Bridging the Wealth Gap: 2019 Update

2019 update bridging wealthgap

At the 2018 US Conference of Mayors (USCM) Annual Conference, USCM and Interise presented a joint paper entitled Bridging the Wealth Gap, which analyzed one of the most challenging situations facing America today. The paper highlighted the need for more focused and systemic approaches to closing the wealth gap, particularly by encouraging and supporting small business entrepreneurship and ownership.

At the 2019 USCM Annual Conference taking place this week in Honolulu, Hawaii, Interise  presents updated data that shows that the wealth gap persists.

  • The richest 10% of households hold 70% of total household wealth, most of which is in high yielding stocks and mutual fund investments.
  • Most of the wealth in the bottom 90% comes from a single source: home ownership. However, home equity was significantly reduced during the Great Recession and is still recovering in some areas.
  • Many households in the bottom 90% have negative wealth--they have more debt than assets--which is particularly true for black and Latinx households.

Analysis: The Racial Wealth Gap

The wealth gap is driven by historic and current income disparities. Lower wages reduce the ability to save, especially among some racial and ethnic minorities. Reduced economic mobility from lower earning potential exacerbates the racial wealth gap.

  • Black Americans have substantially lower rates of upward mobility.
    • Black children with parental income at the 75th percentile reach an average income rank of the 44th percentile, which is 13 percentiles below white children of the same age born to parents with comparable incomes.
  • Black Americans face higher rates of downward mobility than whites, leading to intergenerational disparity.
    • Among children with parental income in the top quintile, 41% of white children earn sufficient salaries to maintain themselves in the top quintile, compared with 18% of black children.
    • Among children with parents in the bottom quintile, 11% of white children rise to the top quintile, while 3% of black children do.
  • Latinx Americans have income distribution similar to blacks. However, they encounter rates of intergenerational mobility that are similar to whites.
    • Latinx children with parental income in the 75th percentile reach an average income rank of the 54th percentile, which is 6 percentiles below white children.
    • At the lower parental income percentile of 25, income outcomes for Latinx children are within 2 percentiles of white peers. This indicates the income gap is closing at the lower end of the income distribution.

Creating opportunity for all business owners to operate sustainable and/or growing businesses is an imperative to creating higher incomes for business owners and employees, allowing the accumulation of wealth that closes the wealth gap across generations.

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