Falling Behind: How the Wealth Disadvantage of Blacks and Hispanics Grows across the Life Course

In the United States, the wealth advantage of whites compared to both blacks and Hispanics is vast and increases with age. While prior research on wealth gaps focuses primarily on modeling wealth levels, we adopt a life course perspective, acknowledging that wealth is a cumulative outcome and examining wealth accumulation across individuals’ lives. Using data from the National Longitudinal Survey of Youth 1979, we show that whites accumulate wealth more rapidly than blacks and Hispanics throughout their 20s, 30s, and 40s, and the gap grows dramatically in the 30s. Unlike whites, whose annual wealth accumulation grows over the life course, blacks’ and Hispanics’ annual wealth accumulation remains low throughout early and middle adulthood. Thus, Blacks and Hispanics are cumulatively disadvantaged in wealth accumulation in two ways: (1) because their median annual wealth accumulation is always lower than whites’, with each year they fall farther behind in amassed wealth; (2) because the accumulation gap grows with age, blacks and Hispanics lose ground at an increasing rate each year. We find that individual demographic and economic traits, especially income and education, explain about 3/4 of the race gap in total wealth accumulation between ages 20 and 50. Net of individual traits, social origins have modest additional explanatory power: whites’ social origins advantage their wealth accumulation primarily indirectly, via own income and education. Finally, speculatively, we examine the role of characteristics endogenous to wealth – homeownership, employment sector, family structure, incarceration, and county traits – and find that homeownership is likely to be a major contributor to the residual wealth gap.