5 Ways that Inequality Improved This Year

8 minute read
Ney is the author of American Inequality and was previously a macro policy strategist at the Federal Reserve

Inequality seems to be improving in America. In the past 3 months, the Federal Reserve, EPA, FBI, White House, and the Census published groundbreaking reports that revealed significant overall improvements in household wealth, reduced greenhouse gas emissions, declining crime rates, flourishing Black-owned businesses, and diminishing incarceration rates. Despite the prevailing sentiment among Americans that social issues are only getting worse, researchers from American Inequality have highlighted the ways that many measures of overall wellbeing are in fact improving. Make no mistake that a tremendous amount of work still remains to be done before broad based equality can be achieved—particularly for low-income Americans and those living in the South—but the data now shows that the U.S. is making significant headway.

Families got 37% wealthier

The average American household saw a $51,800 increase in wealth from 2019-2022, raising median net worth to $192,900. Black households experienced the largest growth in median net worth over the period, increasing 60% from $28,000 to $44,900. However, White households had a net worth that was more than 6 times that of Black households at $285,000 in 2022.

The main driver of wealth gain was housing appreciation.

For the 65% of Americans who own their homes, rising home prices have had a tremendous impact on increasing their wealth. The Federal Reserve estimates that between 2019 and 2022, Americans who owned their homes gained more than $6 trillion in housing-based wealth. Over the 10-year period between 2012 and 2022, the value of a median-priced home in the U.S. increased by $190,000.

While this is a fantastic improvement for many, Emily Badger at the New York Times captures this bittersweet change well:“It’s a remarkably positive story for Americans who own a home; it’s also inseparable from the housing affordability crisis for those who don’t. For them, rents are rapidly rising. Inflation is whittling away their incomes. And the very thing that has created all this wealth has pushed homeownership as a means of wealth-building further out of reach.”

Greenhouse gas emissions fell 12.8%

Every 5 years, NASA, the EPA, NOAA and 11 other government agencies prepare an assessment on America’s climate and sustainability goals. This is a Congressionally mandated survey that has become the de facto source for climate progress. On November 13, 2023 these agencies released their 5th ever report, which highlighted that annual US greenhouse gas emissions fell 12.6% over the past 20 years.

Improvements in electricity generation techniques drove this downward trend in greenhouse gas production. The concurrent factors of declining coal use and increasing reliance on renewable technologies led to a 40% drop in emissions from the electricity sector. 

The EPA acknowledges that the effects of climate change in the U.S. disproportionately impact low-income families and Black families, particularly in the South. The agency estimates that Black families are 40% more likely to currently live in areas with the highest projected increases in extreme temperature-related deaths. Slowing the rate of climate change can therefore act as an equalizer to those communities that are most at risk.

Violent crime declined 23%

In October 2023, the FBI released their annual crime report, which highlighted a welcome and surprising trend that violent crime is declining in America. Not only has violent crime fallen 23% from 2002 to 2022, but also in the past year alone murders fell 6% and violent crime declined 2% overall. New York City, which has been lambasted by politicians for having high crime rates, has actually seen declines in most categories of violent crime. Murders in NYC are down 26.7% from this time last year, burglaries are down 22%, shootings are down 8%, and hate crimes are down 9%; although anti-semitic incidents have spiked in the last month. Overall, violent crime has decreased 49% since its peak in 1991 from a rate of 758 violent crime offenses per every 100,000 people to 380 per 100,000.

More than 50 years ago, Nobel Prize winning economist Gary Becker highlighted the powerful relationship between inequality and crime. Researchers publishing in Nature pushed the findings further and explained, “more unequal societies tend to have higher crime, as well as lower social trust.” Public opinion on crime runs counter to what the data reveals. A 2022 Gallup poll found 73% of Republicans said that local crime had risen, compared with 51% of Independents and 42% of Democrats.

Gun violence, however, still remains a critical issue, particularly in the South. The FBI data showed that firearms were used in almost half a million violent crimes across the country, matching the same number as in 2021. Guns were responsible for the loss of 5.7 million years of life expectancy in the South from 2009-2018, compared to one-fifth that number in the Northeast.

Black owned businesses grew 19% 

The number of Black owned employer businesses rose by 19% from pre-pandemic levels, marking a tremendous increase that has outpaced overall business growth during this time. According to new Census data from October 2023, the U.S. now has 161,031 Black owned employer businesses, up from 134,567 in 2019. These businesses employ 1.4 million people, generating $53.6 billion in annual payroll. The US has an additional 3.1 million Black-owned nonemployer businesses, which is roughly flat with pre-pandemic levels.

City governments have helped spur the growth in Black owned businesses. For example, Washington, D.C. has one of the highest shares of Black owned businesses in the country at 7%, in large part due to multi-million dollar lending programs from the mayor’s office and through creative public-private partnerships that make it easier for Black businesses to access credit. While D.C. has made significant progress, overall 45% of D.C. residents are Black, marking a tremendous gap in ownership that does not match the overall population.

The federal government has similarly tried to increase funding for Black owned businesses. The United States Small Business Administration doubled the share of loans that it gave to Black-owned businesses from 2017 to 2022, offering $1.5 billion dollars in support. The Biden administration has extolled these efforts, saying that the rate of Black-owned small business creation is now at its highest level in 25 years.

Private sector funding for Black owned businesses remains painfully low. Only 1% of venture capital funding in 2022 went to Black owned businesses, roughly $2.3 billion of a total $215.9 billion. Banks are also twice as likely twice as likely to reject a loan application from a Black owned business, and even when they are approved, they rarely get the full funding requested. Not a single metro area in the U.S. has a share of Black-owned employer firms that matches or exceeds the Black population in the area.

Incarceration rates dropped 48%

Incarceration rates have declined in every state and for every racial, ethnic, and gender group (with the exception of white women), accounting for a 48% national decline in the last 20 years. Perhaps most importantly, the imprisonment rate for Black men in the U.S. was cut by nearly half over the last two decades, from 3,457 per 100,000 in 2000 to 1,807 per 100,000 in 2021 according to data from the Bureau of Justice Statistics. The actual rate of incarceration is now far below the often cited figure of 1 in 3 Black men being at risk of incarceration.

The pandemic had a significant impact on driving down incarceration rates. For example, the Prison Policy Initiative explains that there were 24% fewer arrests in 2020 compared to 2019, largely due to widespread stay at home orders combined with short-term guidance to police departments to limit unnecessary contact and jail bookings.

However, as pandemic policies have subsided, the incarceration rate ticked back up by 2% from 2021 to 2022. This was largely led by increased policing in certain states, like in Mississippi where incarceration rates grew by 15%. Black men still make up 35% of the prison population, despite being just 12% of the overall US population. People of color remain massively overrepresented in prisons, accounting for nearly 7 in 10 people in prison.

Inequality still persists

Income inequality remains at one of the highest points in U.S. history, along racial, economic, and geographic lines. Americans in the 90th percentile made nearly 13 times as much as Americans in the bottom 10th percentile, far higher than the gap just 3 years ago. America is a tremendous inequality outlier compared to other developed nations, making the country look much more like El Salvador or Laos than the U.K. or Canada.

Much of the improvements in social issues disappear when disaggregating the national data down to the community level. Income inequality across geographies, for example, has increased 40%. While greenhouse gas emissions declined nationally, 2023 is on track to set a record with 23 climate catastrophes costing at least $1 billion which have disproportionately ravaged the same communities in the South and the Gulf Coast. 

Pandemic era policies helped level the playing field, but the gains were short lived. Cash infusions through PPP loans and Emergency Assistance Funding offered a much needed lifeline, causing the U.S. poverty rate to fall from 11.8% in 2019 to 7.4% in 2021. As those policies expired, poverty rebounded to 12% in 2022.

The data reveals that change is possible. Public, private, and nonprofit action can turn the tide and set Americans on a path towards greater opportunity and equality.

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