio of a White household is not a scaled-up version of that of a Minority household. I analyze the assets and liabilities of families at different levels of income, education and gross or net wealth and find systematic differences in ownership and allocation between Whites and Minorities. The former are much more likely than Blacks and Hispanics to own a house - the most important asset for the median family - as well as a private business. They are also much more exposed to financial markets in terms of stocks, bonds and funds held, thus their incomes are more diversified. Differences extend to the side of the liabilities, where Minorities are closer to Whites than in assets. Debt weighs less on the income of the median Black or Hispanic household but more on its assets, arguably because the two groups are unable to accumulate wealth as Whites do. Not only Minorities are less likely to own a house, they also have lower home equity when they own one. Finally, they are more likely than Whites to have student debt and credit card balances at high levels of wealth. I also discuss the disadvantages that minorities face in approaching the market for credit and report some evidence from the SCF. Besides holdings and debt, the Whites are also better positioned in some factors indicated by the literature as determinants of wealth accumulation and financial well being. They have higher levels of education, better knowledge of financial literacy and earn higher incomes, whether employed or self-employed. They are more likely to receive inheritances and are more oriented towards savings than Minorities. I also document some ethnic differences in family structure, although the effect on wealth is less clear. I conclude the work by performing multiple multi-factor regressions to evaluate the impact and the significance of the analyzed factors on the wealth of US families. Furthermore, I focus on the different extent to which White, Black and Hispanic families are affected, and on the difference attributable to ethnicity when all the other determinants are equal.