Equity research

Addressing the Wealth Gap: Study Shows the Movement Toward Equity Has a Long Way To Go

Equity isn’t limited to equal pay. While the battle continues to get equal pay as a standard for marginalized groups, data shows that it will take a much more concerted effort toward addressing historical issues related to generational wealth.

A study from INROADS looked at the wealth profiles of individuals who had completed the nonprofit organization’s process focused on pathways to corporate leadership for underrepresented groups. It compares the subject’s wealth profiles to that of college-educated whites.

The Importance of Education

The primary mechanism that has been used to address equity gaps has been education, particularly access to higher education. It’s no secret that higher-paying jobs require college degrees, and as more members of marginalized groups have attained a college education and entered the middle class, you might suspect the wealth gap has closed, but that simply hasn’t been the case.

Data shows that for households of color, economic wellbeing on the level of similar white families remains elusive. In the end, a college education isn’t enough to close that gap. In 1968, a typical middle-class Black household had $6,674 in wealth compared to $70,786 for an average middle-class white household. Current data shows those numbers have just inflated, with net worth coming in at $24,100 for Black families and $188,200 for white counterparts.

Since the late 1980s, the net worth of the average white family has progressed at a far greater rate than the net worth of Black families, even in households with similar income levels. The study revealed that even among those in the top 10% of income brackets, the gap persisted as white families in this group averaged $1,789,300 in net worth versus $343,160 for Black families.

While few researchers doubt the value of a college education in opening doors to professions that create opportunities for long-term success, there is a legitimate concern that if it is not addressed beyond equal pay and education, this gap will remain for generations to come.

Effects Over Time

The persistence of the wealth gap is concerning due to its impact on generations down the line. Without that same level of wealth, Black parents are less equipped to finance their child’s education or help them purchase their first home, both of which can help young people control their debt levels early in life.

This intergenerational wealth inequality, therefore, is compounding over time. Saddling a child with student debt or greater amounts to borrow when acquiring a first home means the family has fewer resources for activities that help grow additional wealth, such as entrepreneurial endeavors or investments.

Beyond that, there’s the effect of what the study refers to as “network poverty.” In other words, despite their educational and financial achievements, people of color are less likely to have individuals in their social networks who can provide financial advice or loans. Similarly, people of color are less likely to have connections who can help with further education, access to high-paying jobs or starting a business of their own.

Individuals from these groups may also feel a sense of responsibility to help elevate those around them and, as a result, may be burdened with more significant financial weight than counterparts from more well-to-do networks.

“Racial wealth gaps are the product of gaps in opportunity, income, job benefits, the ability to accumulate savings, the intergenerational transfer of wealth, as well as advantages that accrue by virtue of social networks,” the study said. “In each of the areas mentioned, the circumstances of the past have resulted in continuing and even growing racial/ethnic wealth gaps.”

Read the Full Study Here!

Key Findings

  • With a college degree, white households earn 44 % more than Black households with a college degree
  • Without a college degree, white households earn 41% more than their Black counterparts
  • 71% of White families own homes compared to 41% of Black families and 46% of Hispanic families
  • Among INROADS alumni, homeownership is 76%.

The Impact of INROADS

The study also aimed to assess the impact of the INROADS program. Results indicate that INROADS alumni are advantaged, with 40% of them possessing a net worth of more than $500,000. Comparatively, only 18% of all households and 8% of non-white families have reached that level of wealth.

The program focuses on economic mobility to reduce or eliminate racial wealth gaps. It does so through prioritizing early career placement, entry into high-income fields, establishing career networks and early homeownership.

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