By Julia D. Hewitt and George A. (Sandy) MacKenzie

Insight Overview

The subject of our essay is the impact of educational and labor market discrimination on differences in income and wealth across races and ethnicities. The disparities across the racial and ethnic divides in income are striking (see table 1). Even more remarkable are the disparities in the wealth-to-income ratios (see table 2), and therefore in the disparities of wealth. According to the Federal Reserve’s “Survey of Consumer Finances 2019” (Board of Governors of the Federal Reserve System 2019b), the top decile of households by income accounts for 46 percent of total income, but that same top decile by net worth holds 76 percent of the country’s total net worth. Studies of the impact of racial discrimination on households normally focus on its impact on income, probably because the effects of discrimination in education and in labor market opportunities affect income before they affect wealth. In our essay, however, we first address the issue of the greater disparities that coexist with wealth. We fi nd that these disparities are, at least in part, the result of influences that are not necessarily the direct result of racial discrimination. In part 2 of the essay, we address the impact of educational and labor market discrimination on income.