The Wealth Gap Facing Black Americans Is Vast—and Vastly Underestimated  

Q: What is the goal of the series of papers you have collaborated on?

Jennifer Richeson: There are a few goals. One was simply to ask the question: What do people think the wealth gap is between Black and White Americans? How accurate are their estimates of the size of the gap? Is there some logic to the estimates people offer?

Our first set of studies demonstrated that Americans vastly overestimate the extent to which current society has closed all of the racial economic gaps, including wealth. Their estimates on the wealth gap were off by 80%. That’s really wrong.

Q: How large is the wealth gap today?

Jennifer Richeson: When we first started doing this work in 2013, the gap was twenty to one. For every $100 dollars in wealth the average White family has, the average Black family had $5. In 2016, the gap closed to 10:1. It’s closed by half—it looks so extraordinary. But that’s possible because it doesn’t take that much to close such a ridiculous gap.

It’s still awful and there’s every reason to believe, based on the latest data from the American Community Survey, it’s going to revert again, because inequality broadly in America has widened again.

Michael Kraus: We also asked people to estimate the racial wealth gap at 12 time points. If a typical White family has $100 how much does a typical Black family have? We present the times in random order. Even so, essentially what you get is that people perceive linear progress towards equality for Black families relative to White families.

In fact, the wealth gap has gotten larger since 1963, the earliest time point we used. The result is that people are overestimating equality in 1963 by 40 percentage points. At the most recent time point, 2016, the estimates are off now by 80 percentage points.

Q: What is the impact of that belief in progress?

Jennifer Richeson: Having asked people about their perception of multiple time points really helps us see there’s an architecture to this. People believe there’s a naturally occurring, sort of automatic, progress toward equality. As if after the civil rights legislation of the 1960s took down the legalized forms of discrimination, we’ll get to equality without having to do anything more—it may be too slowly for some, but we’ll get there.

Some of it is wishful thinking; it feels good to believe things are better than they are. But I think the story that we tell ourselves about progress in general, and especially racial progress, is what’s underlying what we’re finding in our data. That’s a belief in a gradual, steady, linear march towards progress. America is understood as a place that went from slavery to freedom. We understand the story of this country in terms of the successful fights for civil rights. But we’re done with that now and can move on to other fights.

If you remind people about periods of retrenchment or poverty statistics, they’ll say, “Oh, that’s right.” It’s not that people don’t have access to information that is inconsistent with this belief, it’s that this is a really strong, compelling story that we tell ourselves. For most Americans, we think this is the default understanding.

Michael Kraus: People are motivated to see signs in the world that confirm pre-existing beliefs rather than what’s actually there. A large disconnect between belief and reality stands as a large barrier to action. Many of the things that people would really like to have—the dignity of a living wage, access to healthcare—we’re not able to deliver, in part, because of this misperception.

People want to live in an equal society. If you believe we need to make changes to create a society that’s equal, that’s a source of political will. If you see society as already being equal, that’s a reason for inaction.

Jennifer Richeson: If most Americans think that we’ve already achieved equality, why would they support new programs and policies to make things more equal?

I would also say it’s certainly not just a cost to people of color who are on the wrong side of this gap. Inequality creates a societal cost for all of us.

Kraus: A goal of our current work is to uncover the reasons why people overestimate the state of current equality. It could be that people are just bad at estimating things in general. It could be that people have low financial literacy. It could be that people are seduced by narratives of progress, and they want to believe that they live in a society that is equal. Our current work is really about marshaling evidence to find support for one or more of these explanations.

Q: How well do people understand the concepts of wealth and a wealth gap?

Michael Kraus: Wealth can be a difficult concept to get ahold of. If you get into the weeds, economists and accountants may disagree about what exactly should be counted. But for a basic definition wealth is assets minus debts. In our own samples, when we ask people to define wealth, only about 20% of our respondents are getting that right. Most talk about money along with things like values. That’s consistent with the messaging of asset management firms. Their websites have testimonials that highlight happiness, retirement, and providing for your family. Whatever the reason, the study participants don’t understand wealth well.

However, wealth—using that basic definition of assets minus debts—is actually the most important financial indicator. It’s why we focus on it so much. To deal with unexpected financial shocks—an illness in the family that’s not covered by healthcare, a fallen tree in your backyard, a broken-down car that prevents you from going to work—you have to have something saved up in the bank to be able to handle those financial shocks. Wealth is incredibly important for predicting how families can respond to the challenges of everyday life.

Jennifer Richeson: Americans also just don’t want to confront the relationship between wealth and racism. They are part of the same story. Slavery is foundational to our country. Slavery, as it was practiced in our country for many, many, many years was about some people owning property who happened to be other people. Slaves generated wealth. Enslaved people were wealth.

It’s great to think about how far we’ve come from there in terms of progress as a nation. We see the miracle that is this country without acknowledging that the ugly stain of slavery was foundational to the current wealth gap. There has always been a wealth gap in part because certain people who we now consider Black people in the United States were property and could not accrue property.

There are no true explanations of the wealth gap that don’t rest in racism. Even looking at just the last 50 years, you can’t possibly explain why there’s been so little movement without confronting the reality of racism. I get that it’s hard to think about. I don’t really enjoy talking about it either, but it’s the reality.

Q: Do you think that a perception of inevitable improvement plays into the backlash against affirmative action based on a belief that White people are actually the ones who are being discriminated against?

Jennifer Richeson: It plays into it. Those feelings are multiply determined. I’ve done some separate work looking at that, but generally, if you think society is already fair, and in a moment of widespread economic insecurity you perceive others as benefiting from policies that you aren’t, of course you are going to say, “I have the feeling of barely making it. Where are the policies that are helping me?”

That’s true in race and we see a very similar set of misperceptions of gender economic equality. People think the gender pay gap is much smaller than it really is. Even when it’s broadcast very widely in the media, that doesn’t get people to think more accurately about it.

Q: Your research also asked about the wealth gap for other minority groups, including Latinx and Asian Americans.

Michael Kraus: We did and it’s something we want to keep exploring. I think the most important point is that the misperceptions are happening not just with Black Americans but with racial minority Americans in general. People have similarly overly-optimistic views of racial equality.

People estimated that for every $100 in wealth held by a White family, a Black family has $90, when, in reality, that Black family has $10. For Latinx American families the estimate was $75 while in reality it is around $9.50. And for Asian American families the estimate was $95 and the reality is around $85.

Different racial minority groups have different histories of how they arrived in the United States. The beliefs and expectations that lead people to misperceive Asian-American wealth equality are not the same as the things that would lead someone to misperceive Black Americans’ wealth equality relative to White Americans. Doing the work with specific racial groups really matters to better understand that.

Q: How does this work fit in the broader question of inequality?

Jennifer Richeson: We cannot really solve the problems of our age, and there are many, if we do not confront the reality of inequality. The racial wealth gap is one example but the gap between the top 1% and everybody else is a related problem. All of the various inequalities are related problems. To move forward we need to recognize that. Recognizing the racial wealth gaps exist is a critical step to solving things that I think we all agree are not so good.

If I didn’t know that the racial wealth gap existed—which is what most Americans believe now—and someone walked in and said, “We should really consider reparations for the descendants of slaves,” I would laugh that person out of the room. If you try to have that conversation in a space where people have no clue about the actual racial wealth gap, you can’t get past, “What are you talking about?”

You can’t address inequality that people don’t think exists. I think this is just a truism. As long as most Americans believe society is pretty much equal and things are fair any effort at change will be met with resistance.

Interview conducted by Ben Mattison and edited by Ted O’Callahan.