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Charts of the Week: The racial wealth gap; the middle-class income slump

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Beginning last month and for the next couple of months, Brookings is rolling out new policy ideas in its Blueprints for American Renewal & Prosperity initiative, a series of innovative and implementable initiatives for the new administration in Washington. The charts in this edition of Charts of the Week are drawn from the first two Blueprints themes: racial justice and worker mobility, and economic growth and dynamism.

RETHINK HOMEOWNERSHIP INCENTIVES TO REDUCE RACIAL WEALTH GAP

Fig2Jenny Schuetz writes that the “wealth gap between non-Hispanic white households and Black households is large and persistent,” and that COVID-19 has only worsened this inequity. The median white family, she notes, has eight times the wealth of the median Black family, and five times that of the median Latino or Hispanic family; and home equity is the largest source of wealth-building for middle-class families. Yet in home equity, too, white families outpace non-white families. To close this racial wealth gap, Schuetz proposes two approaches: “First, redesign homeownership subsidies in the tax system to better support moderate-income first-time homebuyers. Second, develop and encourage wealth-building mechanisms outside of homeownership, including short-term and long-term assets.”

THE MULTI-TRILLION DOLLAR RACIAL WEALTH GAP

Figure 2 Shares of US household wealth, Forbes 400 and Black householdsVanessa Williamson also explores the racial wealth gap, noting how centuries of discrimination against Black Americans has left a racial wealth gap of $10.4 trillion. This disparity is closely tied to wealth concentration in contemporary America, she says, where the 400 richest billionaires have more total wealth than all 10 million Black American households (see chart). “Black people in American have been systematically stripped on the wealth they have produced,” she writes. “Only a transformative national agenda can address the racial wealth gap, because the disparity is the product of societal racism, compounded over generations.”

POLICIES FOR THE MIDDLE CLASS

Graph of middle class incomes falling behindRichard Reeves and Isabel Sawhill show that America’s middle class—the middle 60% of the income distribution—has experienced slower income growth than both the bottom and the top quintiles. There are many explanations for this, and many policy solutions, but overall Reeves and Sawhill argue that “middle-class prosperity must be based primarily on rewarding work.”

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