U.S. Rep. Beto O’Rourke, the Democratic nominee challenging Republican U.S. Sen. Ted Cruz of Texas, said that vast U.S. wealth differences show the economy doesn’t work for everyone.
The El Paso congressman’s half-page ad in the Houston Defender shows O’Rourke shaking hands with an African-American man. Accompanying text says: “Our economy isn’t working for everyone when black Americans have 10 times less wealth than white Americans. Let’s level the playing field by ensuring access to good jobs, higher pay, skills training, and a fair shot at economic success.”
We decided to put O’Rourke’s stats to the Texas Truth-O-Meter.
A reminder: Wealth is distinct from income. It measures how much we own, not how much we make. While the two are closely tied, economists talk about wealth in terms of net worth. A house, for example, adds to net worth if its value is higher than the amount of the mortgage. Assets minus debts gives you net worth.
We asked O’Rourke’s campaign about the basis of O’Rourke’s “10 times less” claim in the ad. Chris Evans of O’Rourke’s campaign pointed to an October 2017 Washington Post story and other reports rooted in 2016 consumer survey data summed up by the Federal Reserve in fall 2017. That data, Evans told us, pegged the median net worth of white families at 10 times the median net worth of black families.
The Post story says that according to the survey results, the “median net worth of white families — $171,000 — is now 10 times that of black families and eight times that of Hispanic families.” A factor, the story says, is that “white families are five times more likely than black or Hispanic families to inherit money. That translates into opportunity — a down payment on a home, tuition to go to school, capital to build a small business, savings to retire on.” Other factors, the story says, include distinct rates of home ownership and participation in job-related savings plans.
According to a pair of September 2017 Federal Reserve articles, the agency’s 2016 Survey of Consumer Finances reached 6,254 families with queries on households’ total pre-tax income, balance sheets, pensions, income and demographic characteristics. “No other study for the country collects comparable information,” the agency says.
The 2016 survey found about a 10-to-1 difference in the median wealth/net worth of white and black Americans — or $171,000 and $17,600. That was the median, or midpoint, with half of the population higher and half lower than those amounts.
It changes when looking at average wealth instead of median. Average wealth of white and black Americans was nearly 7-to-1 — or $933,700 for white residents and $138,200 for black residents. Averages are based on adding up reported incomes and dividing by the number of households, meaning that very high incomes can skew the results upward.
The Fed offered one other comparison: Nearly 1 in 5 black households reported zero or negative net worth compared with a smaller share of white households, 9 percent, the study says.
We asked the Urban Institute, which has tracked such data and concluded that white families have outpaced black and Hispanic families in average wealth for the past 50 years, to evaluate O’Rourke’s claim. The statement had the right spirit, we heard back, although Caroline Ratcliffe, a senior fellow, offered a caveat in that the 2016 Fed survey suggests that black Americans had one-tenth the median wealth of whites, not 10 times less.
O’Rourke said that “black Americans have 10 times less wealth than white Americans.”
Survey results pinpoint two ways to gauge such disparities. According to the Fed’s 2016 consumer survey, black Americans had one-tenth the median wealth of white Americans while black Americans had a little over one-seventh the average wealth of white Americans.
We rate this claim Mostly True.
Statement: ‘Black Americans have 10 times less wealth than white Americans.’