How the Effects of Racial Bias Compound

Decades after the Civil Rights Movement and the abolition of explicit racial discrimination, Black households in the United States still hold only a fraction of the wealth of White households. In 2017, the median White family held 14 times the median wealth of Black families, according to U.S. Census Bureau data.

In this tool, we illustrate one contributing factor—the way that the small effects of racial bias can compound over lifetimes and generations to add up to large differences.

The following story offers illustrative examples of the ways in which this discrimination can affect people’s lives. In the tool below the story, change the inputs to explore how differing degrees of bias can compound to create inequities in education, income, and wealth.

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Story Two Lives, Different Paths

Meet Daniel and Liam. They both live in the same suburban town and attend the same high school, where they both receive average grades. In their free time, they both love to read, swim, and watch suspense movies.

Daniel is Black. Liam is White.

We will follow along their life journeys—fictional scenarios that are broadly based on the relevant research.

Because the field is vast, these narratives do not perfectly represent the research. Rather, their stories are intended to be illustrative of how racial bias can compound and alter their otherwise similar personal trajectories.

In high school, both Daniel and Liam try out for the swim team, and they both make the cut. As they progress through the season, they excel on the team.

But balancing swim team and schoolwork is stressful, and they both begin to feel burnt out.

Daniel receives a phone call during class and takes out his phone to silence it. The teacher tells Daniel to hand over his phone for the rest of the day. Daniel gets upset and tosses his phone onto his teacher’s desk, inadvertently knocking over a cup of coffee onto assignments.

He is reported to the principal’s office, where he receives a week’s suspension—including being barred from swim practice—because the teacher took his behavior as a sign of aggression.

Liam receives a phone call in social studies class and takes out his phone to silence it. The teacher asks Liam to give her his phone. Liam uses profanity and rolls his eyes as he hands her the phone.

The White teacher gives Liam a stern warning but decides not to take further disciplinary action because he is typically a good student.

Selected Research on Bias in School Discipline

In 2017–2018, Black students represented 15.1 percent of total enrolled students, yet they also received 38.2 percent of one or more out-of-school suspensions (U.S. Department of Education, Office for Civil Rights, Civil Rights Data Collection, 2021). Black students—and especially Black boys—face harsher punishment than their White peers; they are more likely than their White peers to face suspension, face expulsion, and be referred to law enforcement (Fenning and Rose, 2007; Skiba et al., 2011). Furthermore, Black students who participated in a fight received more-severe punishment than their equally guilty White peers (Barrett et al., 2019; Liu, Hayes, and Gershenson, 2021).

Indeed, according to a 2015 study, research has shown that

teachers escalated their response to a Black student more so than to a White student when the student had only one previous infraction, even though both infractions were minor and each was distinctive from the other—insubordination versus classroom disturbance. . . . [F]or the Black student, the first infraction seemed to influence how the second infraction was regarded. . . . [T]eachers are more likely to view multiple infractions as a connected pattern when the student is Black as opposed to White. (Okonofua and Eberhardt, 2015, p. 620)

Additionally, research shows that teachers believe that a “Black student’s misbehavior should be met with more severe discipline than the White student’s misbehavior. The Black student was significantly more likely . . . than the White student to be labeled a troublemaker” (Okonofua and Eberhardt, 2015, p. 621).

Learn more in the research appendix

Daniel and Liam both begin to think about college. They both excel in their science, technology, engineering, and math (STEM) classes and begin to think about careers as nurses.

Daniel would be the first person in his family to apply for college. He feels nervous about being rejected and even more nervous about the pressure to succeed if he is accepted. He asks his White health teacher what to expect.

The teacher tells Daniel that college would require a lot of hard work and that if he decides to apply to a nursing program, he will need to take on a lot of debt to pay for it.

Liam asks his White chemistry teacher whether she thinks he has what it takes to eventually become a nurse.

The teacher is thrilled to hear about Liam’s interest in nursing and encourages him to apply for several scholarships intended for future nursing students.

Selected Research on Racial Discrimination

“[T]eachers expect 58 percent of white high-school students to obtain at least a four-year college degree (or more), but anticipate the same for only 37 percent of black students." (Gershenson and Papageorge, 2018, p. 65).

Similarly, teachers have lower expectations for students of color and those living in poverty. After considering multiple factors, such as student motivation and effort, teacher expectation was still the most significant indicator of future success (Boser, Wilhelm, and Hanna, 2014).

Learn more in the research appendix

Daniel and Liam each apply to their top-choice nursing school, and both are accepted.

Because of his suspension record, Daniel is ineligible for the school’s academic scholarships. With his confidence still wavering about college—and without an added nudge from his parents—he had put off applying for external scholarships.

He takes out a mix of federal and private loans to pay for college tuition. His mom offers to pay for his books.

Liam is awarded an academic scholarship at his school and two of the scholarships his teacher had helped him apply for, which help him pay for a new laptop and textbooks.

Coupled with his parents' savings, the scholarships enable Liam to pay for college without accruing debt.

Selected Research on Earning Disparities

More than half of Black children (66 percent) live in a single-parent household, and 46 percent of these families are led by single mothers who are living at or below the poverty line (Noel et al., 2019). This typical Black family composition leads to lower household income (Chetty et al., 2020).

Black students are more likely to carry a higher debt burden that will continue to accrue interest in the forthcoming years. This debt might transfer to a college degree, but not all students finish their respective degrees. For instance, at four-year institutions, the college dropout rate is 54 percent for Black students and 42.3 percent for White students (Hanson, 2021). To that end, about 24 percent of the Black population has attained a bachelor’s degree or higher, while the attainment for the White population is 34 percent (Noel et al., 2019).

Learn more in the research appendix

After four years, both Daniel and Liam graduate from college with 3.5 GPAs. They each pass the National Council Licensure Examination and begin to apply for jobs as registered nurses (RNs).

Daniel submits his application to several hospitals and private practices, but after six months of no callbacks, he struggles to cover his cost of living while paying back his student loans. He decides to take a part-time job as a lifeguard to pay the bills.

After a few months, Daniel receives a job offer as a postoperative nurse and happily accepts. He is able to pay the minimum on his loans while adding a small amount to savings.

Liam decides to live with his parents while applying for nursing roles. He receives several callbacks after three months, and happily accepts a position as an operating room nurse.

Without college debt, Liam is able to start contributing to his savings account almost immediately.

Selected Research on Employment Opportunities

One study found that White applicants received 36 percent more callbacks than their Black counterparts, despite presenting identical resumes (Quillian et al., 2017).

Another study found that purposefully submitted fictitious resumes with anglicized- (White-) and ethnic- (Black-) sounding names showed that anglicized names received 50 percent more callbacks (Bertrand and Mullainathan, 2004).

Learn more in the research appendix

Daniel and Liam both progress in their careers, eventually excelling in the nurse management career track.

Over the course of his career, Daniel receives promotions and raises that average 1.5 percent per year, allowing him to increase his starting salary of $67,000 to $141,051. This leads to lifetime earnings of $5.08 million.

Over the course of his career, Liam receives promotions and raises that average 2.5 percent per year, allowing him to increase his starting salary of $70,000 to $240,598. This leads to lifetime earnings of $7.06 million.

Selected Research on the Racial Income Gap

There is an opportunity gap for Black applicants in terms of career advancement and recruitment, such as in the likelihood of receiving a raise or a promotion and in the possibility of receiving a callback for a position (Quillian et al., 2017).

According to the Bureau of Labor Statistics, the median White worker earned 28 percent more than Black workers and 35 percent more than Latinx workers (, undated).

Learn more in the research appendix

Now married with two adult children, both Daniel and Liam begin to meet with financial planners to settle their finances as they enter retirement age.

Because of the high debt burden Daniel incurred in his early career, he was not able to save enough money for a down payment on a home until the middle of his career. He needs to continue making mortgage payments into his retirement years.

Daniel is able to give $22,000 to his children and future grandchildren.

Without any college debt and with some help from his parents, Liam was able to purchase a home not long after beginning his career. Because he paid off his mortgage fairly early in life, he made the decision to invest in a few real estate properties.

Liam is able to give $475,000 to his children and future grandchildren.

Selected Research on Disparities in Inheritance

Research shows that only 10 percent of Black families receive an inheritance, while 30 percent of White families receive one (Bhutta et al., 2020). Black individuals who do receive an inheritance typically receive 35 percent of the value of the inheritances given to White families (Noel et al., 2019).

White households with a college degree have an average of $180,500 in wealth, while Black households with a college degree have $23,400 in wealth—a difference of $160,000 (Hamilton et al., 2015).

Although Black college graduates can access greater income with their degrees, their wealth conversely decreases because these students are more likely to have to assist their parents financially (Noel et al., 2019).

Black individuals have the lowest rates of homeownership among all racial groups, with 71.9 percent of White households and 41.3 percent of Black households owning a home (Choi et al., 2019). Black individuals also are more likely to be denied mortgage loans (27.4 percent) than White individuals (11 percent). Black households, therefore, are less likely to own a home and are unable to transfer wealth. Overall, intergenerational wealth transmission is significantly lower for Black families than White families (Aliprantis and Carroll, 2019).

Learn more in the research appendix

Exploratory tool Adjust the Amount of Bias to See How Compounding Amplifies Inequities


How Racial Bias Can Affect Education Opportunities

Suppose that bias causes just a 2-percent difference in educational achievement growth;1 a Black student gains 3 percent in educational achievement per year and their otherwise identical White colleague gains 5 percent each year between kindergarten and 12th grade. If both students start at the same level of educational achievement and education compounds continuously, by the time they graduate high school, the Black student’s achievement level is 77 percent of the White student’s level.

Adjust some of these values to see how they could affect the relative opportunity gap. Calculations assume that both students begin at the same level of educational achievement, which research suggests might not be the case (Bassok and Galdo, 2016; Reardon and Portilla, 2016).

According to your selections, the Black student attains percent of the educational achievement an identical White student attains over the course of their education.

Black and White Students’ Educational Achievement Growth over Time

NOTE: The educational achievement growth value projected in this tool is calculated independently and is not tied to values from the income or wealth projection sections of this tool.


How Racial Bias Affects Income

Even small amounts of bias at work can make significant differences in lifetime income. Suppose that bias causes a 1-percent relative difference in annual raises; a Black worker receives a 2-percent raise each year and an identical White worker receives a 3-percent raise.

The Black worker starts with a salary of $67,000, and the White worker starts with a salary of $70,000. Over a 50-year working career, the Black worker will eventually have an annual income of $180,336, while the White worker’s income will be $306,873.

Cumulatively, this results in the White worker accumulating $8,202,654 over their lifetime, while the Black worker accumulates $5,847,156.

Adjust the values to see how they affect income accumulation over time. Consider how relative educational achievement might affect each worker’s starting salary.

According to your selections, at the end of their careers, the Black worker’s cumulative income is $ and the White worker’s cumulative income is $.

Black and White Workers’ Income over Time

NOTE: The income accumulation projected in this tool is calculated independently and is not tied to values from the educational achievement or wealth projection sections of this tool.


How Racial Bias Can Affect Wealth

Even small amounts of bias can make large differences in wealth accumulation over a lifetime and over generations. Historically, there have been large disparities in wealth accumulation by race as a result of (1) the educational and income disparities discussed earlier and (2) impediments to Black wealth accumulation, including discrimination in the mortgage market.

Suppose that bias causes a 2-percent relative difference in the annual ability to build wealth; the White saver is able to compound wealth at 7 percent per year, while the Black saver is able to compound wealth at 5 percent per year.

Assuming that both people start with $500 of wealth and that their wealth accumulation compounds annually over an 80-year lifetime, the Black saver will have accumulated 22 percent of the wealth of an otherwise identical White American. Over the course of multiple generations, the effect is even more stark.

Adjust the values to see how they could affect wealth accumulation. Consider how each earner might have been affected by differences in educational achievement, income, generational wealth, and other factors, in addition to life expectancies.

According to your selections, the Black saver accumulates percent as much wealth as the White saver over their lifetimes.

Wealth Accumulation over Time

NOTE: The wealth accumulation projected in this tool is calculated independently and is not tied to the values from the educational achievement or income projection sections of this tool.


Even ostensibly small amounts of bias in education, income, and wealth can compound to create significant differences in outcomes in these metrics over time. In this tool, we modeled education, income, and wealth independently, without showing their interactions for the sake of conceptual simplicity. In reality, differences in education likely will lead to differences in income, which will, in turn, lead to differences in wealth, which can lead to differences in education, income, and wealth for succeeding generations. So, the differences caused by compounding are likely to be even greater than those illustrated in this tool. This process continues across generations.


  1. Educational achievement is a broad term we use to mean the accumulated learning of the student at any point in time. Return to text ⤴


  1. Aliprantis, Dionissi, and Daniel Carroll, “What Is Behind the Persistence of the Racial Wealth Gap?” Economic Commentary, No. 2019–03, February 28, 2019.
  2. Barrett, Nathan, Andrew McEachin, Jonathan N. Mills, and Jon Valant, “Disparities and Discrimination in Student Discipline by Race and Family Income,” Journal of Human Resources, September 16, 2019.
  3. Bassok, Daphna, and Eva Galdo, “Inequality in Preschool Quality? Community-Level Disparities in Access to High-Quality Learning Environments,” Early Education and Development, Vol. 27, No. 1, 2016, pp. 128–144.
  4. Bertrand, Marianne, and Sendhil Mullainathan, “Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination,” American Economic Review, Vol. 94, No. 4, September 2004, pp. 991–1013.
  5. Bhutta, Neil, Andrew C. Chang, Lisa J. Dettling, and Joanne W. Hsu, “Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances,” Board of Governors of the Federal Reserve System, FEDS Notes, September 28, 2020. As of February 22, 2021:
  6. Boser, Ulrich, Megan Wilhelm, and Robert Hanna, The Power of the Pygmalion Effect: Teachers Expectations Strongly Predict College Completion, Washington, D.C.: Center for American Progress, October 6, 2014.
  7. Chetty, Raj, Nathaniel Hendren, Maggie R. Jones, and Sonya R. Porter, “Race and Economic Opportunity in the United States: An Intergenerational Perspective,” Quarterly Journal of Economics, Vol. 135, No. 2, May 2020, pp. 711–783.
  8. Choi, Jung Hyun, Alanna McCargo, Michael Neal, Laurie Goodman, and Caitlin Young, Explaining the Black-White Homeownership Gap: A Closer Look at Disparities Across Local Markets, Washington, D.C.: The Urban Institute, 2019.
  9. Fenning, Pamela, and Jennifer Rose, “Overrepresentation of African American Students in Exclusionary Discipline: The Role of School Policy,” Urban Education, Vol. 42, No. 6, 2007, pp. 536–559.
  10. Gershenson, Seth, and Nicholas Papageorge, “The Power of Teacher Expectations,” Education Next, Vol. 18, No. 1, 2018, pp. 64–70.
  11. Hamilton, Darrick, William Darity, Jr., Anne E. Price, Vishnu Sridharan, and Rebecca Tippett, Umbrellas Don’t Make it Rain: Why Studying and Working Hard Isn’t Enough for Black Americans, Oakland, Calif.: The New School, Duke Center for Equity, and Insight Center for Community Economic Development, April 2015.
  12. Hanson, Melanie, “College Dropout Rates,”, November 22, 2021. As of March 9, 2022:
  13., “Racial Economic Inequality,” webpage, undated. As of February 15, 2021:
  14. Liu, Jing, Michael S. Hayes, and Seth Gershenson, From Referrals to Suspensions: New Evidence on Racial Disparities in Exclusionary Discipline, Providence, R.I.: Annenberg Institute at Brown University, EdWorkingPaper No. 21-442, July 2021.
  15. Noel, Nick, Duwain Pinder, Shelley Stewart III, and Jason Wright, The Economic Impact of Closing the Racial Wealth Gap, Washington, D.C.: McKinsey & Company, August 2019.
  16. Okonofua, Jason A., and Jennifer L. Eberhardt, “Two Strikes: Race and the Disciplining of Young Students,” Psychological Science, Vol. 26, No. 5, 2015, pp. 617–624.
  17. Quillian, Lincoln, Devah Pager, Ole Hexel, and Arnfinn H. Midtbøen, “Meta-Analysis of Field Experiments Shows No Change in Racial Discrimination in Hiring Over Time,” Proceedings of the National Academy of Sciences, Vol. 114, No. 41, 2017, pp. 10870–10875.
  18. Reardon, Sean F., and Ximena A. Portilla, “Recent Trends in Income, Racial, and Ethnic School Readiness Gaps at Kindergarten Entry,” AERA Open, Vol. 2, No. 3, 2016.
  19. Skiba, Russell J., Robert H. Horner, Choong-Geun Chung, M. Karega Rausch, Seth L. May, and Tary Tobin, “Race Is Not Neutral: A National Investigation of African American and Latino Disproportionality in School Discipline,” School Psychology Review, Vol. 40, No. 1, 2011, pp. 85–107.
  20. U.S. Department of Education, Office for Civil Rights, Civil Rights Data Collection, “2017–18 State and National Estimations,” data set, June 2021. As of March 9, 2022:

About This Tool

Researchers illustrate the ways in which the small effects of racial bias can compound over lifetimes. Users of the tool can adjust the amount of racial bias to see its effects on educational achievement, income, and wealth. Even ostensibly small amounts of bias can compound to create significant differences in outcomes in these metrics over time. This work was conducted within RAND Project AIR FORCE.


Funding for this research was made possible by the independent research and development provisions of RAND’s contracts for the operation of its U.S. Department of Defense federally funded research and development centers.