Net Worth
Net worth is the most common way to measure wealth. It is calculated by subtracting the value of household debt from the value of household assets.
Wealth and Net Worth
Prosperity Now’s analysis measures wealth through net worth. A complex interplay of assets, debts, income, and expenses affects household net worth, with each of these contributors influenced by its unique set of underlying drivers.
On this page, after picturing the state of the racial differences in net worth, we examine the underlying drivers of these inequalities.
There are stark differences in median net worth between ethno-racial groups in Michigan
The figure below shows the household median net worth for ethno-racial groups in Michigan. Median net worth is the amount of net worth separating the wealthier half from the less wealthy half within each group.
White households have a substantially higher net worth than Black households in Michigan. Hispanic households have about the same net worth as white households but there is a lot of variability. There is so much uncertainty around the exact value of the median net worth for households of other ethno-racial groups that we cannot draw any conclusions.
Source: Calculations using data from the 2022 SIPP survey.
Notes: The ethno-racial groups shown here are mutually exclusive and collectively exhaustive. They represent a combination of race and ethnicity of the head of the household rather than the entire household. Whenever a given ethno-racial group is too small for reliable statistical analysis, it is grouped with “Other” (see Methodology for more detail). The grey bars represent the margin of error around the estimated median. Wider bars mean that there is more uncertainty around the exact value of the median. The black dashed lines show the national median net worth by ethno-racial group.
When comparing households with similar income, the net worth gap shrinks
In this figure we compare households with similar demographic characteristics (the sex and age of the head of the household, and the household composition). The squares in the graph below show the differences in median net worth when comparing households with similar demographics. We find that there are still disparities in median net worth across ethno-racial groups, suggesting that underlying household characteristics are not the main reason for the large disparities.
When comparing households with similar demographics, the Black-white wealth gap decreases from approximately $171,000 to $159,000. However, we should be cautious about drawing definitive conclusions from these figures. The confidence intervals for these estimates are quite wide, which means there's a lot of uncertainty around the exact numbers. In simpler terms, while we can see a general trend, the actual gap could be somewhat larger or smaller than what these specific numbers suggest.
Source: Calculations using data from the 2022 SIPP survey.
Notes: The ethno-racial groups shown here are mutually exclusive and collectively exhaustive. They represent a combination of race and ethnicity of the head of the household rather than the entire household. Whenever a given ethno-racial group is too small for reliable statistical analysis, it is grouped with “Other” (see Methodology for more detail). The grey bars represent the margin of error around the estimated median. Wider bars mean that there is more uncertainty around the exact value of the median. The diamonds represent the differences in median net worth without taking other factors into consideration while the squares represent the model with the controls noted above.
When comparing households with similar home equity, the differences in median net worth are quite small
When we compare households with similar home equity (and similar demographics and income), the difference from white households’ net worth becomes small or non-existent. The squares below represent median net worth when comparing households with similar characteristics, income, and home equity.
When we don't account for demographics, income, and home equity, Black households in Michigan have about $171,000 less in median net worth than white households. However, when we compare households with similar demographics, income, and home equity the difference in net worth is only about $17,000. This change suggests that differences in home equity are largely, though not totally, responsible for differences in median net worth between ethno-racial groups in Michigan.
Source: Calculations using data from the 2022 SIPP survey.
Notes: The ethno-racial groups shown here are mutually exclusive and collectively exhaustive. They represent a combination of race and ethnicity of the head of the household rather than the entire household. Whenever a given ethno-racial group is too small for reliable statistical analysis, it is grouped with “Other” (see Methodology for more detail). The grey bars represent the margin of error around the estimated median. Wider bars mean that there is more uncertainty around the exact value of the median. The diamonds represent the differences in median net worth without taking other factors into consideration while the squares represent the model with the controls noted above.