Stark gaps in the amount of wealth held by different ethnic groups in Britain – which have had a serious impact on the financial resilience of households during the Covid-19 crisis – are likely to persist, according to new Resolution Foundation research published today .
The report – A gap which won’t close – explores how wealth gaps between and within different ethnic groups have changed over the past decade, and what these shifts mean for households’ ability to weather the Covid-19 crisis, and for wealth inequality in post-pandemic Britain.
The report finds that, in the UK, people of Black African ethnicity typically hold the lowest wealth (a median figure of £24,000 family wealth per adult), a total which amounts to less than one eighth of the typical wealth held by a person of White British ethnicity (£197,000 family wealth per adult).
Those of Bangladeshi ethnicity typically hold just £31,000 family wealth per adult (median figure), while those with Mixed White and Black Caribbean ethnicity typically hold £41,800.
Looking at how wealth has changed over the past decade, (2006-08 to 2016-18), the report finds that relative wealth gaps have fallen slightly. The disparity between the lowest- and highest-wealth ethnic groups is down from 81 to 76 per cent of the highest-wealth group’s average wealth.
However, absolute gaps in wealth between different groups rose across this period, as household wealth increased. The gap between the ethnic groups with highest and lowest median household wealth (White British and Black African households respectively) has grown to £173,000.
These significant wealth gaps between households have been brought to the fore during the pandemic. The Foundation’s analysis shows that, on the eve of the pandemic, at least half Black African, Bangladeshi and Black Caribbean ethnicity households in the UK had less than £1,000 in family savings to act as a buffer in case of a fall in their income.
Looking beyond the pandemic, the Foundation says that such large wealth gaps are likely to persist, even as some employment and education gaps between ethnic groups have reduced. The combination of rising wealth but stagnant earnings makes it difficult for even higher earners to save their way to being high wealth.
Inheritance will also play a part in prolonging these wealth gaps. The analysis shows that over the past two years, the average person of White British ethnicity inherited a total of £3,068 from friends and family – almost 50 per cent more than an average person from the next highest-inheriting ethnic group, people of Indian ethnicity (£1,958).
The average person of Black Caribbean ethnicity inherited £778, while the those of Black African, Chinese, Bangladeshi or Pakistani ethnicity typically inherited nothing.
The Resolution Foundation says that such persistent wealth gaps must be considered by policymakers, and points to the need for wealth tax reform, help for first-time buyers that is more progressively targeted than recent schemes such as Help to Buy (which largely benefitted young people who already had access to family wealth), and more generous tax pension tax relief for lower earners.
George Bangham, Economist at the Resolution Foundation, said:
“There are starks gaps in the amount of wealth held by different ethnic groups in Britain. These wealth gaps are having a serious impact on the resilience of different households in the face of income shocks during the Covid-19 crisis, and on the life choices of current and future generations.
“Despite significant progress in closing education and employment gaps between different ethnic groups, these wealth gaps are likely to persist. Even high earners will struggle to save their way to being high wealth, while White British people are much more likely to inherit significant sums than those of other ethnic groups.
“Policy makers need to recognise that wealth gaps may be much harder to close than other differences between ethnic groups, particularly as they are often hardly discussed. There is no silver bullet to tackling persistent wealth inequalities but wealth tax reform and better targeting of support for people to access home ownership or save for a pension would help.
