Racial Wealth Gains and Gaps: 9 Economic Facts about the Disparities Survey

FREDERICK MARTIN: Good morning, everyone. I'm Fred Martin, and I serve as chief financial officer here at the Federal Reserve Bank of Chicago. And I want to thank you all for joining us for this event today, Racial Wealth Gains and Gaps, Nine Economic Facts About the Disparities. The racial wealth gap in the United States is an important economic topic. Every three years, the Board of Governors of the Federal Reserve System releases the Survey of Consumer Finances. The data from the most recent survey was released in October of 2023 and includes data on changes in the American Family finances between 2019 and 2022.

When looking at averages, estimates are that the typical white household has roughly six times as much wealth as a typical Black household, representing a wealth gap of some $240,000. The 2022 survey is the first in the data series history to provide data specifically for Asian-American households and revealed that Asian-American households have significantly more wealth than households of other racial and ethnic groups.

It is important to understand how wealth and income gaps came to be, what factors contribute to their continuation, and what policies can be put in place to narrow them. As part of that big project, we have a great program for you today. Kristen Broady, the Director of the Chicago Fed's Economic Mobility Project and Anthony Barr, Research and Impact Director for the National Bankers Association Foundation, will start us off with an overview of some of the major economic factors that impact the racial wealth gap.

Following the research presentation, we'll have a fantastic panel of experts lined up to discuss the work and other topics important to understanding and addressing the wealth gap. They'll also offer some thoughts on a few questions that we received in advance of this event. I should note that a recording of today's event will be posted on our website as well as a meeting summary. With that, let me turn things over to Kristen and Anthony. Kristen?

KRISTEN BROADY: Thank you so much Fred for that introduction.

ANTHONY BARR: Thank you, excited to be here today.

KRISTEN BROADY: Going to share our presentation here. All right. So again, I want to thank Fred and Anthony. It is always a pleasure to work with you, and thank you for joining me in this morning for this presentation. I'd also like to recognize our other coauthors, Darlene Booth-Bell and Lucas Cain. So Anthony and I are going to share our research on the racial wealth gap and nine economic facts about the disparities.

On March 14, 2020, the US declared a public health emergency due to the onset of the COVID 19 pandemic. The early months of the pandemic saw a brief but sharp recession, which included a large spike in the unemployment rate. That rate increased from 4.4% in March of 2020 to 14.8% in April of 2020. Congress acted to pass legislation to provide stimulus and relief to provide a social safety net for people. In July of 2020, the unemployment rate returned to its prepandemic level of 3.5%, and the federal COVID 19 public health emergency declaration was ended on March 11, 2023, and a new normal emerged.

The unemployment rate has remained stable, at 3.7%, between November 2023 and January 2024, according to the most recent Bureau of Labor Statistics Employment Situation Summary released on February 2 2024. Most households that own assets have experienced growth in their overall wealth, including from home appreciation business equity, and stock market performance, but it's vital for policymakers to have a clear picture of consumer's financial health as we emerge from the pandemic.

To that end, every three years the Federal Reserve System conducts the survey of consumer finance, one of the most detailed examinations of household wealth in the US, and fortuitously, the two most recent surveys were conducted in 2019 and 2022, thus providing a valuable resource to researchers like Anthony and I, who wish to explore wealth changes during the pandemic. So this presentation draws from the survey of consumer finance and other important sources to present data on the racial wealth gap and socioeconomic factors that impact the disparities.

So let's start out with the fact that despite a greater percentage of wealth gains among minority households, the racial wealth gap is still significant. Data from the 2022 Survey of Consumer Finance shows that there is this wealth disparity with the average Asian-American household having a median net worth of $536,000, 1.8 times greater than that of the typical white household, 8.7 times greater than the typical Hispanic or Latino households, and 11.9 times greater than the typical Black household. Now, according to data from the 2019 Survey of Consumer Finances, the average white household had a median net worth of $189,100, 5.2 times greater than the median net worth of the typical Hispanic household and 7.8 times greater than the median net worth of the typical Black household.

So for comparison, in 2022, the average white household's median net worth was 4.6 times greater than the typical Hispanic household and 6.3 times greater than the median net worth of the average Black household, so while the multiplier for the Black-white wealth gap decreased from 9.9 in 2016 to 7.8 in 2019 to 6.3 in 2022, the gap in dollar terms increased, from $153,800 to $165,000, so now a staggering $240,000, showing that the disparity is getting worse, point recently underscored by a recently-released Brookings Institution analysis by Andre Perry.

So we talk about income and wealth, but we want to look at the difference. So wealth as measured by net worth is defined as the value of assets a person or corporation owns minus the liabilities they owe and provides a critical safety net to households during economic downturns like the one experienced at the beginning of the COVID 19 pandemic. Wealth holds several advantages over income from work. So in particular, income from wealth is taxed at a lower rate than income from work, and wealth can serve as a source of savings to absorb temporary setbacks, such as loss of a job.

Now, as we look at income, we see that there are still sharp ratio disparities in earned income, but a tight labor market and union activity continue to provide worker leverage across a variety of industries and wage distributions. According to data from the US Census Bureau in 2022, the real median household income was $74,580, and average household income was $106,400. The table shows households by total money income, race, and Hispanic or Latino origin of the household with income percent distributions for the year 2022.

We see that Asian-American households have the highest median income at $108,700, two times greater than the average Black household, with a median income of $52,860. Black and Hispanic and Latino households, along with American Indian and Alaska Native households, were more likely than white or Asian households to have a median income below $50,000.

And so here, we see that same information represented, but what we're looking at is the median household income by race or ethnicity compared to the national average, and this just illustrates the data that we just saw. So we see that Asian-Americans and white households are above that national average while everyone else was under it.

So let's turn to education because we know that education can lead to economic mobility. Minorities are increasing their college enrollment, but higher education is not a silver bullet. So the table and figure here show the percentage of 25 to 29-year-olds by educational attainment by race or ethnicity in 2022, and we see that white and Asian-Americans were more likely to have earned a baccalaureate or master's degree than members of other racial and ethnic groups.

We can look at how higher education is financed as well. So we know that it is a driver, but how do people pay for it? So according to Pew Research, Black and Hispanic students are less likely to study science, technology, engineering, or math, fields which typically lead to higher paying jobs relative to other fields. Second, according to research from Andre Perry at Brookings, in many local markets, Black and Hispanic workers with a college degree still face racial disparities in wages and are underrepresented in managerial roles.

Third, low-wealth households often have to use debt or take on loans in order to pay for college. So if we look at how much people borrow, we would see that Black students borrowed the most, at $58,400, and then when we look at, four years later how, much they owe, 105% compared to Asian-Americans at the lowest at 63%. So when we think about this, it makes it harder to accumulate capital and do things like get a mortgage.

So finally, here we're going to look at earnings with respect to higher education. And so the figure shows median earnings for 25-to-34-year-old full-time year-round workers with a bachelor's or master's degree. And so while Black bachelor's and master's degree graduates had the highest average amount of student loans and borrowed the most, they had the lowest income, making repayment even more of a challenge.

ANTHONY BARR: Thanks, Kristen. So at the beginning of the presentation, you mentioned that income is kind of a huge driver of wealth for most households, and that really underscores why stable employment really matters and why periods of unemployment, even if relatively brief, can have outsized effects. You think about potential knock-on effects, for example, of not just the lost income but potentially greater indebtedness if you have to take on debt in order to finance your bills during a period of unemployment. And so what we've looked at here--

KRISTEN BROADY: I'm not sure that we can hear Anthony.

ANTHONY BARR: Oh, can you not hear me?

FREDERICK MARTIN: Yes, I can hear you.

ANTHONY BARR: OK. So what we've graphed here is the unemployment rate prior to the pandemic. The pandemic recession is shaded and then the most recent data, 2024, as Kristen mentioned. And what I want to point out here is that Black and Hispanic workers experienced a higher rate of unemployment during the pandemic-- that's true after as well-- but also that their unemployment rate took longer to peak and also longer to subside back to that normal baseline relative to other workers. Next slide.

All right. Well, I'll just keep going. At some point we'll get to the next slide. But we also look at labor force participation rates. Kristen mentioned a tight labor market, particularly in the '21-2022 market, and you can kind of see that for all groups the labor force participation rate dipped pretty substantially. Again, relative to the pandemic, Black and Hispanic labor force participation rates dropped the most, and again, it took a little bit longer for them to get back to where other groups were.

But then Black labor force participation rate actually surpassed white labor force participation, and that kind of indicates, when you have that recovery period, you can actually-- a tight labor market can actually pull in workers from the margins back into the labor force. And yet here, looking at this table, you can see that January of each of these years the white and Asian unemployment rates were actually lower than the national unemployment rate.

The Black and Hispanic unemployment rates were above the national unemployment rate, and so even if you're being pulled into the labor market because of the tight labor, if you've got structural or frictional unemployment, that might mean that it's harder for you to get sorted into a job and so, putting all that together, more likely to be displaced during the pandemic and also potentially more likely to experience challenges getting sorted into a job now that we're in that postpandemic recovery period.

So in addition to income, we know that another huge driver of wealth is home ownership, and in fact, if you look at this latest survey, home ownership as a percentage of wealth gains was actually greater for Black households relative to other groups, and yet we also know that Black and Hispanic households have lower home ownership rates relative to the US average and relative to the White rate, showing that in both the table form and also in that graph where you see the line going across as the national rate.

So two sides of the same coin here, again, increasing home ownership is huge for the wealth benefits, and yet there's these disparities in who owns a home. It's also a very illiquid form of wealth, and so even if during the pandemic your on-paper wealth went up, that doesn't necessarily translate to better financial health in a month-to-month period.

And it also matters when you buy and when you sell in terms of the wealth effects, and so a recent Chicago Fed working paper from 2022 shows that minority households are more likely to buy when prices are high, and they're more likely to sell when prices are low, which is kind of the exact opposite that you would want from a wealth standpoint. More research is needed about the causal drivers of that, but if you think-- plausibly, if you think about procyclical credit access, maybe you have a lower credit score or some other factors that make it harder for you to access mortgage lending when credit is tighter, and so you actually need that procyclical boon in order to be able to be pulled into accessing credit. And then, of course, the prices are also higher corresponding to that boon.

And similarly on the downturn side, if selling into a low-priced market is coinciding with an economic downturn, then that liquidity point really matters a lot because maybe you're being forced to sell your home prematurely in order to pay bills or otherwise access cash. Finally, we know that refinancing can really matter in terms of freeing up some liquidity, lowering your monthly payment.

And JP Morgan Institute put out research recently showing that in that early portion of the pandemic, Black households were less likely to refinance when it was a more favorable environment. Even when they did refinance, they paid higher costs associated with that, and so the ability to tap into your home equity and to use it. And then finally, Andre Perry's work at Brookings, and this has been replicated at AEI as well, showing that homes in Black-majority neighborhoods are much more likely to be devalued based on race as a salient factor there. If you take that same home and put it into a nonmajority neighborhood, the evaluation goes up.

And so even being able to-- again, the home equity, but being able to tap into that wealth when you go to sell or when you're passing a home down to family and kind of that intergenerational wealth transfer, all of those things can have impacts as drivers of the wealth disparities.

KRISTEN BROADY: All right. So let's look at our sixth fact, that Black and Latino workers are less likely to have retirement savings accounts or own stocks. So the first table shows retirement savings account ownership and average dollar amount held by race or ethnicity. White workers were more likely than their Black and Hispanic counterparts to have retirement savings accounts, and the average white account holder had more than three times the retirement savings of the average Black or Hispanic account holder.

And the second table shows stock holdings by race or ethnicity, and again, we see a pretty significant disparity, with the average white stock holder having $568,000 in stock versus $80,000 for Black people or $97,000 for Hispanic people. So there's a really big difference in how people are going to be prepared for retirement.

ANTHONY BARR: So I mentioned being able to buy a house, and obviously, for most households, a mortgage is required in order to finance that, and that requires having a relationship with a lender. We know-- and this is what this table is showing-- that Black households and Hispanic households are much more likely to be unbanked relative to white and Asian households. And they're also much more likely to use nonbank financial services, cash-checking, money orders, payday loans, et cetera.

So you can think about maybe supply-and-demand factors that can influence the rates of being unbanked or the rates of using nonbank financial transactions, but we do know that there are disparities in terms of where branches are located, for example. And so a Chicago Fed working paper finds that banks are less likely to locate in Black-majority neighborhoods, for example, even relative to low-income neighborhoods, so again, race playing some salient factor there as well.

But even thinking about who's paying more in overdraft fees or minimum checking requirements or some of those other things those can also influence banking rates. And then finally, even if you do have a banking relationship, we know that Black and Hispanic borrowers often have higher denial rates less, likely to get the credit that they ask for or are denied the full amount that they're requesting. We see that even in the context of the pandemic PPP program, which was lending to small business, fully backstopped by the US government. And so the risk is not, obviously, as much of a factor, and even still, you see that there are these racial disparities in terms of denial rates or the likelihood of being approved for the full amount that you are applying for.

And then tying some of these themes together, less wealth less income less liquidity, greater likelihood of being displaced from your income source, all those kinds of things, we also see credit card debt on the rise. This is true across the aggregate economy. We're at $1.3 trillion, the highest level on record. We've seen eight consecutive quarters of credit card increases.

And if you look at of like some ratios of credit card debt to personal income, it's a little bit less problematic than it might seem, but we also know that Black households are much more likely to carry a monthly balance. So that's a really expensive way of using credit and also suggests that there's a struggle to kind of smooth over consumption. We also know, obviously, that in this current environment, it's even more expensive to be relying on monthly balances than it was even a few years ago.

Black and Hispanic households are also more likely to use alternative sources of credit, like "buy now, pay later" loans and things of that nature. Jury's still kind of out on some of those new products in terms of their full financial impacts, but we know from CFPB that there's a lot of overlap in who's using that kind of product. It's the same groups that have revolving lines of credit or have some of these other concerns.

And there's a little bit of research emerging that suggests that there could be financial harms around induced spending or some of these other effects, and so thinking about if you are relying on a credit card, for example, because your car breaks down and you're not able to get a consumer loan from a bank, those start to play together, if you are having to pay bills with a credit card because you temporarily lost your income source due to unemployment. All of those things can start to intersect in terms of the wealth outcomes.

KRISTEN BROADY: So if we want to think about business ownership, we know that business equity can contribute to household wealth. So during the pandemic, new business applications surged, particularly in Black and Hispanic counties. Now, while Black entrepreneurs may start businesses in an effort to increase wealth and income, without proper support and tools, their efforts may prove inadequate to increase wealth and may even become detrimental.

So according to data from the US Census Bureau's 2023 Annual Business Survey, Black-owned employer firms were least likely to have earned a profit and most likely to have taken on losses in 2022. Further research indicates that Black-owned businesses are less likely to be in business after four years when compared with their white counterparts. Consequently, business ownership is more likely to result in a reduction of economic mobility for people who experience this.

And so we can look at the survey of consumer finance and just see how business ownership contributed to household wealth. We did see as we started with wealth gains for people of all groups, but the racial wealth gap persists. And despite that surge and minority entrepreneurship, there are still fewer Black and Hispanic businesses than would be proportional to their share of the US population. Brookings Institution research by Andre Perry reveals that not a single metro in the US has a proportional number of Black firms.

So while we've tried to share some data that speaks to why we have this racial wealth gap, we would say by no means is this all-inclusive of all of the factors. But we've hoped that we've shared some facts with you to illustrate why this wealth gap exists, why this income gap exists, why the education gap exists and that policymakers will think about these things and make recommendations as we continue to recover.

And so as always, I'd like to Thank my wonderful colleague, Anthony, for working with me and Darlene and Lucas on this paper, and am pleased to now introduce our panel. So first of all, Scott Winship is the senior fellow and director of the Center for Opportunity and Social Mobility at the American Enterprise Institute.

We are joined by Gary Hoover, who is professor of economics, and the executive director of the Murphy Institute at Tulane University. And Natalie Cofield is a member of board of directors for the harbor bank of Maryland and cofounder of the Capital Ready Coalition. And now I am pleased to introduce to all of you Ben Casselman, economics reporter for The New York Times, who will moderate our panel discussion.

BEN CASSELMAN: --so much. Thank you, everyone, for being here. Thank you to Dr. Broady and the rest of the Chicago Fed team for organizing this event. As Kristen said, I'm Ben Casselman. I'm an economics reporter for The New York Times, and think that presentation we just heard did a great job of grounding us in the facts on the racial wealth gap and how it evolved over the pandemic period. What hopefully we can spend the next 30 minutes or so doing is to dig a little bit deeper into what's behind those facts, what's contributing to the racial wealth gap, what's driving the recent patterns, and what some of the policies are that might address that.

So we've got three great panelists here who I think are going to bring a really interesting range of perspectives to the conversation. Dr. Broady already introduced them, so she spared me from needing to do that. So we can just dive in here. And I think maybe we want to start by setting the stakes here a little bit. When we talk about inequality in this country, we often focus on income inequality. It's easier to measure for one thing. But I'm curious from all of you-- and Dr. Hoover, maybe we'll start with you but why and to what extent we should be concerned about wealth inequality in general and the racial wealth gap in particular.

GARY HOOVER: Well, thanks, everybody, for having me around, and thanks, Ben, for moderating the session. When you're thinking about some of the differences between income and wealth, the first thing that comes to mind, for me at least, is that wealth is sticky in that it is transferable and intergenerational. So if I have accumulated some wealth, that is something that then I can leave to my heirs, and that gives them a leg up as they get ready to get going in their life and their pursuits, and so having the ability to have, basically, a nest egg to start from really matters.

Some of the work that I have done deals with also the dynamic effects of wealth in that having that initial starting position of a body of wealth which allows you to transfer it on to your heirs allows them to start with a larger nest, which they can grow on dynamically generation after generation after generation.

Having that starting point allows you just to get further ahead, which is not the case with income, where just because I had a job and I was making a certain amount of salary, that in no way means that my heirs are going to have that same job or any type of job that resembles the job that I had. I cannot transfer the income that I made from my job. I can't even transfer the job onto my heirs, where I could transfer this wealth. And so that matters.

And finally, as it relates to the gap, I normally refer to running, not surprisingly that running plays a big role. But even if you had one runner who jets out front and jumps out to the front of the race and another person is running farther behind, even if they're running at the exact same pace, they'll never close the gap unless the person behind injects some amount of speed, and often what is the case is that that injection of pace to actually try and close the gap expends all of the energy that the person has, and they have no ability to sustain that pace. And I'm sorry that I ran on probably longer than I should have. I'll let everybody else jump in.

BEN CASSELMAN: No, it's a great starting point. Scott, do you want to jump in here? I'm curious sort of what you would add here.

SCOTT WINSHIP: --think I don't have too much to add. I completely agree. I'll just mention a couple things real quick that make looking at wealth inequality a little trickier than looking at income inequality. So I think the first thing that's tricky is that you can have two people that start out with the same income this-- is much less relevant for talking about Black-white or racial wealth gaps because, as I've said, we're not starting out with two people or two groups with the same incomes, but just for sake of illustrating, you can have two people with the same income, one of whom values saving, one of whom values spending their money on things today rather than tomorrow.

Over time, you'll get big wealth differences between those two people, and there's a danger in interpreting that as sort of an indicator of opportunity or something when actually, in this case I've constructed, it's two people who got the same income. They just did different things with it.

I think another tricky thing is that most of our wealth statistics don't include Social Security, which is a promise of future income. We'll see if-- there's a chance the promise won't pan out, but if there were no Social Security system, no Medicare, people would save a lot more for their retirement, and that would show up in the wealth data. But the Social Security doesn't, so that makes wealth statistics a little trickier too.

Last thing I'd mention is that we include student loan debt as negative wealth, essentially, in our wealth statistics, but we don't include the asset that people took the debt out to finance, which is, hopefully, enhanced human capital. And so that also tends to kind of push down our wealth measures versus if we either just excluded the student loan debt or if we could measure the human capital that it financed as an asset. But in general, I agree entirely with what you've said in terms of what you get out of looking at wealth versus income.

BEN CASSELMAN: Natalie, last to you here. Why should we care, to what extent should we care about the racial wealth gap in particular here?

NATALIE COFIELD: Absolutely. So I'll just kind of echo a few of the things that my fellow panelists have mentioned, but I'll speak to it a little bit from the business perspective and use Hoover's example here in terms of running and the infusion of something. What we've also seen-- and we've seen it during the pandemic-- is that this was one of the greatest moments of wealth accumulation for folks.

We had one of the lowest interest rates we've ever had in the history of interest rates over the last-- our living lives, a astronomical number of homes being sold, and then those homes are also going to be retained. That gave, in my opinion, an opportunity for people who had not been able to be in the game an opportunity to get into the game, and so now what we're going to see is those homes being held for generations, to my colleague's point, at such a low interest rate in communities across the country.

I also feel like this is a conversation about cash flow. We talk about the fact that, again, income is a fixed circumstance. We're talking about, if you did a great job, you're talking about 3% to 5%, a continued increase in your wealth if you stay with the same company. What younger people and the younger generation is doing is that many of them are moving, increasing their salary by 20%, moving from one company to the next in order to continue to keep reducing the income inequality that exists for them.

But that's a fixed asset, the tax savings that comes from the perspective of having a business. Again, when you get your W-2s, the taxes have essentially already been taken out for you, but if we understand the way that business works, when you receive your compensation, you then have the ability to make strategic wealth-generating decisions about what you want to do with the income that you have received prior to the actual tax burden being placed on you in a way that actually benefits you and/or, potentially, your company.

But it's hard for Black Americans to do that when, essentially, all of the firms have an average gross receipt of $71,000 versus $488,000 for nonminority firms. So even in that you see the disparity. The liquidity piece-- what do you actually have in your bank account right now to me is another form of assessing and/or generating wealth. We know that real estate has been responsible for creating the greatest number of millionaires, but investment in business through equity has been the greatest generator of billionaires and multimillionaires.

Do we understand-- and is the wealth of information being transferred from generation to generation-- on how to engage in this? And then lastly, I see appreciation. We talked about the undervaluing of Black-owned homes, the issue of-- something I heard recently was-- I went to a conference, and a gentleman shared that seven members of a family had their grandmother pass.

And the tax burden was $2,500, and they could not agree who was going to pay that-- seven people-- and as such, they lost this home in South Central Los Angeles that is now worth $1 million over a $2,500 tax bill. So wealth is also generated through the quality of the conversation, through the quality of the family engagement, the depth there and the management of existing assets, so those would be the things that I would just add to this conversation.

BEN CASSELMAN: Yeah, so I think that's a great starting off point, and Natalie, you talked there a little bit at the beginning about what happened over this pandemic period. And I think, as we heard in the presentation, it was a bit of a complicated story because we saw household wealth grow for all racial groups over the three years here, 2019 to 2022, but the racial gaps remained large.

They grew by one measure in absolute terms. They narrowed in percentage terms. So I wonder-- and Scott, maybe we'll start with you on this one-- what you make of the patterns over the pandemic period and I guess also just why these gaps have remained so persistent even during a period where we've seen some improvement.

SCOTT WINSHIP: Yeah, great question. Yeah, in some ways, it's tricky to think about what happened during the pandemic. You can cite different stats, and it sounds better or worse. If you look at, in inflation-adjusted terms, what happened to median wealth from 2019 to 2022, for instance, among whites, the median increased 31%, among Hispanics, increased 48%, among Black Americans, increased 61%. So you see those numbers, and you think, this is fantastic.

But as everyone's alluded to so far, because the initial differences are so stark, that even when you get higher growth rates for three years among African-Americans than for whites, you still end up with these big gaps. And in fact, if those growth rates were sustained, it would still take us-- I did the math-- it's like 27 years to eliminate the Black-white wealth gap. And those rates are unlikely to continue for the next 27 years.

Because the pandemic was such a strange time, there was so much-- there was such a flood of federal aid first during 2020 and then during 2021 as well. I would argue that a lot of the 2021 aid was kind of above and beyond what a lot of people felt like they needed. Savings rates in the United States had only been above 10%, I think, in one year or one month, I think, in the early 1980s, and they ended up above 10% for the better part of a year, year and a half, I think. And that was just because of this flood of aid.

So a lot of people saved it. That boosts wealth, and I think that's part of what you see in the statistics. And that's not going to be something that will happen over the next 27 years, so unless we can figure out other ways to consistently have the rate of Black wealth growth increase faster than the rate of white median wealth growth, we're going to have large gaps in the future.

BEN CASSELMAN: Hoover, do you want to jump in there? And I'm curious in particular-- this has been, by many measures, the strongest economic recovery on record for a variety of reasons. We don't have the year-by-year data along the way to see how that gap shifted over time, but I'm curious both what you think of what Scott was just talking about but then also the role of the strength of that recovery and how that has played out in some of these racial wealth statistics.

GARY HOOVER: Well, I'm troubled, and let me walk you through what I'm thinking about. I'm wondering-- and I was asked by several members of the media about this same point. They're like, look, shouldn't we all be very happy now that these rates are as good as they were and things were as good as they were?

And my concern was, if this is as good as things can get and the gaps still exist the way that it does between Black and white wealth, is there ever any amount of growth that will ever cause this gap to actually close? And so instead of celebrating and actually being very celebratory about where we stand, I'm not quite sure that we've fundamentally solved the problem.

BEN CASSELMAN: Natalie, I'm curious about your perspective on this.

NATALIE COFIELD: Yeah, obviously, I brought it up. I agree with Hoover in the sense that it's jarring that with that type of federal infusion, it still demonstrates just how far we have to go. But I do want to take time to celebrate certain milestones that have been made. According to Forbes, the Black home value rate has increased to the highest rate it's actually ever been right, so they've seen the greatest amount of appreciation in Black communities, generating almost $84,000 in equity.

So going back to the wealth conversation, while this is not liquid and a bit more illiquid, it's still as wealth. It's still something to be able to take a home line of credit against. It's still something to be noted on your personal net worth to raise that number, particularly for Black women, from $100 in comparison to $44,000 to their white female counterparts for single Black women to something more substantive. So I do want to honor that.

I also want to honor the fact that we've seen an increase in home ownership rates amongst Black men. They've increased by about 2.5%, and in fact, the home ownership rate during COVID was higher for Black people than it was for white men. And so that is important. It's a moment to be excited about because it goes back to what I said earlier, which is the fact that folks now have an asset class to hold on to, one that they can take debt out against, one that they can bequeath to their family members, and it's important to acknowledge that.

But to the broader question that you asked, Ben, and to Hoover's point, we've got so far to go. I believe The Atlantic published a report that said it would take 200-and-some-odd-plus years for Black Americans to actually get to the average net worth of a white family. And so that's not going to happen in a two-year time frame during the greatest economic crises we've ever seen. But we certainly have made economic strides that we can continue to keep growing upon, and I do want to honor that.

And the last thing I want to say to this point-- I know it's not about housing, but it's, we've seen some of these same trends from the business perspective. We've seen access to capital for Black business being increased during this time, the number of loans going to Black businesses being increased during this time, which is, again, great for increasing access in the future and being able to leverage against in the future as well.

BEN CASSELMAN: Yeah, I want to ask more about Black business formation in just a moment here, but before we get there, I just want to stay on this point for a moment of the strength of this recovery. And maybe Hoov first, and then if, Scott, you want to jump in on this as well, I'm interested. Because if I look at this recovery in comparison to the period after the Great Recession, we know it's been a much stronger recovery in the aggregate, but it looks like it's also been a much stronger recovery in communities of color in particular.

And so without sort of wanting to be pollyannaish here and say, great, we've solved our problems, I think is maybe worth dwelling for a moment on how that has looked different from the period after 2008, 2009, and I'm curious what you think is behind that and what the significance of that is. Hoov, maybe go to you first.

GARY HOOVER: I'm sorry, they're cutting the grass outside, and it's hard to hear, so I apologize if you hear a lawnmower in the background. Part of what my work shows and if we're thinking about some of these dynamics is that there are different types of shocks, and those different types of shocks lead to recessions. You can have a supply shock, a demand shock, or some type of monetary shock.

As a result, the differences in the shocks itself will elicit different responses from the central bank or the government, and as such, those responses carry different unemployment characteristics for the groups. And that's what I think-- I think it's-- and I'm probably being a pessimist here. I don't think it's actually very good to try and compare to, the Great Recession with this one.

These were totally different shocks, and as such, the response from the central bank was also different. And how we see then the racial groups responding-- they don't necessarily line up, and so I'm probably a bit more cautious in trying to make those types of comparisons.

BEN CASSELMAN: Fair enough. Scott, curious how you think about this.

SCOTT WINSHIP: Yeah, so I think in some ways what we've seen in the recovery is really just a return to what we were seeing before the pandemic hit, which-- it's funny. I think some sides will cheer the Trump economy. Other people will cheer on Bidenomics. I don't think either president can take a ton of credit for what's happened, but for whatever reason, the recovery from the Great Recession, which is-- we're almost a decade in at this point-- has been inequality-reducing.

And I'm not sure anyone has a good sense of why that is, but because of the tight labor market, wages have increased more towards the bottom end than higher up. And so it's very different, I think, from the Great Recession, which was a deep recession, near-depression, caused by a financial crisis, which historically involved deep, deep recessions and slow recoveries that take a long time to work out. And it did take a long time, but once we got to 2018, 2019, things were already looking pretty good for lower-earning Americans across the board. So I think we're seeing the continuation of that after this temporary shock that the COVID virus gave us.

BEN CASSELMAN: So Natalie, you mentioned Black entrepreneurship a couple of moments ago, and I want to come back to that because I remember in the early days of the pandemic I was writing stories-- a lot of people were writing stories-- about how hard the COVID pandemic was on Black owned businesses in particular. But then we saw something pretty remarkable.

We saw a real rebound in Black businesses, and we saw like a real surge, at least in some of the data that we have, in Black entrepreneurship and Black business ownership, although we heard in the presentation earlier about some of the cautions on how many of those businesses are thriving. I'm curious sort of what you see as behind that explosion in Black-owned businesses and then what role you see entrepreneurship playing in addressing some of the disparities that we've been talking about here.

NATALIE COFIELD: Absolutely, and if I could take the privilege of just making one comment about the last unemployment piece, which is that we now have the lowest Black unemployment rate that we've seen in decades. And in fact, if we look at where we were from a community in 1983, it was almost 12% unemployment rate. In 2020, right before the pandemic, it was 5.4%, and now we've just dipped below that amount. And we're seeing a spread, a delta, between white and Black unemployment of 1.6%, which is the smallest that we've seen in our natural lives as well.

So I do want to, again, honor those moments right because that begets the beginning of the 401(k)s. That begets the beginning of the 529s. That begets how you do create additional forms of wealth and how you sustain the wealth that you have access to. But to your question, this kind of entrepreneurial renaissance that we're in right now, since 2021, we've seen 11 million small businesses come online.

So prior to 2021, the US Small Business Administration was touting about 20-some-thousand small-- I mean 20-some-million small businesses under their tutelage and excited about that, and now, in 2024, we're talking about 33, 3-- somewhere between 32 and 34 million small businesses that have been created, with the largest bulk of that happening over the course of the last two years.

This is the entrepreneurial renaissance era, and I'm excited to say that the category that is leading that is both women and Black women. This is actually not new. This is something that is a continuation of prepandemic entrepreneurialism. Particularly within Black entrepreneurship, 60% of Black firms are started and run by a Black woman, and so I've always said to people, you no longer can have a conversation about Black business without a Black woman sitting at the head of that table, though we still see disparity in her access to gross receipts and gross receipts even for Black men. So the excitement is there.

Another study showed that 60% of Black and Brown women have what we call a "side hustle," and a side hustle is another business. So they're doing the W-2, and they're also offsetting gross and pervasive wage inequality by having another job. For my grandma, that was the second or third shift. In this era, it's a side hustle.

So some things have not changed. The way in which they've been formalized has. So my grandmother's second or third shift was never incorporated. It was never LLCed. It was never documented with her local tax and revenue bureau, but we are seeing that folks are actually going through the process to formalize their business now.

We also know and we saw it during the previous recession, when a recession hits, the first folks to go from employment are Black and brown people, and so they come back into the arms of entrepreneurialism. And so in this instance, this is not a pandemic that was caused by what I would consider to be predatory circumstances, which is the difference between our last pandemic or our last gross recession that we had. That was based off of predatory lending.

In this instance, one, we all went through it together. I don't care if you were Black, white, or anything in between. You were at home, figuring out what life was going to be for you over the next-- we didn't when it was going to end. And so it created a sense of universal experience with folks, and it also gave a the greatest form of being able to readily access from your kitchen table, from your dining room, or even from your bedroom, in the corner of your bedroom, with your laptop, the ability to start a business online and meet people anywhere in the world.

And the barriers to entry for entrepreneurship have gone down significantly. And there was a study that GoDaddy did that said that 25% of new websites that have come out have been from Black-owned businesses.

BEN CASSELMAN: So I want to make sure we leave some time here to talk about policies, and Scott, maybe I'll turn to you first on this one. But I'm curious what policies, whether it's at the federal, state, local level, could make a dent in this and make it so it doesn't take us 250 years or whatever the number was that Natalie cited to close the racial wealth gaps here.

SCOTT WINSHIP: Yeah, obviously, there's a bunch of different ways that you could approach the problem. I think at the root of wealth-building-- obviously, the way that you build wealth is through capital. There's forms of capital, physical capital, financial capital, intellectual property, intangible capital, things like that.

But at root, it's about human capital, your ability to earn income that you then can save and generate wealth from. And then upstream of that, I think, would be social capital, which is the value you get from your relationships, your family, and your community. Because of the nation's long historic history of anti-Black discrimination, there are gaps in educational attainment. There are gaps in marriage rates. There are gaps in neighborhood poverty rates, huge, huge gaps in terms of the poverty rates of the communities that people live in.

All of those, I think, need to be tackled-- again, I'm sort of thinking more upstream-- in order for us to reduce the Black-white wealth gap. So very quickly, there are a few ways you can attack that. I think zoning and land use regulations prevent people from moving to opportunity and living in communities where their kids would do better, where they would get better jobs themselves. Both of those would promote greater wealth, I think. Investing in early childhood programs-- that's way upstream, but I think we've got to figure out how to close test score gaps that kids enter even kindergarten with.

I would say safety net reforms. We have a safety net that does a pretty good job at reducing poverty today but that has a lot of incentives built into it that discourage marriage, that discourage work. So I think reforming those would help as well. And then I've proposed a baby bonds program as well that would essentially make a commitment of 18-year-olds getting a chunk of money when they turn 18 that they could use for a limited number of things, investing in their education, investing in a business, things like that.

The version that I've proposed would require you to graduate from high school and to have a work history and to have a number of years where you were not parenting out of wedlock. Those would build in some incentives to behave in ways that will promote your upward mobility, and they'll give you this sort of capital that you otherwise wouldn't have in the form of the baby bonds. So those are a few approaches I would take.

BEN CASSELMAN: Hoov, curious what policies you would recommend here to make a difference.

GARY HOOVER: We only have a couple of seconds left, and what I'm still concerned about is whatever is still structural. So everything that Scott said is actually what I would echo. Those are great policy prescriptions. But if we have seen the greatest amount of growth or the greatest decrease in the gaps between Black and white and yet there still exists so that we've seen the lowest level of Black unemployment ever and even at its lowest there is still this ratio that exists between Black and white, that tells me that there is something systemic in there, something structural that has bottomed out for one group before it was the other.

That's where the key lies in that there's a structural gap that exists even at its best-- which we could argue that in lots of metrics we're seeing the very best-- yet there is still a structural and systemic gap in between these two groups or between groups. That needs to be addressed, and that's all I'll say because I want to give Natalie the last word.

BEN CASSELMAN: Yeah, Natalie, last word here before we run out of time.

NATALIE COFIELD: Absolutely. So first, Scott, nearly 62% of mothers in the US are single moms, so I would certainly think the baby bond thing would be something that all of America would be excited about and not just Black American women, but I think that's an exciting idea. A couple of things that I would say-- one, access to capital. I've seen the infusion of funds to CDFI, community banks. I sit on the board of one. I'm representing Harbor Bank today.

Ensuring that these banks that are local to the communities that are the first line of access to capital are well funded and have the resources that they need-- this is part of the reason that resources do not get into these communities is that community banks across the board rural America suburban America and urban America do not have access to the same type of funding and support that our large Fortune 500 companies and banking institutions do.

The second one is I would continue the progress of debundling large corporate and government contracts. Again, my vantage point is always from the side of business, and how do you create more opportunities for small business? By making the opportunity something that is enough of a size that they can actually take a bite at, and we can't do that if we're putting out billion-dollar contracts.

Again, that is something that a small number of firms have the ability and capacity to respond to. Increasing the prime capability of small businesses is possible if you reduce the amount, and that's across the board, Black, white, and everybody in between. If you're a small business, that is the circumstance. It gives you equitable access.

And then I'm excited about what we've seen in terms of federal legislation about rollover for 529s. If you've held on to it for 15 years now, you can take out a certain amount of that without having a tax implication. You can roll that into a business. So allow people the ability to be flexible in the use of the funds that they have set aside, and I think that will help them to be able to make more calculated decisions on their own measure without the type of financial penalty that we don't need to see.

BEN CASSELMAN: We are at time, but thank you so much to all three of our panelists here. We've only scratched the surface of a very big topic, but this was a great conversation. And Dr. Broady, I'll turn it back over to you.

KRISTEN BROADY: Thank you so much, Ben. I'd like to thank Natalie Cofield, Scott Winship, and Gary Hoover for a very enlightening conversation. I'd also like to thank our CFO, Fred Martin, for opening this event. I hope that you've learned as much as I have from the discussion, and I hope that you'll read the paper that Anthony, Darlene, Lucas, and I wrote about the topic.

We'll be sending a post event survey, so please be on the lookout for that. We really appreciate your feedback. It helps us to continue to put on programming like this and improve it. And I hope that you all have a great afternoon.