WalletHub on Racial Wealth Inequality in the U.S.

Author(s): Scott Douglas Jacobsen

Publication (Outlet/Website): The Good Men Project

Publication Date (yyyy/mm/dd): 2025/02/28

Chip Lupo is an experienced personal finance writer currently contributing to WalletHub. With a background in journalism from Elon University, he has worked across various sectors, including finance, sports, politics, and religion. Chip has expertise in SEO best practices, content creation, editing, and proficiency in Microsoft and Adobe applications. His career spans over two decades, during which he has held roles as a compliance analyst, wire editor, and night city editor. Chip’s passion for media and communications drives his commitment to high-quality content. Lupo explains that Washington, D.C., has the largest racial wealth gap due to high-paying jobs concentrated among white residents. At the same time, states like West Virginia and Alaska show smaller gaps but lower overall wealth. Entrepreneurship and financial literacy are key factors, but race-based programs may be ineffective compared to merit-based initiatives. Lupo also discusses income inequality policies, how government data sources influence rankings, and the need for better financial education to foster economic mobility.

Scott Douglas Jacobsen: We are here with Chip Lupo of WalletHub. Today, they will cover the states with the largest and smallest wealth gaps by race. How is wealth being measured in the United States for this study? How are race and ethnicity being defined?

Chip Lupo: Well, Scott, to provide some context, we analyzed all 50 states and the District of Columbia across 21 key metrics. Because white individuals comprise approximately 59% of the US population, we used this racial group as the benchmark against which to measure the wealth gap with the nonwhite population, including Black, Hispanic, and Asian individuals. For each metric, we selected the largest disparity among these racial groups.

For example, if the income gap in California was 20% between white and Black individuals, 30% between white and Hispanic individuals, and 0% between white and Asian individuals, we used 30% as the representative figure for that metric.

To measure wealth, we incorporated multiple indicators, including median household income, homeownership rates, unemployment, poverty levels, educational attainment, and gaps in educational attainment. Additionally, given its increasing significance, we examined disparities in health insurance coverage.

By evaluating these factors collectively, we aimed to capture a comprehensive picture of wealth disparities in the United States.

Jacobsen: Which states are performing the best? Why are they performing well? And is there a state that ranks relatively high but is notably unbalanced in its sub-rankings?

Lupo: Interestingly, in this study, lower rankings indicate smaller wealth gaps, so being at the bottom of the list can be seen as a positive outcome. However, this can also reflect low overall wealth levels rather than economic equality.

For example, West Virginia ranked 51st, meaning it had the smallest measured racial wealth gap. The disparities there include an approximate 32% gap in median household income, a 41% gap in homeownership rates, and a 72% gap in poverty between white and Black residents.

Similarly, Alaska, which ranked 50th, follows a comparable trend. Both states are predominantly rural and have lower overall income levels. In such cases, poverty, low wages, and limited economic opportunities affect the population across racial lines, resulting in narrower racial wealth gaps but lower wealth for all groups.

Let’s contrast that with the states at the top of the list, where racial wealth disparities are largest. Washington, D.C., ranks first, meaning it has the widest racial wealth gap. It has a 64% gap in median household income and a homeownership gap exceeding 50%. At the same time, the poverty rate among Black residents is 3.26 times higher than that of white residents.

Washington, D.C., has a unique demographic composition, with approximately 45% of its population being Black. However, as the nation’s capital, it also has a concentration of high-paying jobs in government, law, and consulting, which white residents disproportionately hold. This economic structure creates a sharp divide in income and wealth between racial groups.

In essence, when a minority population has a significant presence in high-income jobs, it can drive up overall income statistics while still leaving a large segment of the population economically disadvantaged, exacerbating wealth inequality.

Jacobsen: Even though white individuals make up a smaller percentage of the population in Washington, D.C., what does Professor Martha Davis attribute to the increase in the wealth gap over the past decade?

Lupo: Okay, now, according to Dr. Martha Davis, a distinguished professor of law at Northeastern University in Boston, and I quote:

“Many recent US tax policies have favoured those who have accumulated wealth. For example, the US Department of the Treasury estimates that 92 percent of the tax value of the preferential rates on long-term capital gains and dividends went to White families in 2023. Racial minorities, particularly Black Americans, bear the legacy of institutionalized slavery followed by decades of de facto segregation, educational bias, and other discriminatory practices. As a group, they start with less, and recent US policies have amply rewarded those who start with more.”

Using that as a starting point, this country must do more to provide economic opportunities. According to Dr. Davis, these efforts should begin at the federal level. However, if you’re going to create real societal change, you have to start locally. To change Washington, you first have to change town hall. You have to begin at the grassroots level—and we’re seeing examples today.

I will go off on a slight tangent here, but take Chicago, for example, amid the current immigration crisis. Issues surrounding undocumented immigrants and rising crime rates in an already crime-stricken city have reached a breaking point. Local leadership has implemented policies that favour undocumented immigrants. In response, residents are mobilizing in what could be considered a grassroots movement.

Where that leads is uncertain. But fundamentally, it comes down to policy decisions relating to employment programs, educational opportunities, or community support initiatives.

If you’re from a background where education is not easily accessible, stronger initiatives are needed to provide better learning opportunities. But real change has to start at the bottom—from the ground up.

Too much of the current approach relies on top-down solutions. Instead, we need bottom-up strategies—starting with education, opportunity creation, and policy reform.

The key is empowering individuals at the lowest economic levels, giving them the belief and the means to succeed. When combined with policies that foster and reward achievement, this can significantly impact wealth disparities.

Jacobsen: Another critical factor is entrepreneurship. Emerita Professor Myra Marx Ferree from the University of Wisconsin-Madison has commented extensively on this topic. Most businesses fail in their early stages, so there’s a risk-reward ratio to consider and a bias when we only focus on success stories. Martha Davis spoke about entrepreneurship programs, too. How should we analyze income inequality by race in the US, particularly business ownership? If most businesses fail, could that be reinforcing false perceptions about the actual success rate of startups?

Lupo: In terms of entrepreneurship—it can be valuable, as Dr. Davis noted. However, to be effective, programs must provide access to capital.

Entrepreneurship highlights a broader issue in the US that affects all racial and ethnic groups: a lack of financial literacy. Businesses fail because of a lack of preparation and fundamental financial or business skills.

Until that issue is addressed, entrepreneurship programs will remain beneficial in theory, but their success will be limited without a foundation in financial literacy. Suppose individuals do not understand how to write a check, calculate interest, manage credits and debits, navigate bank accounts, or handle basic business structures, marketing, and management. In that case, they will struggle to sustain a business.

So, before we can assess the value of an entrepreneurship program, we must ensure that individuals have access to basic financial education.

Furthermore, entrepreneurship is also about instilling a sense of achievement—getting people to believe in themselves. When individuals have confidence in their abilities, they strive for goals they may have once thought were out of reach.

Jacobsen: One of the largest gaps in net household wealth and median household income. Non-Hispanic white Americans have approximately $250,000 in median household wealth. Hispanic Americans have about $50,000, and Black Americans have around $25,000 per household.

So we’re talking about a fivefold to tenfold gap between ethnic groups in the United States.

How does that disparity affect residential patterns, including where people can buy homes, what services they can afford, and the quality across generations?

Lupo: Again, this comes back to localizing these issues. Solutions must begin at local and state levels through incentives, education programs, or policy initiatives. The disparities here are staggering.

Take Washington, D.C., for example. You have a minority population in extreme poverty, yet within that same racial group, there is a wealthy elite. That contrast is stark, and it speaks to broader systemic issues. There must be local initiatives aimed at closing this gap.

Jacobsen: Looking at the highest median household incomes, the District of Columbia, Wisconsin, and Nebraska top the ranking. However, these same states also have the largest homeownership rate gaps and the biggest poverty rate gaps among racial groups.

What makes these states stand out significantly—particularly regarding the disparities affecting African Americans?

Lupo: It’s interesting because when you examine the top-ranking states—number one, two, three, four, five, or six—they share a geographic pattern. These states are Upper Midwestern, have predominantly white populations, and experience cold climates. So, from a geographic standpoint, these may not be the most attractive locations for minority populations to settle in the first place.

For the minorities who do live in these states, policies and initiatives need to be developed that make them more attractive to Black and minority residents while also encouraging economic opportunity for those already residing there. This is a fascinating geographic trend—not one I initially expected to see. We often look for regional patterns, and here, we see a cluster of cold-weather, sparsely populated states sharing the same issue.

Take Minnesota and Wisconsin—they have some major metro areas, but these states, like Nebraska, have vast rural areas where economic opportunities are limited for people of all races.

Jacobsen: What policies help reduce income inequality across racial and ethnic groups in the US? And which policies fail to have an impact?

Lupo: When discussing entrepreneurship programs, job training programs, or educational initiatives, they can be effective if they are adequately funded and if participation levels are high. The focus should be on well-structured programs. Now, race-based programs do not work. Everything should be based on achievement. Artificially bending the curve and providing opportunities to individuals who have not earned them—regardless of race—can do more harm than good. That’s why any initiative or opportunity should be merit-based.

Jacobsen: Why is everything weighted equally? That might be a good way to wrap up.

Lupo: That’s a great question—I just noticed that myself. Let’s see if there’s any context provided on why the weights are distributed this way.

That’s an interesting point. This is because the data was compiled from only two government agencies: the Census Bureau and the Bureau of Labor Statistics.

You may not need to assign different weights to each metric when you have such a limited number of sources. Yeah, that’s something to think about—every metric being weighted equally is unusual.

Also, the fact that only two government agencies were used for these rankings stands out. Many other potential data sources could have been incorporated. Yes, I don’t know how to answer that. This is the first time I’ve seen a study in which every metric is weighted equally.

Jacobsen: Hypothetically, if you adjusted the weightings to make them more nuanced, which factors would you weigh more heavily and which would receive less weight?

Lupo: Household income, unemployment, education, and poverty should be weighted the most because they are the biggest drivers of wealth inequality.

The uninsured rate might receive slightly less weight since disparities in health insurance are a more recent trend than structural inequalities in income, education, and employment.

Homeownership could be given less weight since having a high income does not always correlate with high homeownership rates.

So, if I were adjusting the weights, household income and unemployment would carry the most weight, followed by the education gap. Poverty would be weighted less, as it is often a result of high unemployment and lower educational attainment rather than a standalone driver. The highest priority metrics would be income, unemployment, and education gap.

Jacobsen: All right, man. I appreciate your time again. Thank you.

Lupo: Thanks, Scott. Bye now.

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