Lifetime Earnings, Social Security, and the Racial Wealth Gap
DOI:
https://doi.org/10.25071/1874-6322.40655Keywords:
Social Security, household wealth, racial wealth gapAbstract
The large and persistent gap in household wealth by race in the United States is a well-established empirical fact, although the causal mechanisms behind wealth differentials are still a subject of much debate. Earnings are clearly a key driver of wealth accumulation, and wealth differentials by race are known to be much larger than earnings differentials by race. This article addresses two related questions about the relationship between earnings and wealth. First, does switching from contemporaneous to lifetime earnings have a large impact on estimates of the racial wealth gap? Second, does expanding the wealth measure to include Social Security benefits have any additional impact on estimated wealth gaps, after controlling for lifetime earnings? The answers to these questions vary depending on the measure of racial wealth gaps, with substantial impacts on relative wealth levels but only modest effects on relative wealth rankings.
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