For more than 30 years, the wealth gap has been growing between the top 1% and the bottom 99% of earners in the US. — and the disparities become even more prominent when the numbers are broken down by race. Below we’ll explore what the wealth gap is, what caused it, and what you can do to start closing it.

What is the wealth gap?

Wealth is the cumulation of all tangible and intangible assets that have value, like homes, stocks, bonds, inheritances, wages and income, savings, and more.

The wealth gap is the large disparity in the distribution of money and assets among individuals, groups, populations, or social classes. The wealth gap permeates population segments based on a number of different factors, like sex, race, geographic location, occupation, historic income, and more.

What created the wealth gap in the US.?

Income and wealth inequality is higher in the United States than in almost any other developed country, and it is rising.¹ The US wealth gap is the highest of all the G7 nations.² But how exactly did we get to this point? Income inequality has been the largest catalyst in creating the wealth gap. American workers’ hourly compensation only increased 17.5% from 1979 to 2020, while productivity during the same period rose by 61.8%.³

A culmination of events and policies⁴ over several decades has created and exacerbated the US. wealth gap, including:

• Decreases in wages for workers with less education
• Tax cuts that disproportionately favored the country’s richest households
• Large decreases in US manufacturing jobs
• Fewer unionized positions with good benefits
• A minimum wage that has not kept pace with inflation
• An increase in low-paying service-sector jobs

Additionally the African-American community and other minorities have dealt with challenges like segregation, Jim Crow, redlining, evictions and exclusion, and denial of access to wealth-building opportunities⁵ , among other obstacles. These issues have driven a large wedge between ethnic minorities and white communities in terms of wealth and wage equality.

One of the few equalizing forces among all groups in the US. in terms of wealth is Social Security.
Since it provides universal coverage and requires mandatory contributions, Social Security helps close the wealth gap by providing assets to those who need them the most, regardless of race.

What happens when there’s not enough wealth?

Beyond providing stability and income, wealth can help protect families from financially derailing due to income loss or temporary setbacks. A lack of wealth may mean less access to working capital needed for an entrepreneur to start a business, create jobs, and contribute to community wealth. Not only that, but a lack of wealth may mean less access to housing in safe neighborhoods with high-quality schools — decreasing the chances that the next generation will succeed and be able to build wealth of their own.

A pathway to building wealth and closing the gap

There are a few primary ways Americans have built wealth, including:

• Home ownership
• Reducing expenses where you can
• Inheritance
• Entrepreneurship
• Investing in the stock market
• Career advancements/choices

However, wealth-building requires both knowledge and systemic changes in everyday life. As the old adage goes, “it takes a village,” and recruiting (or becoming) a financial ally can help people from groups with historically less wealth build and sustain more wealth. There’s also a common misunderstanding that financial professionals only work with wealthy individuals or only with those who have investments. This is not the case. There are professionals who can help close the wealth gap with meaningful counsel.

• Mortgage lenders can assist in finding tools to get the best rates.
• Investment advisors can give insights about where and how to invest money.
• Financial professionals can provide guidance on how to leverage term or whole life insurance and other tools to accumulate wealth and leave a legacy for the next generation.
• Accountants and financial professionals can help individuals define and reach financial goals through saving, investing, and retirement strategies.
• Career and business coaches can help you achieve short and long-term goals.

Building assets is essential in establishing financial health and wealth. When assets accumulate over time, the chances for success will increase for future generations. With over a trillion dollars for the US to gain from doing so, closing the wealth gap means making both systemic changes and personal, everyday changes to the way we navigate our lives.⁶ Learn more by starting a conversation with a financial professional today.

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2023-151998 Exp. 3/2025