Persistent racial inequality in the United States

1 Introduction

freedmen

A once-enslaved person (of either gender) who is now free, that is, no longer enslaved.

In the late nineteenth century, Robert Smalls was the most successful politician from Beaufort county, South Carolina. Beginning as a state representative in 1867, he moved on to state senator, and then served as a congressman for most of the period between 1874 and 1887. At the same time, he invested in a local store for freedmen, a railway to serve Beaufort county, and a newspaper, the Beaufort Southern Standard.

These accomplishments are especially notable given that Smalls was born enslaved in 1839, and was still enslaved as late as 1861, which marked the beginning of the Civil War fought between the Confederate slave-owning Southern states and the anti-slavery Union states of the North, where slavery had been declared illegal. During the war, he was an enslaved pilot for a Confederate navy boat, the Planter. With his colleagues, he stole the ship and ran it to Union army lines (along with a lot of military intelligence on Confederate troops). His bravery made Smalls a national hero in the North, earned him some prize money, and got him an appointment in the Union Navy, piloting the Planter using his knowledge of the South Carolina coastline.

During the Civil War, Smalls used his money to purchase his family’s freedom. Next up was purchasing some land. As it happens, in Beaufort the Union army auctioned off land that had belonged to former slave owners, and Smalls was able to use his savings to buy his old master’s property. The land remained his, despite a lawsuit from the former owners, unlike much of the land redistributed during the Civil War, which ended up back in White hands. He also spent money on becoming literate but, despite his intelligence and talents, was reportedly never completely comfortable reading.

As a result of Smalls’ wealth and success, his children and grandchildren (and great-grandchildren) were solidly middle class and better off than most Black people. But despite all this advantage, he and his descendants still had to contend with American structures of inequality, with sometimes complicated effects. For example, one of Smalls’ granddaughters, Dolly, got a Master’s degree in physical education from Columbia University in 1953, paid for by the state of Maryland. Why? The state of Maryland was willing to pay for her degree since she was a public school teacher, but the University of Maryland system was still racially segregated, so the degree could only be obtained out of state.

A major question for social scientists, and one relevant to ongoing policy debates around reparations, is what racial inequality would look like today had there been more people like Robert Smalls; that is, if more freedmen had received some initial grant of wealth or land.

Besides Beaufort, there were a few other places where the formerly enslaved received some initial property, most famously the strip of coastal land where freedmen were promised 40 acres by Union General William Tecumseh Sherman’s Special Field Order 15. While exceptional, these provide a good natural experiment for economic historians to study the long-term effects of giving land to formerly enslaved people.

As is common in the U.S. we refer to people of African and European origin respectively as Black and White, terms that may not be appropriate in other societies.

An example studied by economist Melinda Miller is the Cherokee Nation. The Cherokee is a Native American tribe which was forcibly relocated to Oklahoma in the 1830s along the infamous “Trail of Tears,” where approximately 4,000 Cherokee died, as well as thousands from other tribes. At the same time, the Cherokee held enslaved Black workers who subsequently became part of the tribe and by 1860 made up 15% of Cherokees.

After the Civil War, the United States government renegotiated the Cherokee treaty in 1866 and guaranteed formerly enslaved people rights to claim land in the public domain, along with federal farming assistance and protection from having their property taken away by state or federal governments. Within the Cherokee Nation, formerly enslaved Black people were given property and assistance that was largely denied to Black people in the U.S. South. Fifteen years later, in 1880, Black Cherokees had a farm ownership rate five times higher than non-Cherokee Black people and owned farms at about the same rate as the rest of the Cherokee Nation. There were also smaller racial gaps in farm size and value in the Cherokee Nation compared to the rest of the South. In 1880, within the Cherokee Nation, Black farmers had 10% fewer acres and 23% higher farm values than non-Black farmers. However, in the rest of the South Black farmers had 40% fewer acres and 23% lower farm value than White farmers. All of this resulted in noticeably lower racial gaps in wealth and income among the Cherokees compared to the U.S. South.

Remarkably, this difference persisted through generations. Miller shows that in 1900, the gap in literacy and school attendance between Black and non-Black Cherokees was smaller relative to that among non-Cherokees. In other words, the smaller initial racial gap in wealth within the Cherokee Nation meant that, a generation later, gaps in other dimensions of economic opportunity, such as education, were smaller as well.

The experience of the formerly enslaved Black members of the Cherokee Nation remains an outlier in the U.S. In the rest of the South, most of the formerly enslaved started with little to no wealth or capital at all, even as many ex-slaveholders quickly recovered (or retained) much of their former wealth.

Figure 1 shows the White-to-Black ratio of wealth and income since the end of the Civil War.

Fullscreen

https://books.core-econ.org/insights/persistent-racial-inequality-in-the-united-states/01-introduction.html#figure-1

Figure 1 The ratio of average White to average Black wealth (left) and income (right) from approximately the end of the Civil War until the present.

Ellora Derenoncourt, Chi Hyun Kim, Moritz Kuhn, and Moritz Schularick. 2021. “Wealth of two nations: the U.S. racial wealth gap, 1860–2020”. NBER Working Paper Series, No. 30101.

One of the most striking features of this figure is the rapid decline in the wealth ratio between 1860 and 1870. Formerly enslaved people started with very little wealth of their own, so even modest increases in their wealth dramatically decreased the wealth ratio. The figure also shows a consistent decline in the wealth and income ratios in the century following the end of the Civil War. However, the figure demonstrates relatively constant ratios since the late twentieth century, which are still far from parity, with White people having around six times as much wealth as Black people and around two times as much income. Finally, the graph on the left also demonstrates a slight increase in the wealth ratio in recent years.

Today much of the Black population is at least middle class with respect to income, whereas through much of the nineteenth and early twentieth century, most of them lived in poverty. However, if the middle class is defined by wealth (or by both income and wealth), then the size of the Black middle class is considerably smaller.

Although social scientists disagree on the relative importance of various explanations for enduring racial inequality in America, the fact that such inequality exists is uncontroversial.

• As of 2019, the median White household had a net wealth of $189,100, whereas the median Black household had a net wealth of $24,100.
• Median household income in 2020 was $74,912 for White households, $55,321 for Hispanic households, and $45,870 for Black households.
• The unemployment rate in July 2022 was 3.1% for White people, 3.9% for Hispanic people, and 6.0% for Black people.
• Between 1972 and 2021, Black unemployment was on average 2.1 times higher than White unemployment.
• Before the COVID-19 pandemic, life expectancy for White people was four years higher than that for Black people. The pandemic has added an extra year to that gap. (As you continue reading this Insight, think about why that might be.)
• Black men are six times more likely to be incarcerated than White men, and eight times more likely to be murdered.

Persistent racial inequality is among the U.S.’s most stubborn and harmful problems. This Insight outlines the mechanisms identified by social scientists that produce and sustain such racial inequality over generations as a way of identifying policies that might address the problem.