Children of middle-class African American families, are at risk of dropping out of the middle class altogether, according to the report.
The racial wealth gap in the US is the product of a series of interactions between social, historical, political, and institutional forces. While it’s a complex picture, in much the same way that addressing the gender pay gap has been shown to create positive ripples throughout a country’s economy, closing the racial wealth gap is in everyone’s interests.
Only 8% of black families in America can expect to be in receipt of an inheritance, compared with 26% of white families. Even then, the value of that inheritance is likely to be as much as one-third less.
The average black family with a household income of $100,000 lives in a neighborhood where the average income is just $54,000. Home ownership is one of the most accessible forms of wealth accrual. Even when this is the only major owned-asset in a family, it can be a valuable inheritance for the next generation. But only about 40% of black families own a home, compared with 73% of white families.
African Americans are incarcerated at more than five-times the rate of white Americans and make up 34% of the total population in correctional custody.
Even discounting earnings lost during imprisonment, incarceration can reduce an individual’s annual income by as much as 40%, McKinsey says.
McKinsey estimates that closing the racial wealth gap in the US could add anywhere between $1 trillion and $1.5 trillion to the country’s economy – between 4% to 6% of GDP forecasts for 2028.