Race and Wealth: A Look at Inequality in Recovery and Crisis

By Jaskaran Bajwa

Tragic events, such as the deaths of George Floyd and Breonna Taylor, have ignited the complex and heavily divisive discussion between the relation of wealth and race in the United States. While many people are aware that there is a relation between the two, many, even myself, still do not understand how deep the problem runs, from our flawed criminal justice system to the impact of redlining, to our education gap.

Recently, as we gradually recover from the effects of the COVID-19 pandemic, economists are witnessing a distressing occurrence in the world economy. The COVID-19 pandemic has had a devastating impact on the world economy but has hit minorities and communities of color harder than other communities. Our economy is undergoing what is known as a K-Shaped recovery. According to Business Insider, a K-Shaped economy is when different parts of the economy recover at different rates. “A K-shaped recovery is a post-recession scenario in which one segment of the economy begins to climb back upward while another segment continues to suffer.” This recovery pattern has caused economists to look at the root cause of the problem, and many have turned to the idea of wealth.

According to The Brookings Institute, wealth is defined as the “difference between household assets and debt…” Income from assets and wealth is taxed at a much lower rate than income from work and can serve as a buffer of sorts in the case of an economic downturn, such as the one we currently find ourselves in. Recent and previous studies have found that the difference in wealth between white and African-American families is staggering and has persisted well into the COVID-19 pandemic. This has caused Black households to be left with far less wealth to weather the storm caused by COVID-19.

In a difficult time, such as the one we currently face, it is important to have capital and wealth at one's disposal to be able to survive the impacts of the crisis. The pandemic has proven that, unfortunately, that is not true for all families. The average white family has $983,400 in wealth while black families only have $24,1000 in average wealth. The Black-White wealth divide serves as an example of how economic recoveries can become uneven as discussed in the previously mentioned K curve recovery.

One example of the difference in how wealth can affect recovery after a crisis is the aftermath of the 2008 Great Recession. During the recession, both white and black families saw the same decline in wealth. However, after the recession ended, while white families were starting to gain wealth, black families continued to lose their wealth. This recession serves as an example of how recovery does not affect everyone equally. Inherited wealth also plays a part as white families on average have generational wealth to pass down to their offspring, while black families on average do not and sometimes can pass on negative wealth.

The K shaped recovery should concern all of us and serves as an example of how deep racial inequality penetrates our society. Hopefully, with the hard lessons learnt from the past, we can rectify our mistakes and steps can be taken. We live in a society that strives for equality so let us continue to work towards that goal.