Decomposing Lifetime-earnings Differences between White, Black, and Hispanic Families 
Researchers have explored racial disparities in lifetime earnings, but most of the studies focus on individuals as opposed to families and are based on data sources that largely exclude high-income earners and information on business ownership. Furthermore, some of the studies focus on workers before they reach peak earnings ages. This paper seeks to address these shortcomings of the literature.
Key Findings
- Data from the Survey of Consumer Finances and the Current Population Survey indicate that differences in mean and median lifetime earnings by race for a subset of families headed by respondents aged 40 to 59 are substantial. Mean lifetime earnings for White and “other” race families are $2.0 million compared with $1.3 million for Black families and $1.2 million for Hispanic families.
- The observed differences by race in lifetime earnings ultimately result from substantial differences in household composition by race, particularly households’ number of working members, number of years of paid employment across the working life for each member, and the level of compensation for employment.
- Forty-four percent of all “other” race families—which includes Asian families—and 42 percent of all White families are headed by married/partnered couples in which both adults are working compared with 34 percent of all Hispanic families and 24 percent of all Black families.
- The average number of years of full-time work reported over a family’s working life (combined for both adults when a spouse/partner is present) is 39.5 for White families, 34.5 for “other” race families, 32.9 for Hispanic families, and 31.7 for Black families.
- The average annual income is $139,000 for “other” race families, $122,000 for White families, $67,000 for Hispanic families, and $64,000 for Black families.
Implications
The importance of education and occupation in explaining racial disparities in lifetime earnings indicates that policies focused on increasing Black and Hispanic representation among college graduates and in high-paying jobs could help to close these gaps. Such policies could involve initiatives to improve elementary- and secondary-school performance in math and science, given the large share of high-paying occupations in technology sectors. The important role that years of full-time work play in explaining the lifetime-earnings disparities points to the potential benefits of policy that would increase the number of workers and labor force participation over the life cycle among Black and Hispanic households.
Abstract
This paper explores disparities between White, Black, and Hispanic families using a measure of lifetime earnings developed by Jacobs et al. (2022) for the Survey of Consumer Finances (SCF). Lifetime earnings are a particularly important measure of well-being, with relevance for wealth accumulation among other economic and social outcomes, but they are under-studied in the context of racial disparities. We describe how the different components of lifetime earnings—including annual earnings of workers, number of working household members, and number of years of employment during the working life—vary by race. We then decompose the differences in lifetime earnings using the recentered influence function and show that human capital-related variables, including educational attainment and years of full-time employment, account for most of the observed differences in lifetime earnings between White, Black, and Hispanic families. We also explore the contribution of business ownership to explained disparities in lifetime earnings and find that it is significant and that business ownership’s explanatory power increases at the top of the lifetime-earnings distribution.